If the U.S. Internal Revenue Service (IRS) wins the lawsuit it has had with William Zietzke since 2017, the privacy of thousands of Bitcoin holders would be compromised.

William Zietzke’s story, A systems engineer who mined bitcoins in 2011 as an experimentIt shows what the plans of the United States Internal Revenue Service (IRS) could look like for all cryptocurrency users in the future. It all started when Zietzke made a mistake in his income tax return in 2017 and made the profits from his cryptocurrency holdings in 2016 in his 2017 tax return.

According to the story published on Reason.com, the user was able to spot his mistake after hiring an accountant in 2017. Given the situation, Zietzke did the only thing in his hands, changed his statement, eliminated capital gains of $ 104,482, and caused a refund of $ 15,475. “I’ve never been in this situation, I’ve made a mistake. Those who play these tax optimization games know how to dot every I and cross every T, and I didn’t do it, “says Zietzke.

The refund caught the attention of the IRS, so they immediately checked Zietzke, the He had reported his income in bitcoins since 2013. He was a leader in tax returns for cryptocurrency holdings since the IRS issued the Bitcoin Tax Guidelines in 2014. Although the review process was complicated from the start, Zietzke provided the company with a wealth of information to meet its requirements and quickly resolve the problem.

A relentless fight for privacy

The user provided accounting data for its taxable Bitcoin transactions in 2016. Screenshots of your activities on Purse.io and Coinbase, the Armony activity log and the software to manage some BTCs. He also reported bank statements to confirm the cost base of bitcoins purchased through Coinbase, but Zietzke’s biggest mistake was that he included the public addresses of his wallets in the information sent to the IRS.

Because of the transparency of the Bitcoin blockchain With public addresses, anyone can monitor a user’s movements. You just need to know whose address is being monitored.

After a year, Zietzke received a letter saying that he could not fulfill IRS requests. For this reason, they cited the Bitstamp, Coinbase and Zietzke platforms themselves to get more than just public addresses. They asked for the identity and wallet address of anyone with whom they would have done business through the bureau de change.

Zietzke submitted applications to annul the subpoena on Bitstamp and Coinbase and has so far refused to comply with the IRS demands. In his own words, he would give them “total vigilance” about his financial activity. However The IRS insists that the only way to prove Zietzke’s innocence is to investigate all transactions of all the bitcoin purses he owned this year.

Although nothing concrete has been achieved today, thousands of users in the United States could find themselves in the position William Zietzke is in today if the Zietzke IRS gets what it wants. In particular, the US Congress last year asked the IRS for clearer rules on crypto assets.


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