Coinbase Users Who Evade Taxes Beware, IRS Is After You


  • Once a criminal investigation is opened, it will be too late to make amends without repercussions, tax lawyers warn
  • Coinbase has been receiving several requests from IRS seeking customer account information
  • This year, the exchange received a total of 1,914 requests worldwide, most of which were from the U.S.

Tax lawyers have advised Coinbase users to properly declare their cryptocurrency holdings and earnings and not try to evade taxes.  

The Tax Law Office of David W. Klasing, a California-based tax firm, in a press release, said those who failed to report their cryptocurrency holdings should “act to correct it now,” warning that the Internal Revenue Service is investigating the issue very seriously.

“Once an audit or criminal tax investigation has begun, it will be too late to amend your returns or take advantage of a voluntary disclosure program,” the tax law office said in the statement.

Coinbase released its first-ever transparency report in October, detailing the level of customer account information that U.S. government agencies such as the IRS and the FBI requested from the cryptocurrency company. 

Coinbase said it regularly receives such requests worldwide, coming in the form of subpoenas, search warrants or even court orders. These measures are to ensure that its platform is not used for, among other things, money laundering and financing of terrorism.

The company said will respond if the requests are valid. Recognizing each request is different, Coinbase said, adding that it has a team of specialists to confirm the validity of the requests.

In the report, Coinbase said it received a total of 1,914 requests from law enforcement agencies in 2020. Of this, 1,848 were for criminal cases while 66 were for civil or administrative cases. Most of the law enforcement requests were from the U.S., which was followed by the U.K. and Germany. “90% of all requests come from three jurisdictions: the U.S., UK, and Germany,” Coinbase said in the transparency report.

Coinbase said 58% of the requests came from U.S. agencies, of which 16% were from state or local authorities. The data clearly shows that the IRS, along with its Criminal Investigation Unit, is one of the top receivers of information. “This data makes it clear that the IRS is requesting information from Coinbase for the express purpose of checking it against its own taxpayer data and looking for discrepancies where holdings on Coinbase have not been reported on taxpayers’ returns,” the tax law office said in a statement.

It was previously reported that the IRS is of the opinion that any gains from a cryptocurrency or earning cryptocurrency, no matter if it is worth as small as $1 is taxable.

Coinbase CEO Brian Armstrong. Photo: Anthony Harvey/Getty