Privacy for Crypto Users Is at Issue in IRS Court Challenge – CoinDesk

The Internal Revenue Service’s latest response in its ongoing privacy lawsuit with James Harper is in, and it seems the U.S. government tax agency is determined to miss the point, according to the defendant’s attorney. 

The Department of Justice, representing the IRS, has responded to pushback on its motion to dismiss the ongoing James Harper v. Charles P. Rettig, et al. lawsuit over allegations by Harper that the IRS violated his constitutional rights. 

Harper’s case may have widespread implications for privacy laws regarding cryptocurrency users if he wins. 

Harper filed a lawsuit against the IRS in 2020 over the governmental body’s alleged overreach in requesting vast amounts of records from the popular exchange Coinbase based on nothing more than users’ volume of cryptocurrency use, according to the plaintiff. The end result was the IRS sending 10,000 letters to crypto holders, warning they may not have paid taxes properly even if, as Harper alleges, they did. 

The DOJ initially filed a motion to dismiss the case in December. Harper’s team responded with a motion objecting to that dismissal, which was filed in mid-January. On Monday, the DOJ filed its latest response to that objection, re-emphasizing that Harper’s lawsuit should not be subject to judicial review. 

“They are 100% committed to the idea that I’m supposed to raise this issue by filing for a refund on taxes that I voluntarily paid and that I don’t dispute owing,” said Harper in reaction to the filing. 

The latest legal filing by the DOJ states that “plaintiff’s remedy here is the same as the remedy available in Florida Bankers Association: if the IRS contends Plaintiff owes a tax, Plaintiff can challenge the [IRS’] actions prior to assessment in Tax Court or, after assessment, through a refund proceeding.” 

“If IRS agents broke into my home and rifled my papers, finding that I had no more tax liability, should I file a claim for a refund to address that conduct?” said Harper in a comment shared by his attorneys. 

The DOJ declined to comment because the legal case is ongoing. 

In August 2019 James Harper received a letter from the IRS. So did 10,000 other people. The letter informed him the agency had obtained his financial records related to owning bitcoin. The IRS said the letter was “educational” and that the receivers had “potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly,” according to an IRS statement at the time. 

“Taxpayers should take these letters very seriously by reviewing their tax filings and, when appropriate, amend past returns and pay back taxes, interest and penalties,” said IRS Commissioner Chuck Rettig. “The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their…