IRS dismisses Coinbase user’s allegations of account surveillance

• The IRS told a California federal court that its investigation is entirely legitimate.
• IRS is reportedly seeking information for the user’s tax liability.

The United States Internal Revenue Service (IRS) recently filed a case against major American crypto exchange Coinbase. According to a filing on Nov. 15, the IRS told a California federal court that its investigation of Coinbase customer William Zietzke is entirely legitimate.  

Zietzke is trying to revoke the summons issued to Coinbase Inc. in June, which asked him to hand over his financial records regarding his 2016 returns. Zietzke classified IRS’s summons as too broad of a request since it was not restricted to the 2016 tax year only. He further said that the records that the IRS wants to acquire could compromise his financial and personal security if lost by the government.

In response, the IRS said in a filing that Zietzke was unable to give a valid reason for why the summons should not be enforced. He claimed that the tax agency is developing a database to track anyone who owns virtual currency accounts. In the filing, the agency wrote:

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.

As per the IRS, records after 2016 were necessary to determine his tax liability. This is because Zietzke claimed a refund based on transactions involving Bitcoin (BTC) he obtained in 2011.