The United States Internal Revenue Service (IRS) has argued that its summons on major American crypto exchange Coinbase is indeed legitimate in a recent filing.

Per a Nov. 15 filing, the U.S. tax agency told a California federal court that its investigation of Coinbase customer William Zietzke is completely legitimate.

Zietzke claims summons was issued outside IRS's authority

Zietzke is attempting to quash the summons issued to Coinbase Inc. in June, which requested that they hand over his financial records pertaining to his 2016 return. Zietzke claimed that the IRS’s summons was too broad of a request, as it was not restricted to the 2016 tax year only. He added that the IRS wanted to obtain records that could compromise his financial and personal security if lost by the government.

However, the IRS was not impressed and said in a filing that the Washington resident was unable to show any reason why the summons should not be enforced. The IRS also laughed off Zietzke’s vague allegations, where he insinuated that the tax agency is developing a database, so they can 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.”

The IRS added:

“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.”

The IRS further explained that records beyond 2016 were necessary to determine his tax liability because Zietzke claimed a refund based on transactions involving Bitcoin (BTC) he obtained in 2011.

Tax clarity for cryptocurrencies

In November, the Democratic 2020 presidential candidate Andrew Yang promised to promote legislation on the crypto asset market space by defining what a token is, when a token is a security, and equally important, clarify the tax implications of owning, selling, and trading digital assets, among others.

Back in June, the U.S. Congressman (R-N.C.) Ted Budd testified to the House of Representatives Ways and Means Committee on issues with current tax laws on cryptocurrencies, arguing that the industry needs clear tax regulations.