The U.S. Internal Revenue Service (IRS) is coming under increasing scrutiny following its request to view the transaction records of Coinbase.

The focus on Coinbase, which the exchange described as “indiscriminate” in breadth, is poignant, coming after a treasury audit highlighted a range of failures by the IRS.

As the exchange promises to go to court over the request, experts are joining in the debate in a bid to demonstrate the need for more realistic regulatory management surrounding taxation of the everyday cryptocurrency user.

IRS shows users still bear responsibility  

Perry Woodin, CEO of Dash masternode provider Node40, told Cointelegraph that despite any intermittent confusion, the burden of tax reporting still falls on users themselves:

“The issues around compliance will be remedied, but it is going to require guidance from the regulatory authorities along with a technological solution that removes the barrier for accurate reporting... In the meantime, the risk of not complying falls on the end user.”

Coinbase has always been seen as highly compliant with U.S. regulations. Indeed, the exchange even assisted law enforcement in prosecuting bad actors via its company data.

The IRS move thus reveals rifts in the legislative landscape which persist - only blanket data examination would do, it seems, as opposed to a more intuitive investigation.

Woodin: any exchange could follow Coinbase

“The Treasury Inspector General for Tax Administration (TIGTA) proposed three recommendations revolving around new strategy, better guidance and revised third party reporting documents, to which the IRS have already agreed to implement,” Woodin continues.

He added that users will need considerably easier ways of reporting cryptocurrency gains and losses in the future, in order to avoid mass examinations continuing.

“For the mid to long-term, tax software will need to be upgraded so that any user or investor of cryptocurrency can compile a report at the end of the fiscal year, showing unrealized and realized gains and losses from their entire virtual currency portfolio,” he explained.

“Nonetheless, in the meantime there is no guarantee that the problems will stay confined to Coinbase. Tax evasion could equally affect any exchange operating in the U.S., including the many with less well-kept compliance histories,” Wooden says.

He reiterated:

“I would not be surprised to see other exchanges receive the same type of summons, but it is the responsibility of individuals to report their gains or losses.” 

“Anybody living in a jurisdiction where compliance is required needs to treat their Bitcoin as a serious asset with serious consequences if used as a shelter for avoiding responsibility.”