Monday, February 26, 2018

Coinbase Will Comply with JDS on Approximately 13,000 Customers for Bitcoin Transactions (2/26/18)

I have reported before about the IRS John Doe Summons issued to Coinbase, a digital currency exchange.  See Court Orders Enforcement of John Doe Summons Against Bitcoin Firm (12/1/17), here.  According to Coinbase's web site titled "IRS Notification," here, Coinbase has notified approximately 13,000 customers that, pursuant to the Court judgment, here, Coinbase expects to comply with the JDS.

The Coinbase web page has the contents of the letter notification.  Key points of the notification are:

  1. Conbase expects to comply within 21 days of the notification (February 23, 2018).
  2. Potentially affected customers may want to seek advice of counsel.
  3. Regarding the effect of the delay in compliance from the original issuance:

In addition, we also want you to know that because Coinbase received a summons on December 8, 2016, and more than six months passed before our challenges to the summons were resolved by the court, the period of limitations under sections 6501 and 6531 of the Internal Revenue Code (title 26 of the U.S. Code) were suspended beginning as of June 8, 2017 and continuing through the final resolution of Coinbase’s response to the summons. This may be relevant to the tax returns that you have filed for the 2013, 2014, and 2015 calendar years. If you have questions about your tax liability for those years, we strongly encourage you to consult with your tax advisor.
Section 6501, here, is the civil statutes of limitation, and Section 6531, here, is the criminal statute of limitations.  Pursuant to Section 7609(e)(2), here, the suspension is from: (i) the date which is 6 months after the service of such summons, until (ii) "the final resolution of such response."  Assuming that the expected Coinbase response on or around mid-March fully resolves the scope of the summons as ordered by the Court, the period of the suspension will be about 280 days.  If, however, that response does not fully resolve the summons, then the statute will continue running until there is full compliance.  So far as I am aware, there is no public announcement as to when there is full compliance to conclude the suspension period.  However, the IRS calculation of the suspension period should be disclosed in any audit where the IRS relies on the suspension period and may also be obtained informally if a publicly released document otherwise refers to it or a document from an audit is circulated among practitioners.  (See the FTC Blog link for 1/26/15.)

For earlier posts on the suspension of the statutes of limitation for noncompliance with summonses, see (presented in reverse chronological order):

  • IRS seeks John Doe Summons to Bitcoin Firm (Federal Tax Crimes Blog 11/23/16; 11/30/16), here.
  • Suspension of Statute of Limitations From the UBS John Doe Summons (Federal Tax Crimes Blog 1/26/14), here.
  • Suspension of the Statute of Limitations from the UBS John Doe Summons (Federal Tax Crimes Blog 8/11/12), here.

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