A US judge has ruled that the United States Internal Revenue Service’s (IRS) was within the law when it requested data from crypto exchange Bitstamp in connection with a tax reporting case. Crypto trader William Zietzke argued that the IRS was operating outside of its remit when it requested his trading history from the New York-based exchange after he had failed to reveal his use of the exchange in his tax filing. However, Judge John C. Coughenour ruled that the IRS was well within its rights to request the data, something that should be noted by all US-based crypto investors.
IRS Asking for Comprehensive Records
The case in question involves data going back as far as 2016, with Zietzke recently informing the IRS that he was seeking a tax refund due to overestimating his capital gains earnings during this period. Naturally, the IRS sought to verify this information and asked Zietke’s to provide extensive data on his history of Bitcoin holdings and transactions. According to the IRS, Zietke failed to inform them of his use of Bitstamp, prompting the agency to request data from the exchange regarding his holdings, public keys, and the blockchain addresses associated with his transactions.
Zietzke questioned the IRS’ actions on a number of grounds, including the way they had gone about obtaining the information and accusing them of violating his reasonable expectation of privacy in Bitstamp’s records. The court refuted all but one of Zietke’s claims, that of the summons being “overbroad because it seeks both relevant and irrelevant material”, meaning that Zietke can expect the IRS to start digging through is history any day now, something that he presumably wanted to avoid.
To Tell or to Keep Quiet?
It could be argued that Zietke, in trying to do the right thing and pay his taxes on his crypto earnings, could be in a worse situation than if he had hidden them. However, if he has intentionally hidden his Bitstamp Bitcoin earnings then he is only asking for trouble. With the IRS notably stepping up their efforts against crypto profiteers in August, 2020 may see a great many such crypto-related tax cases. BitStarz News urges all crypto users to play ball with their local tax authorities and not hide anything – as the Zietke case proves, there’s no hiding from the taxman forever.
