My 1099s from several Schwab accounts are the basis for much of my tax return each year and I am quite grateful for the way Schwab abstracts so much complicated accounting into a single statement that both I and the IRS can trust without question.
Is there a BTC exchange that DOES provide 1099-type statements?
If I use my bank to transfer you money, the bank isn't responsible for filing a 1099 to report that income to you; I am. Using coinbase to transfer funds to you should be handled the same, and Coinbase is a wallet and merchant service as much as it is an exchange.
Now selling coins is always a taxable event. But when properly using an exchange, the coins should not be kept "on account." So ideally, every bitcoin sold was transferred into Coinbase/GDAX prior to the sale. How does Coinbase know the cost basis to report? It doesn't. Not unless that information is freely provided by the user, in which case it is fully unverifiable and the user would be free to put whatever the heck they want. Should Coinbase be required to file 100% self-reported tax information from its users without any way to verify the authenticity of that reported cost basis and time held?
Cypto-exchanges might be able to skirt those laws for now, because they're slightly different, new, and small, but if cryptocurrencies become mainstream the laws will be updated to include them.
In this way, it is the government who commits a crime, crusading into new territory and plundering those who object.
Why is this any different at all?
If you already paid taxes on them, you can demonstrate that pretty easily.
And since your bitcoin trades attached to your name can be linked to your tax returns I think they would absolutely know that you've already paid taxes on yours, and they will ask for your help in tracking down people for whom you did transactions so that they might connect their transactions to taxes that they have paid on them.
That said, you still did business in an unsanctioned proxy-currency. There's bound to be a cost to that.
Honestly, you should be upset with the broker (coinbase) for not providing you with suitable reporting documentation in the first place.
This is not a family law judge subpoenaing coinbase for records. I've actual been an expert witness on such a court case and where Coinbase complied and gave the transaction history, for the record.
This is not the FBI or some regulator's enforcement arm investigating money laundering and having a court order requesting details of specific accounts. I'm sure they comply there too.
Nor is the IRS requesting information on specific people they think failed to report their taxes. That too would be understandable.
This is a fishing expedition. The IRS is requesting coinbase to turn over all personal information of all accounts and the entire transaction histories, with no specific basis given.
This is the financial privacy equivalent of court-order wiretapping vs dragnet surveillance. It is entirely reasonable to be angry about this.
Case in point: I bought and sold bitcoin on Coinbase at that time, as part of my non-registered sole proprietorship consulting business--I was paid by my clients in bitcoin, and purchased some on behalf of my father. As per the advice received by my accountant at that time, prior to publication of any IRS rules regarding bitcoin, I merely reported aggregate values of my own sales, not individual trades, on my Schedule C business income part of my personal 1040. Even in light of later advice published by the IRS, it's not clear that this was the incorrect way to file since it business income is handled differently. So I paid my taxes, legitimately, but there's no mention of bitcoin, or the individual trades that were made to cash out that bitcoin on Coinbase.
But, it now seems that the IRS is going to get a data dump that has my name and a bunch of bitcoin trades from years ago, and have no way of knowing that I already paid taxes on them. And, bad on me, I'm not sure I have sufficient record to prove my story, or if I do it will take a lot of unpaid work to put together. So I'm either going to get hit with an excessively large tax bill, or deal with a lot of pain and suffering and personal cost fighting this in tax court, losing a ton of my time for having done nothing wrong.
Fuck that. That's why we have due process and don't allow law enforcement fishing expeditions. False positives have a cost.