#bitcoinirs

[virtualcurrencyspace]

IRS narrows Coinbase Data Request.

A lawyer for the Internal Revenue Service said Thursday that the agency intends to narrow its request for broad swaths of account-holder information from San Francisco-based bitcoin exchange Coinbase Inc. Federal tax enforcement officials have asked Coinbase to sift through reams of data for U.S. customers, including user communications with the company, account passwords and security settings, to allow the government to search for unreported income. DOJ trial attorney Amy Matchison said at a court hearing before U.S. Magistrate Judge Jacqueline Scott Corley Thursday that the IRS has been in talks with Coinbase about narrowing its request to only items the agency would need to look for unreported income. In particular, Matchison said that the agency intends to retract its request for password and security setting information for U.S. Coinbase users. Matchison's comments came at a hearing where anonymous Coinbase account holders were seeking to intervene in the matter to oppose the government's request for the information. Lee Weiss of Berns Weiss, who represents two John Doe account holders, argued that his clients have interests that are distinct from Coinbase's and that it's their information that's at stake. http://www.therecorder.com/id=1202791929451/IRS-to-Scale-Back-Bitcoin-Account-Data-Request

[virtualcurrencyspace]

IRS Bitcoin Hunt May Breach the 4th Amendment.

The demand is not limited to owners of large amounts of Bitcoin or to those who have transacted in large amounts. Everything about everyone. Equally shocking is the weak foundation for making this demand. In a declaration submitted to the court, an IRS agent recounts having learned of tax evasion on the part of one Bitcoin user and two companies. On this basis, he and the IRS claim “a reasonable basis for believing” that all U.S. Coinbase users “may fail or may have failed to comply” with the internal revenue laws. If that evidence is enough to create a reasonable basis to believe that all Bitcoin users evade taxes, the IRS is entitled to access the records of everyone who uses paper money. Anecdotes and online bragodaccio about tax avoidance are not a reasonable basis to believe that all Coinbase users are tax cheats whose financial lives should be opened to IRS investigators and the hackers looking over their shoulders. There must be some specific information about particular users, or else the IRS is seeking a general warrant, which the Fourth Amendment denies it the power to do. Speaking of the Fourth Amendment, that rock-bottom “reasonable basis” standard is probably insufficient. Americans should and probably do have Fourth Amendment rights in information they entrust to financial services providers required by contract to keep it confidential. Observers of Fourth Amendment law know full-well that the “third-party doctrine,” which cancels Fourth Amendment interests in shared information, is in retreat. The IRS’s effort to strip away the privacy of all Coinbase users is more broad than the government’s effort in recent cases dealing with cell site location information. In the CSLI cases, the government has sought data about particular suspects, using a standard below the probable cause standard required by the Fourth Amendment (“specific and articulable facts showing that there are reasonable grounds to believe”). https://www.cato.org/blog/irs-believes-all-bitcoin-users-are-tax-cheats

[virtualcurrencyspace]

CPA Group asks for IRS Guidance for Virtual Currencies

Challenges with Specific Identification for Computing Gains and Losses Allow an alternative treatment under section 10121 (e.g., first in first out (FIFO)). The treatment of convertible virtual currency as non-cash property means that any time virtual currency is used to acquire goods or services, a barter transaction takes place, and the parties need to know the fair market value (FMV) of the currency on that day. The party exchanging the virtual currency for the goods or services will need to also track the basis of all of his or her currency to determine if a gain or loss has occurred and whether it is a short-term or long-term transaction. This determination involves a significant amount of recordkeeping, even if the transaction is valued at under $10. Currently, there are no alternative tracking methods provided for such transactions (other than for securities under Treas. Reg. § 1.1012-1(c)). Therefore, taxpayers are required to specifically identify which virtual currency lot was used for each transaction in order to properly determine the gain or loss for that particular transaction. In many cases, it is impossible for a taxpayer to track which specific virtual currency was used for a particular transaction. https://www.scribd.com/doc/315796895/AICPA-Comments-on-Notice-2014-21-Virtual-Currency-Guidance