US federal judge has allowed the IRS to collect data about customers’ assets from Bitstamp crypto exchange. Nevertheless, the agency was also ordered to reduce the number of requests.
29 November 2019 | AtoZMarkets – The IRS (Internal Revenue Service) concerns with cryptocurrencies are nothing new, especially when it comes to potential tax evasion. A United States federal judge rejected a petition brought forward by a Washington state resident that sought to stop the IRS from obtaining data pertaining to his Bitcoin holdings from the exchange.
The Washington resident in question is William Zietzke and he presented two arguments to the court.
IRS allowed summoning of Bitstamp over a Customer's transactions in 2016
In a ruling delivered by a Washington judge, John Coughenour ordered the IRS to narrow down the number of summons it had issued to Bitstamp. However, what makes this particular ruling notable is the fact that the federal judge overruled two arguments. These two arguments would probably resonate with many digital assets users. Some of this would be the cypherpunk, early adopters.
The judge noted that third parties such as the tax collector are not in a position to be trusted with safeguarding private information. The reason is that the petitioner had a constitutional right to have their financial information remain private.
According to this particular order:
“William Zietzke filed the petition to quash the IRS summons on Bitstamp, after the agency began an audit of his cryptocurrency holdings and transactions following the filing of an amended tax return.”
Zietzke and the IRS
According to court documents, William Zietzke self-prepared his 2016 tax return using Turbo Tax. He reported long-term capital gains of $104,482 as a result of Bitcoin transactions that he said took place in 2016. He eventually hired a Certified Public Accountant (CPA). Moreover, the CPA amended his returns and reduced the long-term capital gains in 2016 from $104,482 to $410. This should have resulted in a $15,475 refund.
Zietzke was audited and he told the Revenue Officer that he had two separate groups of Bitcoin holdings. The first group was managed through Armory wallet software. Meanwhile, the second was held in wallets hosted by Coinbase and Purse.io. Nevertheless, he did not mention Bitstamp. The Revenue Officer found at least one transaction through Bitstamp while reviewing the taxpayer’s records.
As a result, the agency sent out summons to Bitstamp in a bid to establish the total number of transactions that the petitioner had made since the moment his account was opened.
In June of 2019, the Revenue Officer issued a third-party summons to Bitstamp. A third-party summons is typically issued when the IRS has reason to believe that another party, like a bank or an employer, has information that a taxpayer has not made available.
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