IRS Making Gains on IDing Bitcoin Users

Chris Gaetano
Published Date:
Aug 22, 2017


While its relative anonymity is one of the main appeals of Bitcoin and other digital currencies, the IRS has been making progress in finding ways to identify people trying to use them to avoid taxes, according to Fortune. The service has contracted with a third-party firm called Chainalysis that, in a recently-leaked letter from the company, said it has at least some information on about 25 percent of all Bitcoin accounts, which themselves account for 50 percent of all Bitcoin activity. These accounts have, in turn, been marked with four million different tags linked to forum posts and deposit and withdrawal information. Using these tags, the firm is then able to link a specific purchase to particular users. The IRS’s contract with the Swiss company comes amid a court case with popular digital currency exchange Coinbase, which is fighting an order to release customer information to the government. The IRS has noted that, in 2015, just 802 people declared a capital gain or loss related to digital currencies, which it believes indicates that there is a high level of tax evasion happening around these currencies. Fortune notes, though, that it’s likely the IRS will only target people who owe large amounts of money, as it recently modified its request for customer records t include only those who made transactions over $20,000. 

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