Monthly Archives: March 2022

The IRS announced on March 21, 2022, that Money received through ‘crowdfunding’ may be taxable. 

Crowdfunding is a method of raising money through websites by soliciting contributions from a large number of people. The contributions may be solicited to fund businesses, for charitable donations, or for gifts. In some cases, the money raised through crowdfunding is solicited by crowdfunding organizers on behalf of other people or businesses. In other cases, people establish crowdfunding campaigns to raise money for themselves or their businesses.

he crowdfunding website or its payment processor may be required to report distributions of money raised if the amount distributed meets certain reporting thresholds by filing Form 1099-K, Payment Card and Third Party Network Transactions, with the IRS. If Form 1099-K is required to be filed with the IRS, the crowdfunding website or its payment processor must also furnish a copy of that form to the person to whom the distributions are made. The American Rescue Plan Act clarifies that the crowdfunding website or its payment processor is not required to file Form 1099-K with the IRS or furnish it to the person to whom the distributions are made if the contributors to the crowdfunding campaign do not receive goods or services for their contributions.

Prior to 2022, the threshold for a crowdfunding website or payment processor to file and furnish a Form 1099-K was met if, during a calendar year, the total of all payments distributed to a person exceeded $20,000 in gross payments resulting from more than 200 transactions or donations.

For Calendar Years Beginning After December 31, 2021,
The Threshold Is Lowered And Is Met If, During A
Calendar Year, The Total Of All Payments Distributed
To A Person Exceeds $600 In Gross Payments,
Regardless Of The Number Of Transactions Or Donations.

Accordingly, if a crowdfunding website or its payment processor makes distributions of money raised that meet the reporting threshold, and the contributors to the crowdfunding campaign received goods or services for their contributions, then a Form 1099-K is required to be filed with the IRS. Additionally, if the distributions of the money raised are made to the crowdfunding organizer, a copy of the Form 1099-K must be furnished to the organizer; alternatively, if the distributions of the money raised are made directly to individuals or businesses for whom the organizer solicited funds, the Form 1099-K must be furnished to those individuals or businesses that receive amounts that meet the reporting threshold.

A person receiving a Form 1099-K for distributions of money raised through crowdfunding may not recognize the filer's name on the form. Sometimes the payment processor used by the crowdfunding website, rather than the crowdfunding website itself, will issue the Form 1099-K and be included as the filer on the form. If the recipient of a Form 1099-K does not recognize the filer's name or the amounts included on the Form 1099-K, the recipient can use the filer's telephone number listed on the form to contact a person knowledgeable about the payments reported.

Box 1 on the Form 1099-K will show the gross amount of the distributions made to a person during the calendar year, but issuance of a Form 1099-K doesn't automatically mean the amount reported on the form is taxable to the person receiving the form. As discussed below, the income tax consequences depend on all the facts and circumstances. If the distributions reported on a Form 1099-K are not reported on the tax return of the recipient of the form, the IRS may contact the recipient for more information. The recipient will have the opportunity to explain why the crowdfunding distributions were not reported on the recipient's tax return.

See FS-2022-20 four more information regarding "Crowdfunding."

Have an IRS Tax Problem?

 

Read more at: Tax Times blog

According to Law360, the Internal Revenue Service is in a position to resolve its backlog of unprocessed tax returns, which number in the tens of millions, by the end of this year, IRS Commissioner Chuck

Rettig told House lawmakers on March 17, 2022.

Barring any unanticipated developments, such as those related to the pandemic, the IRS should be able to enter the next calendar year having resolved its backlog, Rettig said during a hearing before the Ways and Means oversight subcommittee.

In testimony provided to the Senate Finance Committee last month, National Taxpayer Advocate Erin Collins said that as of early February, the IRS had approximately 23.5 million returns, correspondence and account management cases in its inventory that needed to be processed manually. The IRS announced in January that it would be deploying so-called surge teams that would help return the agency's processing and correspondence inventories to a "healthy level."

As part of the surge teams, the IRS has brought 800 experienced employees onto its account management team and, as of Thursday, has added 700 workers to its submissions processing operations, Rettig said during the hearing.

The IRS was also granted direct-hire authority from the Office of Personnel Management to fill some 10,000 entry-level positions in submission processing and account management, Tony Reardon, head of the National Treasury Employees Union, previously told Law360. That authority went into effect only two days ago, Rettig said.

Employees can be on-boarded within 30 to 45 days under the direct-hire authority, Rettig said, compared with the normal six- to eight-month process.

"I'm pleased to say that we put out that announcement and we received multiples of that from folks who are coming on board," he said.

Still, the IRS is consistently "out-gunned" when it comes to complex matters involving partnerships, despite having 6,500 experienced field agents active, Rettig said.

"We do not have the resources to go after the 'bigs' or the 'super bigs' as we refer to them," he said.

Rettig has previously told lawmakers that the agency is outmanned on those types of issues.

Read more at: Tax Times blog

According to Law360, the Internal Revenue Service's Criminal Investigation division lost about a quarter of its workforce since 2010.

The IRS Said In a Fact Sheet That The Division's Staff Had Dropped About 25%, to Below 3,000 Employees, From 4,017 in 2010.

Nonetheless, the agency said, the division managed last year to identify $10.4 billion in tax fraud and financial crime and likely deterred at least an equivalent amount of criminal behavior, using a budget of $600 million.

The IRS also released an item highlighting broad categories of cases the CI division tackles, including tax, narcotics and cryptocurrency investigations, with specific case examples under each umbrella.

 Failed To File or Pay Your Taxes?

Read more at: Tax Times blog

According to Law360, a California woman the government is suing in federal court for nearly $120 million in penalties over alleged violations of foreign bank account reporting rules is not complying with IRS summonses, the U.S. said on March 16, 2022.Barry without The case is U.S. v. Francis Burga et al., case number 5:18-cv-01633, in the U.S. District Court for the Northern District of California, San Jose Division.

Francis Burga has produced documents sought by the Internal Revenue Service, according to a status report filed by the U.S., but hasn't indicated when additional documents she requested from another individual will arrive. The government has said that it can't determine whether she has complied with the summonses, which are being enforced by a court order, until it can review all the material they are expected to yield.

Efforts to enforce the summonses are unfolding parallel to a separate case centered on claims that Burga and her late husband willfully failed to file reports on their foreign bank accounts. She and Margelus Burga, founder of the data storage design and manufacturing company Glide/Write USA, had hundreds of bank accounts between 2004 and 2009 in several countries for which they failed to file the reports, the government said.

Read more at: Tax Times blog