A federal judge has indicated that A person may not have the power to force the Internal Revenue Service (IRS) to delete financial records received from cryptocurrency exchanges.
With the grant of an application for dismissal filed in December, the judge has Joseph DiClerico in the New Hampshire District suggested that the Internal Revenue Service is under no obligation to honor requests to clean up cryptocurrency transaction records received from Coinbase or other exchanges regarding federal tax information. The civil rights battle of plaintiff James Harper against IRS Commissioner Charles Rettig, the agency and its officials was dismissed in part for lack of jurisdiction and closed after almost a year in court.
Today’s release said that Harper was not entitled to damages or to have the IRS limited in its ability to obtain tax information from exchanges, primarily due to the Injury Act.. The law applies only to federal taxes and prevents federal courts from exercising jurisdiction in certain cases to hinder “the assessment or collection of taxes”.
“The injunction and disclosure requested by Harper would prevent the IRS from evaluating Harper or others’ taxes based on information obtained through the John Doe process from a third party.” Judge DiClerico said. “Consequently, his assertion, in so far as it seeks a precautionary measure, is prohibited by law against precautionary measures.”
Harper had a Coinbase account from 2013 and received Bitcoin (BTC) deposits as income from consulting assignments for the first time. He claims that he declared cryptocurrency transactions as capital gains on his tax return until he liquidated and transferred all stocks on the exchange as well as all BTC in Abra and Uphold in 2016.
In 2019 IRS sent 10,000 letters to crypto investors Clarification of the requirements for the tax return for digital assets and apparently suggest they pay outstanding taxes? The letter contained a veiled threat to cryptocurrency users “Subject to future civil and criminal enforcement measures” in the event that they have not declared and paid taxes on the stocks.
According to reports Harper had no cryptocurrency on Coinbase since 2016 and the exchange said in its terms of contract that it would protect users’ personal information from “loss, misuse, unauthorized access, disclosure, alteration and destruction”. However, upon receiving the letter from the IRS, Harper concluded that Abra or Coinbase, or both, had provided the agency with his personal information.. In July 2020, he filed a civil rights lawsuit against the IRS alleging the tax authority violated his fourth and fifth amendments.
A 2017 federal case involving Coinbase was referenced in the court documents where this was stated The IRS, which receives personal financial information from the exchange, has been rated “Tax Compliance, Not Investigation” which “serves the legitimate investigative purpose of enforcing tax laws against those who benefit from virtual currency trading.” That decision, and today’s decision, could indicate that cryptocurrency users have little recourse when an exchange like Coinbase shares their personal information in response to a subpoena or request for information from the IRS.
The judge’s decision comes just three weeks before the April 15th U.S. tax filing deadline.