Key points to remember
- The US District Court in New Hampshire ruled in favor of the IRS, ruling that John Doe’s summonses do not violate US constitutional rights.
- The ruling asserted that private citizens are not permitted to sue the IRS for alleged tax violations.
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A The US Federal Court has confirmed that the Internal Revenue Service (IRS) has the power to demand user data from Coinbase, a major cryptocurrency exchange. The verdict dismissed constitutional objections raised by early cryptocurrency trader James Harper. according in the official file.
Harper’s lawsuit against the IRS, its former commissioner Charles Rettig and ten agents claimed rights violations through a “John Doe” summons. A John Doe summons occurs when the IRS requests – or demands – information about an anonymous taxpayer, usually one who holds funds in an offshore bank account, according to the taxman.
SEO In the 2021 Supreme Court decision of CIC Services LLC v IRS, the U.S. District Court in New Hampshire ruled that the powers of the IRS, granted by Congress, meant Harper had no additional protections or relief. Harper had previously argued that the request violated his Fourth and Fifth Amendment rights, according to the filing. The court document further confirms this, stating:
“With respect to Harper’s statutory claim, the statute at issue does not expressly or implicitly grant taxpayers a private right to sue the IRS for alleged violations of law.”
Despite Harper’s resistance, Coinbase should have disclosed the data of its top users in response to a summons against the exchange. The IRS took action against Harper’s failure to report his crypto transactions in 2013 and 2014.
On September 22, 2022, U.S. District Judge Paul G. Gardephe allowed the IRS to issue a John Doe summons to MY Safra Bank in an effort to identify US taxpayers who may have failed to fully report their cryptocurrency transactions.
This summons from John Doe specifically targets clients of the leading cryptocurrency broker, SFOX, who have used the services of MY Safra Bank for their digital currency transactions.
“John Doe’s summons directs MY Safra to produce records that will allow the IRS to identify U.S. taxpayers who were customers of SFOX and who engaged in cryptocurrency transactions that may not have not been correctly reported on tax returns.”
Assistant Deputy Attorney General David A. Hubbert said in response, “Taxpayers who transact with cryptocurrency should understand that income and gains from cryptocurrency transactions are taxable. The information sought by the summons approved today will help ensure that cryptocurrency owners comply with tax laws.