Coinbase will be passing customer details onto the IRS
13,000 Coinbase customers who did a lot of transacting from 2013-2015 are getting a visit from the taxman.
Coinbase is one of the world's larger cryptocurrency exchanges, with over 13 million registered users around the world. But as an exchange that serves US customers it's obligated to reasonably pass on user information to the Internal Revenue Service (IRS) when requested.
Zerohedge reports that the IRS initially requested the exchange to hand over details on every single one of its then half a million customers in July 2017, but then it took a step back and is now only requesting information on some 13,000 higher-transacting customers who did a lot of trading during the 2013-2015 period.
Coinbase says in a blog post that these users have been notified, and will be ordered to provide their taxpayer ID, name, birth date, address and historical transaction records.
A lot of these users probably won't be too happy to receive this news. In the USA cryptocurrencies are classified as an asset which can be converted to US dollars, and therefore earnings may be subject to capital gains tax. If it's held for less than a year, like many cryptocurrencies would have been, it might be taxed at up to 40%.
With almost half their earnings on the line, to say nothing of the general headache of doing crypto tax, it might be little surprise that cryptocurrency earnings are suspected to be extremely underrported. Reuters reports that only 0.04% of Credit Karma users reported any cryptocurrency gains, well below how many there are expected to be.
Those with the most gained also have the most to lose, and the relatively unobtrusive state of cryptocurrency in 2014-2015 means most people probably imagined they'd never be called up to ever pay tax on those gains. Odds are that at least a few of those 13,000 users are pulling their hair out at the thought of being taxed a fortune in cryptocurrency gains, especially if that fortune has already been spent, and might be wondering if they can get away with disappearing their money into Monero.
In Australia bitcoin might similarly be subject to capital gains tax, but there's a bit of fine print which says "Where you use bitcoin to purchase goods or services for personal use or consumption, any capital gain or loss from disposal of the bitcoin will be disregarded (as a personal use asset) provided the cost of the bitcoin is $10,000 or less."
This might be handy given the prevalence of services like Living Room of Satoshi and Paid by Coins which let you immediately use cryptocurrency to pay bills, credit card debt and similar. But you'd probably have to ask a professional whether paying off a credit card with cryptocurrency really counts as purchasing goods or services.
- SEC crackdown on Binance, Kraken – What it means for Aussie investors
- Sam Bankman-Fried found guilty – what it means for Australian FTX victims
- Bitcoin’s price soars over 10% on ETF rumours – here’s why
- New regulations for Aussie crypto exchanges: What it means for investors
- Sam Bankman-Fried’s FTX trial starts tomorrow – what it means for FTX customers
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, SALT, BTC