IRS Looking for Virtual Currency Users

SAN FRANCISCO (CN) — A federal judge Wednesday authorized the Internal Revenue Service to issue a John Doe summons on Coinbase Inc., a virtual currency issuer, to seek information on taxpayers who conducted transactions with the virtual currency from 2013 to 2105.

The Department of Justice has “a reasonable basis for believing” that Coinbase users “failed or may have failed to comply with any provision of any internal revenue laws,” U.S. District Judge Jacqueline Scott Corley said in the 2-page order.

The U.S. Attorney’s Office said that Coinbase is one of “nearly 1,000 virtual currencies,” of which the best known is bitcoin.

“Because transactions in virtual currencies can be difficult to trace and have an inherently pseudo-anonymous aspect, taxpayers may be using them to hide taxable income from the IRS,” the U.S. Attorney’s Office said in a statement.

The IRS does not allege that Coinbase has done anything wrong. The John Doe summons merely “directs Coinbase to produce records identifying U.S. taxpayers who have used its services, along with other documents relating to their virtual currency transactions,” the U.S. attorney said.

IRS Notice 2014-21 provides tax guidance on virtual currencies.

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