This month the U.S. Internal Revenue Service (IRS) recently sought out a continuation of its court hearing with Coinbase. The initial hearing was scheduled to be held on February 16, but the tax agency now wants to postpone the hearing until March 23. The case will also begin with a motion from a former Coinbase customer concerning the tax agency’s request for customer’s data from 2013 to 2015.
The IRS Requests to Reschedule the John Doe Summons Hearing
In November 2016, the IRS revealed a ‘John Doe’ summons against Coinbase. The tax agency is looking to obtain customer records “for the years ended December 31, 2013, 2014, and 2015, of United States persons who conducted transactions in a convertible virtual currency.” The IRS is particularly looking for those not reporting their taxes when using the cryptocurrency with the regulated exchange.
Following this event, Coinbase vowed to fight the matter in court as the company, and many within the Bitcoin community, believed the probe was an invasion of privacy. Furthermore, a Coinbase customer has entered his own litigation and is asking the tax agency to withdraw the court summons. Attorney and Coinbase user Jeffrey Berns filed a motion in December to fight the IRS request for the information on 3 million users. The initial proceedings would begin next week, but now the IRS has asked to reschedule the court hearing for March 23.
‘Sparing the Parties’ Time and Expense’
The purpose of the delay is so that the tax agency may pursue or “take other action with respect to the John Doe summons.” The case filed in the District Court for the Northern District of California will give all three parties more time to formulate arguments for the litigation process. Both Coinbase and Berns have not filed a motion to fight the delayed court hearing. Due to the statements made by the tax agency, the other parties involved may be interested in finding out why the IRS has decided to postpone the hearing.
“If more time is provided a hearing on movants’ motions may be avoided altogether, sparing the Court’s judicial resources and the Parties’ time and expense,” explains the IRS’ proposed motion on February 2.
Coinbase Could Pay $1 Million in Legal Costs Fighting the ‘Broad Subpoena’
Coinbase has been vocal about the case from the get-go and has explained that people should pay their taxes, but the ‘John Doe’ summons is too reaching.
“I believe Coinbase and the IRS fundamentally want the same thing: for all U.S. users of virtual currency to pay their taxes,” details Coinbase founder Brian Armstrong in January. “And I believe our prior actions demonstrate that we are committed to making this happen. I also feel that the IRS sending us a John Doe summons on all customer accounts is not the best way for us to mutually accomplish this objective.”
The implications of this proceeding could be pretty significant towards the privacy rights of bitcoiners if the IRS manages to gain access to Coinbase customer data. The San Francisco-based bitcoin exchange believes they will spend a lot of time and money throughout this legal battle. “We will likely incur a legal cost of between $100,000 and $1,000,000 in the process of defending our customers from this overly broad subpoena,” says the Coinbase founder.
What do you think about the upcoming IRS court hearing between Coinbase and a former customer? Let us know in the comments below.
Images via Shutterstock, District of California court documents, and Twitter.
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