Monthly Archives: April 2022

According to TIGTA Report Number: 2022-30-019, additional actions are needed to address non-filing and non-reporting compliance under FATCA.

Due To Resource Limitations, The IRS Has Significantly Departed From Its Original Comprehensive FATCA Compliance Roadmap In Favor Of A More Limited Compliance Effort.

As part of its effort, the Large Business and International (LB&I) Division established two campaigns to identify noncompliance with the individual and FFI provisions of FATCA. 

The chart below reflects nearly $574 million of FATCA-related implementation and maintenance costs compared against the LB&I Division’s campaign compliance results from the IRS’s systemic approach to address FATCA noncompliance, as well as FATCA-related assessments from field examinations.

Campaign 896 - Offshore Private Banking (related to individual taxpayers) has been able to complete a review of FATCA forms filed for Tax Years 2017 and 2018; the LB&I Division issued 830 “education letters” and five “soft letters” (soft letters do not necessarily result in compliance action) for Tax Year 2018. 

Initially, Campaign 896 Focused Only On Taxpayers Who
Have Underreported Their Foreign Assets On The
Forms 8938 And More Recently Started To Plan To
Address Taxpayers Who Have Not Filed Forms 8938.

IRS data show there are over 330,000 U.S. taxpayers from 2016 to 2019 who failed to file Form 8938, each with foreign accounts over $50,000. Potentially, these taxpayers would have owed at least $10,000 each in FATCA-related penalties, for a total of $3.3 billion in penalties. A portion of this population could be due to errors in IRS data, misreporting, or failure to file due to reasonable cause, which would reduce the total subject to penalties.

Campaign 975 - FATCA Filing Accuracy (related to the FFIs) has been able to fully review only Tax Year 2016 cases. For Tax Year 2016, the IRS concluded that the majority of the FFIs identified for potential noncompliance were in fact compliant. Only 12 “soft letters” were sent out between November 2019 and October 2020.

TIGTA made six recommendations to help the IRS address non-filing and non-reporting compliance under FATCA. The IRS agreed to consider expanding the scope of Campaign 975 to address noncompliance by the FFIs from Intergovernmental Agreement countries, and to establish goals, milestones, and timelines for FATCA campaigns. IRS officials indicated that they have already implemented most of the other recommendations; however, they did not agree to issue a notice to countries with Model 1 Intergovernmental Agreements

 Have an IRS Tax Problem?

Read more at: Tax Times blog

According to Law360, Individuals who, over the past decade, amassed a small fortune in virtual currencies or other assets, who then expatriated from the United States without subjecting those assets to the expatriation tax, may feel like they have successfully flown under the radar of IRS’ civil and criminal tax enforcement.

Recent IRS Enforcement Initiatives, However, Including The IRS 2019 Expatriate Compliance Campaign And Its 2018 Virtual Currency Compliance Campaign, Suggest That The IRS Has Not Been Idle And Is Now Publicly And Officially On The Hunt.

Taxpayers should check whether it is still possible to correct the tax return or file a Voluntary Disclosure in order to avoid any criminal proceedings and penalties, as well as administrative costs.

Have a Virtual Currency Tax Problem?

Value Your Freedom?

Contact the Tax Lawyers at

Marini & Associates, P.A. 

 

 for a FREE Tax Consultation 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

The federal government and several other states have increased their focus on the regulation and taxation of cryptocurrency and other digital assets. 

On March 9, 2022, President Biden issued an executive order calling for evolution and alignment of the federal government’s approach to digital assets with key priorities to include: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation. This call to action reflects the government’s desire to take more focused and coordinated steps to address the risks and cultivate the benefits of digital assets and their related technology.

From a federal tax perspective, the IRS began its focus on the taxation of “virtual” currency nearly a decade ago. Over the years, the IRS disseminated guidance in this area including IRS Notice 2014-21, IRB 2014-16 (and related FAQs), Rev. Rul. 2019-24, IRS Chief Counsel Memorandum 202114040, and others. These authorities generally provide that virtual currencies are treated as property (not fiat currency) for federal income tax purposes, and they describe how existing tax principals apply to various virtual currency transactions.

Furthermore, the IRS Priority Guidance Plan for 2021-2022, which outlines the IRS’s priorities for allocating resources to matters most important to taxpayers and tax administration, includes as its focus: (i) general guidance concerning virtual currency; and (ii) regulations regarding information reporting on virtual currency under Sec. 6045 of the Internal Revenue Code.

We have previously posted:

• IRS Cryptocurrency Enforcement and Stablecoins 
• Proposed FBAR Reporting For Crypto
• 2023 IRS Cryptocurrency Reporting Requirements
• Justice Announces First Director of National Cryptocurrency Enforcement Team
• IRS Seized $3.5B In Crypto In Fiscal 2021 and May Seize Billions More In 2022
• Cryptocurrency Is The IRS Criminal Investigation Unit's Primary Focus 

Both New York and New Jersey have joined a handful of states in addressing the tax treatment of virtual currencies from an income, sale/exchange and sales tax perspective. California Attorney General Rob Bonta recently acknowledged that crypto is an “area of concern.” 

The current tone of the rhetoric from our legislative and executive branches suggests that tax authorities will continue to focus more on providing detailed rules applicable to taxation, reporting, and compliance with respect to digital assets.

Taxpayers should check whether it is still possible to correct the tax return or file a Voluntary Disclosure in order to avoid any criminal proceedings and penalties, as well as administrative costs.

Read more at: Tax Times blog

Cryptocurrencies have garnered an increasing amount of attention from the IRS in the last several years. Guidance documents have been issued to clarify the tax treatment of cryptocurrency, and enhanced enforcement efforts have been undertaken to ensure taxpayer compliance with tax reporting obligations. 

Recently, a Type of Cryptocurrency Known as “Stablecoins”
Has Experienced Rapid Growth, Becoming The Fastest Growing Segment Of Cryptocurrency With Market Capitalization Surpassing $30 Billion as of January 2021.

As their name implies, “stablecoins” are designed to avoid the price instability that often accompanies more traditional types of cryptocurrency, such as Bitcoin. With their increasing popularity, determining the proper tax treatment and reporting of stablecoins is becoming a more pressing issue for tax policymakers and practitioners. Stablecoins are digital currencies that are price-stabilized by collateralizing and/or pegging them to an underlying, more stable asset such as the U.S. dollar (USD) or gold. Traditional cryptocurrencies such as Bitcoin, Ether, Ripple, and many others have long been plagued by extreme price volatility. 

Stablecoins use collateral to reduce volatility while retaining other benefits of digital currencies such as liquidity, transparency, and immutability through cryptography, encryption, and hashing. Users can conduct transparent peer-to-peer transactions, eliminating middlemen and many, if not all, of the fees typically associated with financial transactions. Because stablecoins are digital currencies that function on blockchain technology, they support real-time transactions and are available for use by anyone, anywhere in the world.

Stablecoins are generally differentiated based on the collateral used to reduce volatility in their price. Categorization based on collateral results in four general types of stablecoins:

1. Fiat-collateralized stablecoins.
2. Commodity-collateralized stablecoins.
3. Cryptocurrency-collateralized stablecoins.
4. Algorithmic (non-collateralized) stablecoins.

While fiat currencies such as the USD have served the role of money for centuries, there is increasing demand for global electronic payment systems to augment or even replace centralized, fiat-based systems. .

Businesses and consumers do not want to be exposed to unnecessary currency risk when transacting in cryptocurrencies. Businesses will not pay someone a salary in Bitcoin if the exchange rate between the salary in USD and Bitcoin is constantly fluctuating. Most who would consider using cryptocurrencies are not interested in speculating. Users want a store of value on a censorship-resistant ledger, escaping the local banking system, currency controls, or a collapsing economy. To date, cryptocurrencies such as Bitcoin and Ethereum have not been able to offer that.

To solve the volatility problem of cryptocurrencies, in late 2014, an organization called Tether Limited issued the first successful stablecoin, Tether, that was collateralized by USD (and later other fiat currencies and even gold). While extremely successful, Tether has been the subject of controversy and government investigations. Much of the controversy centers around whether Tether maintained the promised 1-1 collateralization ratio of Tether to USD.

Taxpayers should check whether it is still possible to correct the tax return or file a Voluntary Disclosure in order to avoid any criminal proceedings and penalties, as well as administrative costs.

Read more at: Tax Times blog