A federal judge rejected a Washington resident’s request to stop the United States Internal Revenue Service (IRS) from receiving information about his BTC held on the Bitstamp exchange.
Judge John Coughenour of the Washington County District Court instead ordered the IRS to reduce the number of requests made to the Bitstamp exchange. This decision is noteworthy in that the judge rejected two arguments that cryptocurrency users often rely on: that the applicant has a constitutional right to financial integrity, and that third parties (in this case, a tax collector) cannot be trusted to protect confidential personal information.
According to the court, William Zietzke filed a motion to cancel the IRS disclosure requirements for Bitstamp after the agency began checking its cryptocurrency assets and transactions in connection with the filing of the amended tax return.
Tsitske recorded a capital gain of $ 104,482 for 2016, with two transactions with BTC apparently making up the bulk of his income. However, in 2017, he realized that the transactions did not take place in 2016, and filed a revised declaration showing a capital gain of only $ 410, and demanded the return of taxes paid by him.
In response, the IRS began checking its cryptocurrency transactions, identifying the various services that it used, including Bitstamp. The agency turned to the exchange to determine how many transactions and for what amounts in BTC Tsitske sent through the exchange from the moment the account was opened.
The judge agreed with Tsicke’s argument that the IRS request was too ambitious, but rejected his other arguments. Including regarding the bad faith request of the IRS and the fact that the agency already had the necessary information, as well as that the Tax Service “did not take the administrative steps” required by law.
The judge dismissed several of Tsitske’s arguments, noting that the IRS conducts an audit of its assets and operations that meets legal requirements and there is no evidence that the IRS is acting in bad faith. The judge’s order states that the IRS request to the exchange should be limited only to those operations that were completed in 2016. The IRS now has two weeks to submit a revised request to Bistamp.
Tax Service spokeswoman Dean Patterson declined to comment, saying “federal law prohibits the IRS from discussing specific taxpayers.” Despite Tsitske’s efforts, the judge’s decision suggests that the IRS will ultimately receive the necessary information about the user’s cryptocurrency transactions.
“Like many other things in life, cryptocurrency transactions have tax consequences,” the judge said.
Recall that in mid-October, the US IRS added cryptocurrencies to the taxpayer reporting form. Earlier that month, the Revenue Service issued the yjdjc manual, which was the first document published in the United States in five years regarding the calculation of taxes on cryptocurrency transactions, as well as when receiving new coins as a result of forks and distributions by developers.