Yearly Archives: 2022

The Infrastructure Investment and Jobs Act of 2021 (IIJA) was signed into law on Nov. 15, 2021. The IIJA includes IRS information reporting requirements that will require cryptocurrency exchanges to perform intermediary Form 1099 reporting for cryptocurrency transactions. Generally, these rules will apply to digital asset transactions starting in 2023.

Currently if you have a stock brokerage account, then whenever you sell stock or other securities you receive a Form 1099-B at the end of the year. Your broker uses that form to report details of transactions such as sale proceeds, relevant dates, your tax basis for the sale, and the character of gains or losses. Furthermore, if you transfer stock from one broker to another broker, then the old broker is required to furnish a statement with relevant information, such as tax basis, to the new broker.

The IIJA expands the definition of brokers who must furnish Forms 1099-B to include businesses that are responsible for regularly providing any service accomplishing transfers of digital assets on behalf of another person ("Crypto Exchanges"). Thus, any platform on which you can buy and sell cryptocurrency will be required to report digital asset transactions to you and the IRS at the end of each year.

Sometimes you may have a transfer transaction that is not a sale or exchange. For example, if you transfer cryptocurrency from your wallet at one Crypto Exchange to your wallet at another Crypto Exchange, the transaction is not a sale or exchange. For that type of transfer, as with stock, the old Crypto Exchange will be required to furnish relevant digital asset information to the new Crypto Exchange. Additionally, if the transfer is to an account maintained by a party that is not a Crypto Exchange (or broker), the IIJA requires the old Crypto Exchange to file a return with the IRS. It is anticipated that such return will include generally the same information that is furnished in a broker-to-broker transfer.

For the reporting requirements, a "digital asset" is any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology. Furthermore, the IRS can modify this definition. As it stands, the definition will capture most cryptocurrencies as well as potentially include some non-fungible tokens (NFTs) that are using blockchain technology for one-of-a-kind assets like digital artwork.

Furthermore, when a business receives $10,000 or more in cash in a transaction, that business is required to report the transaction, including the identity of the person from whom the cash was received, to the IRS on Form 8300. The IIJA will require businesses to treat digital assets like cash for purposes of this reporting requirement.

These digital asset reporting rules will apply to information reporting that is due after December 31, 2023. For Form 1099-B reporting, this means that applicable transactions occurring after January 1, 2023 will be reported. Whether the IRS will refine the Form 1099-B for digital asset nuances, or come up with an entirely new form, is yet to be seen. Form 8300 reporting of cash transactions will presumably follow the same effective dates.

Some things to keep in mind: 

1. If you use a Crypto Exchange, and it has not already collected a Form W-9 from you (seeking your taxpayer identification number), expect it to do so. 
2. The transactions subject to the reporting will include not only selling cryptocurrencies for fiat currencies (like U.S. dollars), but also exchanging cryptocurrencies for other cryptocurrencies. 
3. A reporting intermediary does not always have perfect information, especially when it comes to an entirely new type of reporting. 

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

In Jones (CA9 2/03/2022) 129 AFTR 2d ¶2022-380, another innocent spouse was found to be not so innocent and is was decided that the Tax Court properly determined that a taxpayer's joint return was valid and she wasn't entitled to innocent spouse relief. The Tax Court's determination that the taxpayer consented to filing a joint return was supported by the record, according to the Ninth Circuit.

Innocent spouse relief. Generally, married individuals can file joint returns with their spouses. Spouses who file joint returns are jointly and severally liable for the tax liability reported on that return. However, an individual who has filed a joint return may seek relief from that joint liability under the innocent spouse procedures. 

To be relieved of a tax liability on a joint return, a spouse seeking relief must, among other things, prove that when they signed the return (1) they didn't know and had no reason to know of the tax liability, and (2) they didn't have reason to know that their spouse wouldn't pay the tax due.

Lindsey Jones Argued That Her 2010 Joint Return, Which Was Filed After Her Divorce From Her Husband In November 2012 Was Invalid Because She Didn’t Consent To Filing A Joint Return And Her Ex-Husband Signed Her Name
To The Joint Return Without Her Consent. 

However, the Tax Court found that even though Jones didn't sign the 2010 joint return, she consented to her former husband signing and filing it because: 

1.      she provided her ex-spouse with her W-2s and other tax information,

2.      she failed to file a separate income tax return, and

3.      she also allowed her current spouse to sign her name to their joint tax return. (Jones, TC Memo 2019-139)

The Ninth Circuit agreed that Jones was not entitled to innocent-spouse relief. The Tax Court properly determined that Jones's 2010 joint return was valid and she wasn't entitled to innocent- spouse relief, the Ninth Circuit held.

According to the Appeals Court, the Tax Court's finding that Jones had reason to know that her ex-husband couldn't pay the tax liability reported on their 2010 joint return was supported by the record. 

In addition, given the circumstances (Jones and her ex-husband had to sell their home to satisfy their 2008 tax liability) she should have taken some steps to "assure herself" that the tax liabilities on the 2010 joint return would be paid.

 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

TIGTA found that the IRS has not provided taxpayers with adequate information on PPIAs on its public website or with the instructions pertaining to the form used to request an installment agreement, nor has the IRS created an effective means for taxpayers to request PPIAs or appeal rejected PPIAs as required by law. 

Also, TIGTA found that PPIAs were established without evidence of a complete financial analysis of the taxpayers’ ability to pay. From a judgmental sample of 30 PPIAs, TIGTA determined that the taxpayers’ financial statement had been deleted from IRS files for 11 PPIAs because more than one year had elapsed since the PPIA was established. With no financial statement in the file, TIGTA could not determine whether the IRS had properly computed the maximum monthly payment amount the taxpayers had the ability to pay. 

Collection default data indicate that the IRS is also establishing PPIAs for amounts that taxpayers cannot afford. 

Contributing to the higher default rate, TIGTA found 1,007 taxpayers defaulted on their PPIA, with an original PPIA balance over $197 million, when they failed to comply with an essential term of their agreement. 

Lastly, TIGTA found that the IRS procedures to close cases as currently not collectible should be enhanced with a PPIA option. The decision process for determining a currently not collectible case are similar to the steps taken by the IRS prior to granting a PPIA. 

If PPIAs were established for these four taxpayers, TIGTA estimates that they could have paid over $79,724 before their respective collection statutes expired. Based on our random sample, TIGTA projects that the 16,026 taxpayers who had tax liabilities closed as uncollectible could have entered PPIAs and paid a total of over $319 million before their respective collection statutes expired. 

TIGTA made six recommendations to help the IRS improve administration of PPIAs. IRS management agreed to inform taxpayers of the availability of PPIAs and provide outreach; explore and consider additional changes to the instructions for Form 9465; extend AMS history note retention requirements; remind Collection employees to conduct and document a financial analysis; and request a change to Computer Paragraph 522. IRS management partially agreed to revise CNC procedures.

 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

Now that April 18th deadline for filing 2021 income tax has passed, practitioners may encounter some clients who don't have cash to pay the balance due on their returns. Clients can avoid penalties but not interest if they can get an extension of time to pay from IRS. Financially distressed clients may be able to defer paying their income taxes, including installment agreements and offers in compromise with IRS.

Paying in full within 120 days (short-term payment plan). A taxpayer can pay the full amount owed within 120 days, without having to pay any fee, but interest and any applicable penalties continue to accrue until the tax is paid in full. Taxpayers can use an online payment application (IRS website) or call IRS at 800-829-1040.

Installment agreements (long-term payment plan). Taxpayers unable to pay the full amount owed within 120 days may be able to enter into an installment agreement with IRS to pay the tax. Apply using Form 9465, Installment Agreement Request, and Form 433-F, Collection Information Statement. (IRS website)

There are different installment agreement rules for taxpayers who owe $10,000 or less, and for taxpayers who owe $50,000 or less.

Taxpayers are eligible for a guaranteed installment agreement-in other words, IRS is required to enter into the agreement-if the aggregate amount of the liability (determined without regard to interest, penalties, additions to the tax, and additional amounts) is not more than $10,000 and:

• During the past five tax years, the taxpayer (and spouse if filing a joint return) have timely filed all income tax returns and paid any income tax due, and have not entered into an installment agreement under Code Sec. 6159 for payment of income tax;
• The taxpayer agrees to pay the full amount owed within three years and to comply with all Code provisions while the agreement is in effect; and
• The taxpayer is financially unable to pay the liability in full when due and submits information that IRS may require to make this determination (i.e., a financial statement). (Code Sec. 6159(c)(2); Reg. § 301.6159-1(c)(1)).

Despite the last condition, the Internal Revenue Manual 
5.14.5.3, notes that as a matter of policy, IRS grants
guaranteed installment agreements even if the taxpayer
can pay his or her liability in full.

 There's a streamlined procedure for granting agreements for payment of tax in installments for amounts of $50,000 or less. IRS may accept streamlined installment agreements without requiring financial statements or managerial approval if the taxpayer

1.     has an "aggregate unpaid balance of assessments" (tax, assessed penalty and interest) of $50,000 or less, 

2.     has filed all returns, and 

3.     will pay up within 72 months, or will pay in full before expiration of the collection statute of limitations, whichever comes first. (IRM 5.14.5.2, IRS website)

Remember to FILE YOUR RETURN,
Even if You CANNOT Pay Your Tax!

I know this is counterintuitive, since no one wants to bring attention to the fact that they cannot pay their taxes by filing a tax return showing a tax due and not paying the tax. However by filing your return,

1.     You begin the running of the Statute of Limitations for assessment & collection,

2.     You begin the running the two-year period for discharging this debt in bankruptcy and

3.     You reduce your associative tax return penalties from 5% a month for late filing to .05% for late payment penalty. 

o    The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes.

o    If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date.

Need Time To Pay Your IRS Taxes?  

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