Regulation

New Hampshire Resident Sues The IRS For Collecting Crypto Data

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A New Hampshire resident sued the IRS for collecting crypto data unlawfully from cryptocurrency companies as we can see more in our latest crypto news today.

The US Internal Revenue is being sued by a New Hampshire resident named James Harper for collecting private and financial data from a crypto trading platform. Harper is one of more than 10,000 crypto holders that received a letter from the IRS accusing them of improper reporting of crypto transactions. According to the complaint filed earlier this month with the US Court of Appeals for the First Circuit, the IRS took Harper’s data without “reasonable suspicion and without a judicial warrant” which means it violated his constitutional rights protected by the 4th and 5th amendments. The appeal follows a decision by the US District Court for the District of New Hampshire to dismiss legal actions against the IRS where Harper sought damages and injunction requiring the tax agency to delete all of the private financial data that is obtained.

Pointing to the contracts that he signed with crypto exchanges, Mr. Harper claimed that each of the companies agreed to provide robust privacy protections to the financial records and supplied him with a reasonable expectation of privacy in his personal information. He argued that the contracts recognized that his data is his property and made it clear that he didn’t voluntarily surrender his 4th Amendment rights by doing business with the companies. As per the court documents, Harper had accounts with Abra, Uphold, and Coinbase. Since Uphold confirmed it didn’t provide the private financial information to the IRS, he alleged that the authorities obtained it from either Abra or Coinbase.

Mr. Harper opened an account with Coinbase in 2013 with the exchange providing terms of agreement stating that it will “take reasonable precaution to protect personal information from loss, misuse, disclosure, unauthorized access, alteration, and destruction.” In 2013 and 2014 Mr. Harper deposited BTC he received as income from his consulting work into his Coinbase account as the litigant alleged that he declared both the transaction on his tax returns and all appropriate income from BTC payments including capital gains tax.

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Prior to the March 2021 district court’s ruling, Mr. Harper received a letter from the IRS with the agency claiming that he hasn’t reported properly his transactions involving virtual currency and in the press release, the IRS urged taxpayers to take these letters very seriously and correct previous errors. The lawyers are confident that the Supreme Court should reinstate the lawsuit.

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