IRS rejects ‘surveillance conspiracy’ as it demands Coinbase turn over user records

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The Internal Revenue Service (IRS) has ordered California-based cryptocurrency exchange Coinbase (NASDAQ: COIN) to turn over records about one of its users. It issued a summons to the exchange this past June, looking for information on William Zietzke and his tax return from 2016 as it wants to determine if he properly reported his earnings. Zietzke has tried to get a court to deny the request, but he’s not having much luck. The IRS just fought back, essentially laughing at the Washington resident for some pretty absurd claims.

Zietzke believes that the request is too broad and that releasing the information could compromise his personal security, especially if the government were to lose the data. This, despite the fact that the IRS already has a good idea of what people across the country are up to at any given time. He also tried to argue that the IRS only wants to create a database of crypto owners, which, again, is already in place.

The IRS is willing to go by the book, though, and responded to the court arguments, Law360 reported. It said, “Rather than allow the IRS to summon the information it needs from Coinbase, Mr. Zietzke invents an IRS surveillance conspiracy and argues that the IRS has all the relevant information it needs to determine whether he is entitled to the refund he claims − that is the limited, sometimes redacted, and ever changing information he has provided. By the summons at issue, the IRS seeks information to do exactly what Congress charged it to do: make an accurate determination of Mr. Zietzke’s tax liability.”

Zietzke set himself up to be put in this situation and any argument that he would be compromised by the revelation of crypto transactions is invalid. In filing his tax returns, he already admitted to having conducted transactions in BTC that he had obtained in 2011, so there isn’t much room for denying his participating in the market.

The IRS has already established that, per current rules, crypto holdings are considered property, a stance it took in 2014. There is still a lot more work to be done and the government agency is slowly addressing the space. In the meantime, though, no U.S. taxpayer should be under the impression that the IRS will look the other way when it comes to their crypto transactions.