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    This week the battle between the U.S. Internal Revenue Service (IRS) and the San Francisco firm Coinbase is heating up once again as a U.S. Magistrate Judge is siding with the tax collector.

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    U.S. Magistrate Judge: ‘It’s Legitimate for the IRS to Investigate Coinbase Users’

    The IRS May Get Approval to Conduct Coinbase Tax ProbeLast Thursday in California the two organizations convened in court to continue the controversial case, the “U.S. v. Coinbase 17-01431.” The recent hearing discussed the proposed IRS tax probe of Coinbase customers who used the platform from 2013-2015. According to multiple news outlets which attended the hearing, the U.S. Magistrate Judge, Jacqueline Scott Corley, has shown she favors the arguments brought forth by the IRS and believes the probe is warranted.

    “It’s legitimate for them to investigate whether people are making money on their bitcoin purchases and paying taxes on any gains,” explains Judge Corley.

    I have to give tremendous discretion to the agency as to how they investigate.  

    The IRS: ‘Out of 500,000 Customers Less Than 900 Per Year Are Paying Taxes’

    The IRS May Get Approval to Conduct Coinbase Tax ProbeThe IRS issued its request a year ago in November and has been fighting with Coinbase in court ever since. The tax collector is looking for customers who “failed or may have failed to comply with provisions of the internal revenue laws.” After Thursday’s statements and the pending decision from Judge Corley, the IRS may get what they want.   

    News.Bitcoin.com reported earlier this year that the IRS searched the MTRDB for Form 8949 data for tax years 2013 through 2015 and the results were interesting. Each year only 800 individuals filed their taxes correctly in relation to their personal bitcoin gains and losses. This fact was brought up again at the hearing as the IRS explained to Judge Corley that between 2013-2015 out of 500,000 Coinbase customers, less than 900 U.S. citizens per year were reporting their bitcoin tax obligations.

    “U.S. taxpayers, including Coinbase users, have made use of virtual currencies to avoid the reporting and payment of taxes,” explains the U.S. tax agency.

    [The IRS] need to gain some degree of visibility into a space where it is already necessarily moving about somewhat in the dark.  

    Coinbase: ‘The IRS is Improperly Searching for Private Information of Our Customers’

    The chief legal representative for Coinbase, Mike Lempres, revealed after the hearing that the San Francisco digital asset firm hasn’t been able to have meaningful discussions with the IRS.  

    “We’re in this tussle with them where they are improperly searching for private information of our customers with no evidence of wrongdoing,” Lempres explains to Bloomberg. Coinbase can appeal the pending ruling, but Lempres declined to comment on Judge Corley’s statements or the cryptocurrency company’s plans going forward with the litigation process.

    What do you think about the legal battle between the IRS and Coinbase? Let us know what you think in the comments below.


    Images via Shutterstock, the IRS, and Coinbase.


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