Coinbase remains a prime target of investigation for the IRS regarding Bitcoin transaction being used to evade taxes and launder money. If the company were to argue the John Doe summons, it would cost them up to US$1m. That is quite a steep price, but given the broad range of what the subpoena implies, it is only normal to see associated costs go up exponentially. For now, it appears the company will not challenge the subpoena in court.
IRS-Coinbase Story Can Get Expensive Fast
Although one Coinbase user continues to oppose the IRS’s John Doe summons regarding Bitcoin exchange Coinbase, the company itself is not planning to undertake any legal action right now. Coinbase CEO Brian Armstrong estimated how defending Coinbase customers would cost up to US$1m in legal fees. Quite a steep amount, even for a company that has been making a good chunk of money over the past few years.
Considering how the San Francisco federal judge ruled Coinbase could be ordered to provide years of customer data tot he IRS, it is only normal the exchange explores all options at their disposal. The subpoena by the IRS has been greeted with a lot of criticism, due to its broad scope and unclear reasoning as to why this investigation would need to happen right now.
While it is understandable the IRS wants to investigate whether or not Coinbase customers sued Bitcoin to mitigate tax liability, their methods for this inquiry are vague at best. According to the official subpoena, the IRS “needs” Coinbase records to identify some Bitcoin wallets. Moreover, the agency wants to check if all platform users pay all proper taxes on their Bitcoin income.
While Coinbase does what they can to operate within the confines of the law, the IRS feels they have not done enough in this regard. Otherwise, the John Doe summons would not be an issue at this time. Coinbase CEO Brian Armstrong reaffirmed how the company worked hard to comply with all IRS guidelines in existence, even the ones dating back to the period related to this subpoena. It is rather telling Coinbase is the only exchange serving US customers to be hit with this request, though.
On February 19th, Coinbase will make its first formal appearance before the San Francisco federal judge. The company’s goal remains to achieve some intervention in the court proceedings. Whether or not their efforts will be successful, remains to be seen, though.
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