Monthly Archives: October 2021

The extension of the statute of limitations for failure to report Subpart F income applies to a taxpayer's entire return, not just the Subpart F-related items, the IRS said in an Office of Chief Counsel memorandum released on October 22, 2021.

In memorandum 202142009, the Internal Revenue Service said that when the statute of limitations is extended to six years under Internal Revenue Code Section 6501(e)(1)(C) for failure to report Subpart F income, the extension applies to the entire return. 

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According to Law360, Cryptocurrency has become a primary focus for the Internal Revenue Service's Criminal Investigation division because the technology offers a convenient means to hide assets and income as well as facilitate other types of criminal activities, an agency official said.

The CI division is leading the way when it comes to tracing cryptocurrency and identifying criminal activity that's related to emerging cryptocurrency markets, said Ryan L. Korner, the special agent in charge of the CI division's Los Angeles field office. Korner spoke late Thursday during a virtual conference hosted by the University of California, Los Angeles Extension.

"It's One Of Our Top Priorities," He Said.
"We're Really Looking At Cryptocurrency From Several Different Perspectives, Obviously No. 1 Being Tax Crimes."

The IRS has been cracking down on cryptocurrency traders to increase tax compliance, as demonstrated in 2019 by the agency sending 10,000 letters warning cryptocurrency users to properly report and pay taxes on these transactions. A notice from 2014 requires cryptocurrency to be reported the same way as any other gain or loss on the sale or exchange of property, and additional guidance issued in 2019 did not change that position.

When examining cases involving virtual currency, Korner said the division is looking into a taxpayer's intent to hide assets or income using cryptocurrency or whether there is some sort of legitimate purpose for their cryptocurrency holdings, such as investment. 

The CI Division Is Skilled At Evaluating The Difference Between A Misunderstanding Of The Law And
A Willful Intent To
Evade Taxes, He Said.

"CI doesn't have the resources to waste in investigating innocent taxpayers," Korner said. "So we're doing a lot of work to make sure on the front end [that] when we initiate an investigation, we're looking at someone who actually has criminal culpability." Him him him him him

• In fiscal year 2021 as of Aug. 31, CI had more than 150 "Cyber Cases" in inventory and about 90 of those were directly related to cryptocurrency, Korner said. 
• Of the 230 cases in the pipeline in which prosecution recommendations have been made to the U.S. Department of Justice, approximately 80 cases were directly related to cryptocurrency, he said.

"We [also] had over $3.5 billion in seizures stemming from virtual currency investigations in FY 21, and that's about 90% of our total seizures for the year," he said. "So you can see we have got a lot of activity in this virtual currency space."

CI has become good at tracing cryptocurrency through its use of data analytics, which continues to be one of the primary weapons to combat tax fraud, Korner said.

The IRS has deployed a system by Palantir Technologies Inc. that enables personnel in every agency unit to cull vast quantities of data from both internal and external sources in a single, unified research platform. The agency announced a seven-year, $99 million deal with Palantir, which is based in Palo Alto, California, in September 2018.

Palantir continues to be the IRS' No. 1 choice in the field and the government continues to add new cryptocurrency-related data sets to the Palantir database, Korner said. In addition, the IRS is using information from cryptocurrency exchanges to gather that data through cyber crime units, he said.

One way data analytics is being used is to identify non-filers who have significant virtual currency activity by comparing received data with tax filings, Korner said. CI also identifies people who have purchased significant assets such as gold and real estate that are beyond their afforded means using cryptocurrency, he said.

But data analytics is not the only tool that's used and hasn't replaced boots-on-the-ground case development and investigative work, Korner said. CI continues to focus on developing informants in the virtual currency industry and continues to collaborate with federal, state and international law partners to identify other trends for tax noncompliance in the cryptocurrency space, he said.

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According to Law360, the IRS' Large Business and International Division said that it will accept all requests to meet virtually with government employees, extending a practice established during the coronavirus pandemic to help offer an alternative to in-person meetings all around or telephone discussions.

The Internal Revenue Service Will Allow Large-Business Taxpayers To Meet Using Secure Videoconferencing Through Platforms Such As WebEx And ZoomGov,
The Government Said In A Memorandum To LB&I Employees.

"Since 2020, we advanced several measures to better interact virtually and digitally with large business taxpayers," LB&I Commissioner Nikole Flax, who was appointed to the position in April, said in a statement. "Our success in using these tools and the convenience and efficiency for taxpayers and their representatives convinced us that the way forward will continue to involve the use of video teleconferencing."

LB&I is the division within the IRS that is in charge of tax administration for domestic and foreign companies with assets over $10 million that must report federal taxes, global high-wealth individuals and international individual compliance programs.

Based on feedback the IRS received on its operations during the pandemic, the agency determined that telephone communications are not always productive or adequate, the IRS said. In response, if a taxpayer requests a video meeting on an approved platform, an IRS employee will grant that request, according to the LB&I memorandum.

LB&I's decision to accept all virtual meeting requests demonstrates how the agency has been working with taxpayers virtually, especially in conjunction with other programs such as expanding the use of secure email and creating a virtual reading room, the IRS said. These other programs allow parties to share certain privileged documents in a read-only capacity, the government said.

"These efforts are aimed at continuing to improve service to meet the needs of large business taxpayers and their representatives and are a part of the IRS' ongoing commitment to find more convenient and effective ways to interact with taxpayers and the community of tax professionals," the IRS said.

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Read more at: Tax Times blog

According to Law360, the current Infrastructure Bill was modified by congressional Democrats to loosened their proposal to require banks to file annual tax information returns with customer account data, raising the reporting threshold from $600 to more than $10,000 and provide an exemption for wage earners and those whose income comes from federal programs such as Social Security.

Banks would not be required to report specific transactions to the IRS, Wyden said, only those that result when taxpayers save for major purchases valued above $10,000. He said the IRS would receive only two specific pieces of information: the total amount going into and out of an account.

As originally proposed this year in the Treasury Green Book, the Internal Revenue Service information reporting proposal would require banks to file tax information returns on their customer accounts with data on gross inflows and outflows, cash and foreign transactions, and transfers among each customer's different accounts.

U.S. Treasury Secretary Janet Yellen released a statement Tuesday saying the IRS reporting proposal is needed to help the agency collect taxes from wealthy Americans with opaque sources of income that typically avoid the scrutiny that wage income undergoes.

"This Two-Tiered Tax System Is Unfair And Deprives The Country Of Resources To Fund Core Priorities," Said Yellen,

adding that the administration of President Joe Biden wants to focus on collecting unpaid taxes from Americans at the top of the income scale.

Citizens are worried the proposal will turn "bank presidents, community bankers, credit unions, lenders and tellers into spies for the IRS," he said.

Taxpayers reporting $0 to $100,000 in adjusted gross income on Schedule C were responsible for about 73% of unreported income while taxpayers earning $500,000 and over were responsible for about 4%, Barthold said. 

Republicans said this analysis shows the IRS reporting proposal would impact average Americans not just the uber-wealthy.

"The reality is wealthy people often earn their income through partnerships or other ways in which they can sell an asset for $2 million, put that $2 million in the bank account and tell the IRS that they only earned $200,000," he told lawmakers.

The IRS would be able to "spot when a wealthy tax cheat has millions of dollars flowing into an account, but isn't reporting that money on their tax return," she said. "Their wealthy clients are outright lying about this proposal, claiming that it would give the IRS information on individual transactions."

This mandate could reach anyone who accepts cryptocurrency for goods or services, leaving those who fail to properly complete their paperwork facing ruinous fines and even prison. Imposing it is unnecessary, ill-advised and possibly unconstitutional.

The ostensible purpose of this requirement is to enhance tax collection. Those who share detailed personal and financial information with their bank cannot complain, when the bank shares some of that information with the government.

Person-to-person crypto transactions are fundamentally different. They involve no third party. Recipients of cryptocurrency have no reason to gather the sender's personal information and senders have no reason to offer it.

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Read more at: Tax Times blog