The IRS May Limit The Records Requested In Coinbase Fight

The Internal Revenue Service could pull back its inquiry into around 1 million Coinbase customers accounts, requiring less information on the users.

According to a report in Fortune, the IRS said last week in a hearing  over its fight with anonymous bitcoin buyers that it has been talking to Coinbase about limiting the information it needs to search for unreported income.  Among the items it  may not request are passwords and security settings for the accounts, noted the report.  Coinbase customers and the IRS have been embroiled in a legal battle since last year, when the government agency requested all Coinbase customer activity from 2013-15. During that time frame the value of bitcoin rose from $13 to more than $1,100.  The IRS, according to the report, contends only 802 people claimed gains or losses from bitcoin in 2015.  A group of bitcoin holders hired a law firm to request permission to challenge the IRS summons. The IRS argues anonymous customers don’t have the right to the agency in court.

Legal analysts have long thought the IRS would scale back the records it would demand, but up until last week’s court hearing, it hasn’t done much to prove them right. The IRS, on the flip side, has yet to respond to a letter from U.S. Sen. Orrin Hatch and included other lawmakers calling the agency’s case as “overly broad, extremely burdensome, and highly intrusive to a large portion of individuals.” The lawmakers pointed out in a letter to the IRS that Coinbase has more than 1 million customer accounts and 500,000 active customers that would be affected by the summons.  It’s not clear if the IRS is going after other cryptocurrency exchanges. Coinbase is the largest in the U.S., it’s not the only one out there.