It is a well-known fact that the IRS is targeting cryptocurrecy users for quite some time now. While the agency is legally allowed to do so, their approach doesn’t please everyone. One New Hampshire Bitcoin trader is even taking the agency to court.
Not Everyone Likes the IRS
Many Bitcoin users across the United States try to avoid the IRS. Dealing with the national tax agency head-on is often a very bad idea. Those who have reported their cryptocurrecy activity properly should have nothing to worry about. That is, other than having a lot of financial information exposed to the tax agency.
Some cryptocurrency users are drawn to this form of money due to the perceived privacy. Unfortunately, that layer of privacy can be eroded fairly quickly. Anyone on the IRS’ radar has received at least one letter in the past year, asking them about their crypto asset holdings. It is this letter that has upset one New Hampshire-based cryptocurrency user.
James Harper is suing the IRS over its recent “crackdown” against cryptocurrency users. More specifically, he claims that demanding private financial information – or seizing it through other means – violates the Fourth and Fifth amendments. As the IRS can do so without any judicial process, it was to be expected some concerns would arise.
In the complaint, Harper states how he has properly paid taxes on Bitcoin since 2013. Any transaction affecting his portfolio can be linked to the Coinbase, Abra, and Uphold trading platforms. Harper also states how these exchanges are supposed to protect his private information. When the John Doe summons letter from the IRS arrived in 2019, he immediately knew something was up.
Violating two Amendments
In the document, it is mentioned how the IRS received records with a valid subpoena, court order, or warrant. Violating the Fourth Amendment may not have been the smartest play by the IRS. Proving that the agency effectively violated the amendment is something else entirely.
Making matters more interesting is how the IRS also violated the Fifth Amendment. It contains a Due Process Clause, which should prevent the agency from taking private financial information from third parties without using the proper channels.
If both claims can be proven, there will be severe consequences. It may even provide ample reason to reform constitutional privacy law in the United States. Additionally, it would be a moral victory for all cryptocurrency users opposing the IRS’ aggressive approach. To be continued……