Category Archives: criminal tax law

In IR-2023-12, dated January 24, 2023, the Internal Revenue Service reminded taxpayers that they must again answer a digital asset question and report all digital asset-related income when they file their 2022 federal income tax return, as they did for fiscal year 2021. The term "digital assets" has replaced "virtual currencies," a term used in previous years.

The question, which appears at the top of Forms 1040, Individual Income Tax Return; 1040-SR, U.S. Tax Return for Seniors; and 1040-NR, U.S. Nonresident Alien Income Tax Return, was revised this year to update terminology.

In addition, the instructions for answering the question were expanded and clarified to help taxpayers answer it correctly. All taxpayers must answer the question regardless of whether they engaged in any transactions involving digital assets.

For the 2022 tax year it asks: "At any time during 2022, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, gift or otherwise dispose of a digital asset (or a financial interest in a digital asset)?"

What is a digital asset?

A digital asset is a digital representation of value which is recorded on a cryptographically secured, distributed ledger. Common digital assets include:

• Convertible virtual currency and cryptocurrency
• Stablecoins
• Non-fungible tokens (NFTs)

Everyone must answer the question

Everyone who files Form 1040, Form 1040-SR or Form 1040-NR must check one box, answering either "Yes" or "No" to the digital asset question. The question must be answered by all taxpayers, not just those who engaged in a transaction involving digital assets in 2022.

When to check "Yes"

Normally, a taxpayer must check the "Yes" box if they:

• Received digital assets as payment for property or services provided;
• Transferred digital assets for free (without receiving any consideration) as a bona fide gift;
• Received digital assets resulting from a reward or award;
• Received new digital assets resulting from mining, staking and similar activities;
• Received digital assets resulting from a hard fork (a branching of a cryptocurrency's blockchain that splits a single cryptocurrency into two);
• Disposed of digital assets in exchange for property or services;
• Disposed of a digital asset in exchange or trade for another digital asset;
• Sold a digital asset; or
• Otherwise disposed of any other financial interest in a digital asset.

How to report digital asset income

Besides checking the "Yes" box, taxpayers must report all income related to their digital asset transactions. For example, an investor who held a digital asset as a capital asset and sold, exchanged or transferred it during 2022 must use Form 8949, Sales and other Dispositions of Capital Assets, to figure their capital gain or loss on the transaction and then report it on Schedule D (Form 1040), Capital Gains and Losses, or Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, in the case of gift.

If an employee was paid with digital assets, they must report the value of assets received as wages. Similarly, if they worked as an independent contractor and were paid with digital assets, they must report that income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). Schedule C is also used by anyone who sold, exchanged or transferred digital assets to customers in connection with a trade or business.

When to check "No"

Normally, a taxpayer who merely owned digital assets during 2022 can check the "No" box as long as they did not engage in any transactions involving digital assets during the year. They can also check the "No" box if their activities were limited to one or more of the following:

• Holding digital assets in a wallet or account;
• Transferring digital assets from one wallet or account they own or control to another wallet or account they own or control; or
• Purchasing digital assets using U.S. or other real currency, including through electronic platforms such as PayPal and Venmo.

For more information, see page 15 of the Tax Year 2022 1040 (and 1040-SR) InstructionsPDF. For a set of frequently asked questions (FAQs) and other details, visit the Digital Assets page on IRS.gov.

Have an IRS Tax Problem?

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or Toll Free at 888 8TAXAID (888-882-9243) 

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On August 16, 2022 we posted Inflation Reduction Act of 2022 Is Law, where we discussed what's in the Inflation Reduction Act allocates $80 billion to increase enforcement by the IRS.

Now according to Law360, the Internal Revenue Service is on track to deliver the spending plan for the Inflation Reduction Act's nearly $80 billion funding boost to the Treasury Department by the Feb. 17, 2023 deadline, according to a Treasury Inspector General for Tax Administration report released on Monday, January 16, 2023.

The IRS is taking actions to develop the spending plan detailing how the agency wants to spend Inflation Reduction Act funding over a decade on technology, workers and service improvement, according to the report. The plan, requested by Treasury Secretary Janet Yellen, must also include metrics for focus areas and goals the agency will strive to reach.

The IRS is working to monitor the implementation of Inflation Reduction Act tax provisions, coordinate organizational transformation efforts and track funding and spending, TIGTA said. According to the report, the agency is on track to timely implement all provisions before the filing season begins.

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

A taxpayer who bought cryptocurrency in 2022 and saw its value plummet to less than a cent, but retained ownership over it at the end of the year, can't take a loss on the steep decline in value, the Internal Revenue Service's Office of Chief Counsel said in memorandum released Friday.

In Chief Counsel Advice Memorandum 202302011, dated January 17, 2023, the IRS said that such a taxpayer hasn't actually suffered a loss yet for the purposes of a deduction under Internal Revenue Code Section 165. Even if the decline in value had been a loss, the taxpayer still couldn't take the deduction because it would be categorized as miscellaneous and blocked under IRC Section 67(g), the agency 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, as a result of a Floridian who moving his assets offshore in the wake of an $18 million penalty for failing to report foreign bank accounts, the U.S. should be allowed to seize the overseas funds, the U.S. told a Florida federal court on January 6, 2023 in U.S. v. Isac Schwarzbaum, case number 9:18-cv-81147, in the U.S. District Court for the Southern District of Florida.

Isac Schwarzbaum has not paid any amount he owes, forcing the U.S. to repatriate the funds he has deposited in several Swiss banks, the U.S. said in a motion to repatriate foreign assets.

"Schwarzbaum's blatant refusal to pay the judgment deprives the United States of funds to which it is legally entitled, and it also undermines the authority of the court," the U.S. said. 

"Schwarzbaum's Actions May Encourage Others To Simply Refuse To Pay, Or Move Assets Offshore, Unless The United States Pursues Enforced Collection Efforts." 

The Internal Revenue Service penalized Schwarzbaum in 2013 and 2014 for his willful failure to file Reports of Foreign Bank and Financial Accounts, or FBARs, for 2006 through 2009 on his Swiss accounts, according to court documents. The U.S. government sued in 2018 after he failed to pay the penalties, and a Florida federal district court found in March 2020 that he willfully failed to file.

However, the Eleventh Circuit found that the IRS erroneously used the highest balances of his foreign bank accounts to compute the penalties rather than their balances as of June 30, the deadline for filing FBARs, and made its own calculations of the penalty amount. The IRS should have redone the calculations, the Eleventh Circuit said in remanding the case. This remand did not vacate the entire judgment, the Florida court later ruled.

The IRS Recalculated Schwarzbaum's Penalties At 

$17.9 Million As Of Sept. 12, 2022.

Schwarzbaum has no intention of paying the money he owes, the U.S. said in its motion. He sold his home in Florida and moved the proceeds overseas, it said. Schwarzbaum also has fled the country for Switzerland, the U.S. added, and has no intention of returning.

The Question Now Is How Does The IRS Levy On Assets
Outside The US or Against a Taxpayer
Who Is No Longer AUS Resident?

Can't Wait To See The Answer To This One!

Do You Have Undeclared Offshore Income?

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