The biggest problem, however, and the reason why the IRS is unlikely to relent is that as the IRS said, it detected a "reporting gap" between the 500,000 virtual currency users Coinbase reported between 2013 and 2015 and the less than 900 bitcoin users reporting gains or losses for each of those years.
That would imply that less than 0.2% of coinbase users bothered to report anything on their tax forms. One can see why the IRS is angry.
And, worse for those who believe they will be able to get away with their cryptoprofits unscathed by Federal Taxes, following last week's hearing, a federal judge is poised to allow a limited investigation into those gains to proceed over the company’s objection that the agency is on “a massive fishing expedition” meant to make itself look tough in the eyes of its critics in Congress, according to Bloomberg.
"It’s legitimate for them to investigate whether people are making money on their bitcoin purchases" and paying taxes on any gains, U.S. Magistrate Judge Jacqueline Scott Corley in San Francisco told lawyers for Coinbase at a hearing last Thursday. "I have to give tremendous discretion to the agency as to how they investigate," she added later.
http://www.zerohedge.com/news/2017-11-1 ... -or-losses