Skip to main content You are hereHome Cryptic currency Sarah Saunders The mysterious world of bitcoin Related articlesPrinter-friendly version Back to topSAN FRANCISCO — The Internal Revenue Service is on the hunt for people who used Bitcoin to evade taxes.The tax agency sent a broad request on Thursday to Coinbase, the largest Bitcoin exchange in the United States, asking for the records of all customers who bought virtual currency from the company from 2013 to 2015.The document, a so-called John Doe summons, said that an I.R.S.agent recently found three cases in which people were using Bitcoin to evade taxes — two of which involved Coinbase customers.The I.R.S.said that those findings — and Bitcoin’s relatively high level of anonymity — have led the agency to think that many more people are using the virtual currency for similar purposes.not only has suspicion that the John Doe class includes U.S.taxpayers who are not complying with the law — it knows that the class in the past included such violators, and very likely includes others,” the document says.

The summons comes shortly after the Treasury Department’s inspector general issued a report chastising the tax agency for not taking more aggressive action to curb “unlawful activities by those who use virtual currencies.”“None of the I.R.S.operating divisions have developed any type of compliance initiatives or guidelines for conducting examinations or investigations specific to tax noncompliance related to virtual currencies,” the report, delivered in September, said.The request this week would require Coinbase, a start-up based in San Francisco with funding from several leading venture capital firms, to turn over the identity and full transaction history of millions of customers — it had about three million customers at the end of 2015.But the company is already gearing up to fight the request.“We want to work with law enforcement — that’s generally our policy,” the company’s head legal counsel, Juan Suarez, said Friday.“But we can’t tolerate sweeping fishing expeditions.

We are very concerned about the financial privacy rights of our customers.”The existence of the summons was reported earlier on Twitter by the financial blog Zero Hedge.The request from the I.R.S.appears to be the most sweeping single effort to track down people using virtual currency to break the law.In the past, Coinbase has received narrowly tailored requests for information about customers, and generally complied, Mr.texas bitcoin conference 2015Suarez said, but never something as broad as the latest summons.ethereum trend analysisCoinbase and other companies that buy and sell Bitcoins are required by regulators to record the identities of people who buy and sell virtual currency on their platforms.The underlying Bitcoin wallets, however, are tracked by a decentralized network of computers that generally do not record the identities of the people involved in transactions.bitcoin classic vs unlimited

A Bitcoin wallet looks like a series of random letters and numbers, and anyone can open one without providing their identity.The most famous early use of Bitcoin came on the Silk Road, an online site where users could pay for drugs with Bitcoin, with the understanding that their identity would never be recorded.The documents filed this week indicated that the tax agency was interested in going after both large tax evaders as well as small-time Bitcoin users who might not be recording their virtual currency transactions properly for tax purposes.litecoin mining on cpuThe basic tax rules for Bitcoin users were set down by the I.R.S.ethereum phone wallpaperThe agency’s guidance said that people should treat their virtual currency as property, rather than currency, for tax purposes.bitcoin farming machine

If a person buys a Bitcoin for $200, for example, then sells it later when its value has risen to $400, the $200 in gains are supposed to be recorded to the tax authorities.Omri Marian, a professor of tax law at the University of California, Irvine, said that most Bitcoin users were probably not aware that they were supposed to record their losses and gains as taxable events every time they bought anything with their Bitcoins.“It may be the case that many people were not aware that what they were doing is taxable,” Mr.bitcoin profitability comparisonMarian said on Friday.bitcoin skimming“Are those the people the I.R.S.bitcoin header blockis looking for?”An I.R.S.agent, David Utzke, said in a document filed on Thursday, along with the summons, that he was already pursuing larger offenders.

Utzke said he identified two companies that were buying Bitcoin and misreporting them with the I.R.S.Utzke said both of the companies were customers of Coinbase.The companies themselves were not named in the document.Coinbase provides its customers with information about the gains or losses they make on every virtual currency transaction.The tax agency, however, said it was not getting the information it needed to determine whether Coinbase users were making the proper tax payments.“The risk/reward ratio for a taxpayer in the virtual currency environment is extremely low, and the likelihood of underreporting is significant,” Mr.“The characteristics of virtual currencies could enable them to replace traditional abusive tax arrangements as the preferred method for tax evaders.”Just in time for tax season, the Canada Revenue Agency says the users of bitcoins will have to pay tax on transactions in the upstart digital currency.Bitcoins are a fringe online currency that entered the mainstream this year after speculators rushed in and caused their value to more than quadruple in value.

Originally designed as a virtual currency alternative to conventional money, the cash value of a bitcoin jumped from under $50 US to above $250 and back earlier this month, as speculators flooded the market after awareness of them grew.Price swings like that mean some bitcoin buyers and sellers likely made or lost a lot of money, which raises the question of how that will be handled come tax time.The issue is not just academic.Saskatoon realtor Paul Chavady said he has listed a house priced in bitcoins, and has found clients willing to pay his fees in the electronic currency."When you sell [the bitcoins], they will deposit that in your account," said Chavady."As soon as it turns into Canadian dollars, it's back in the eyes of the CRA and everybody else.If you get a big deposit of $10,000, or $100,000, [CRA is] going to say, 'Hey, where did that come from?'" Indeed, the tax man has already thought of that.The CRA told the CBC there are two separate tax rules that apply to the electronic currency, depending on whether they are used as money to buy things or if they were merely bought and sold for speculative purposes.

"Barter transaction rules apply where bitcoins are used to purchase goods or services," Canada Revenue Agency spokesman Philippe Brideau said in an email.Barter is the exchange of one good for another good without the use of cash, such as when a farmer who grows vegetables trades with another who raises chickens.Many Canadians don't realize such exchanges are taxable, but they are.Paragraph 3 of the CRA's Interpretation Bulletin IT-490 clearly states that in a barter transaction between arm’s-length persons, "we generally consider that the value of whatever is received is at least equal to the value of whatever is given up."In the above example, that means whatever you've received in exchange for your $1 worth of vegetables must be documented as a taxable gain of at least $1 somewhere.When it comes to trading bitcoins for profit, the tax man says there are tax implications there, too."When bitcoins are bought or sold like a commodity, any resulting gains or losses could be income or capital for the taxpayer depending on the specific facts," ruled the CRA.