If you think your information is safe when you hand it over to crypto exchanges, think again; top exchange provider Coinbase was recently forced to turn over personal information for over 13,000 users. If the IRS had its way, however, this handover would have spanned the entire Coinbase platform. If you were spared, you can take comfort for now, but not forever; a stricter crackdown is likely. The more you know about how the IRS handles the data it obtains, the better you can prepare for the worst-case scenario.
Which Coinbase Users Did the IRS Target?
After Coinbase insisted on narrowing the scope of users impacted by IRS demands, the information request was strictly limited to high-profile users with transactions exceeding $20,000 in a given year. Specifically, however, the IRS examined information for users who made significant transactions between 2013 and 2015. Everyday users who profited little from crypto did not see their trading history move into the hands of IRS agents — but that doesn’t mean they’ll elude the IRS forever.
Increased Potential For Audits Or Prosecution
With the release of information to the IRS comes the increased potential for IRS audits — particularly if Coinbase income data fails to square up with users’ tax returns. The IRS could even pursue prosecution on the grounds of tax evasion for the most severe cases. Ultimately, however, severe repercussions are far more likely for high-income traders who purposefully seek to work around their tax obligations. Like it or not, most virtual currency is taxable — the sooner this is reflected in crypto enthusiasts’ tax returns, the better.
If you were impacted by Coinbase’s release of tax information to the IRS, don’t panic — take action. The team at the Highland Tax Group can help; reach out to learn more about our background in cryptocurrency tax concerns.