Bitcoin User Tries to Stop IRS

Bitcoin User Tries to Stop IRS

Bitcoin and The IRS are engaged in a series of legal and monetary battles right now. The IRS is doing what they can to force Bitcoin exchange Coinbase

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Bitcoin and The IRS are engaged in a series of legal and monetary battles right now. The IRS is doing what they can to force Bitcoin exchange Coinbase to surrender the identities of its clients. The primary goal for the IRS in conducting this move is to help them find individuals who are cheating on taxes.

Profits from Bitcoin have been investigated by the IRS as far back as 2014. IRS standards consider the alt-coin legal property, but not actual currency. Citizens owe taxes on any profits made by selling Bitcoin.

A motion to stop the IRS’s subpoena versus Coinbase was filed in U.S. District Court this week. The motion was filed in the Northern District of California. The name of anonymous John Doe was used for the case. Coinbase customer Jeffery Berns was the one responsible for filing the motion.

Berns goal is the have the IRS procedures brought to an immediate stop. Some of the details of the motion include:

  • “The IRS has no legitimate purpose in obtaining requested documents from Coinbase.”
  • “Enforcement of the IRS Summons would result in an abuse of process.”
  • “The IRS itself does not have the ability to enforce compliance with its own 2014 virtual currency guidance.”
  • “The IRS Summons requires personal disclosures that are not relevant to the IRS.”

The motion was filed by lawyers working with the firm Berns Weiss LLP. The motion relies on legal precedent. Over 4 decades ago the Supreme Court issued a statement that declared the intent of an IRS summons was to ensure a legitimate investigation could be conducted, but it should stay within the limits of its specific purpose. The case of United States v. Biceglia was cited for the relevant precedent it had in protecting the rights of the individual being investigated by the IRS.

The District Court role was expanded on by The Supreme Court. A summons that is challenged must be upheld to scrutiny by a court. The court shall determine whether the information being sought is relevant to investigation purposes. There should never be intent to harass taxpayers. Collateral disputes and other cases should be conducted in a manner that provides good faith.

No specific summons was being targeted by the IRS with respect to a specific investigation. Information covered by the summons was never narrowed by the IRS investigation. Primary objectives for the IRS in this matter are for Coinbase to name over one million American citizens with virtual currency transactions and find who is not paying their fair of taxes due to these transactions. Clear expectations have been made by the IRS for Coinbase to provide full details about every transaction that has taken place with those roughly one million clients over the past three year period.

Substantial personal information that is unrelated to tax compliance issues is being searched for under the guidelines of the summons. Hackers would have much greater access to clients’ funds and identities if the summons exposes all customers. This would greatly increase the lack of safety and security of all Coinbase accounts. Considering that hackers have succeeded numerous times in hacking the IRS, it could be considered sensible to accuse the IRS of engaging abusing legal processes.

Coinbase is trying to fight against the IRS summons. Customers of Coinbase may not be judged to be impartial enough, since they have personal interests in the case.

Many citizens find the IRS’s existing rules regarding virtual currencies confusing.

There is a demonstrated need to clarify virtual currency tax policies. To date, the IRS has not issued any clear rules about virtual currency guidelines. Public IRS admissions of failing to provide sufficient guidelines for virtual currencies are on record. Why would the IRS be permitted to issue investigations or summons when they have been unwilling or unable to provide proper guidelines in the first place? How has the IRS avoided creating clearer policies about how to conduct a legitimate investigation? Can the IRS be capable of examining over one million taxpayer records regarding vital currency tax compliance when they have no established guidelines on the taxation rates?

If Berns can’t stop the IRS subpoena he intends to operate against the IRS and chare they the agency is acting in bad faith. The motion is scheduled for a hearing on January 19th, 2017.