Crypto trader loses appeal to stop IRS from accessing exchange data

A US crypto trader who tried to stop the IRS from accessing his exchange accounts has been struck down in court, despite apparent precedent.

Crypto trader James Harper, who sought to stop the US government from accessing details of his crypto holdings, was derailed for a second time after the state’s appeals court decided against reviving an already-dismissed suit.

As reported by Law360, Harper was one of more than 10,000 crypto holders who received a letter from the IRS in mid-2019, informing them that the government had gained access to their crypto exchange data.

The letters were sent as the IRS sought to investigate suspected omissions on crypto traders’ tax returns. However, in this case, it gave no indication of what Harper or any of the other recipients might’ve done wrong.

Harper sued the IRS for allegedly breaching his constitutional rights last year, but the case was dismissed by a New Hampshire federal court in March.

He claimed that IRS attempts to gather information from one of three crypto exchanges without prior warning violated his fourth and fifth amendment rights.

Despite his claims, the federal court previously determined Harper’s request to restrict access to his exchange data would “prevent the US from assessing or collecting federal taxes.”

As such, Harper’s lawsuit was in breach of the Anti-Injunction Act (AIA) — which prohibits any suit that may interfere with the US government collecting taxes.

“A taxpayer cannot avoid the reach of the AIA by framing his claims as constitutional violations,” said the court.

Courts opted out of crypto trader’s whataboutism

Harper says he’s not challenging collecting his taxes per se, rather the way in which the IRS went about accessing his data.

He also attempted to draw parallels with May’s Supreme Court decision that handed victory to tax advisory firm CIC, where it won the right to set aside collection notices, and even outright sue the IRS.

The US government however pointed out that Harper’s case and CIC’s are quite different.

“The plaintiff in [CIC’s lawsuit] sought to avoid the economic burdens of providing information about other taxpayers to the IRS and challenged its legal obligation to do so,” said a government representative.

“Here, the taxpayer simply does not want the IRS to possess information bearing on his tax liability.”

The IRS sent a warning to crypto traders earlier this year.

There’s no word yet from Harper’s legal team on this latest ruling. But back in July, Harper’s lawyer again referenced the CIC case, saying:

“After CIC, it is not sufficient for IRS to claim that the information it possesses ‘may culminate in the assessment or collection of taxes.'”

“By that logic, all information the IRS comes into possession of — whether obtained by following proper procedures or otherwise — could culminate in the assessment or collection of taxes. But the Fourth and Fifth Amendments to the Constitution do not contain an IRS exception.”

So, it seems in this crypto trader’s case, there’s no stopping the US government from accessing crypto exchange data — especially if that data proves it’s owed taxes. Go figure.

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