Category Archives: criminal tax law

Cryptocurrency is being targeted by the IRS as evidenced by the April 13, 2021, hearing o

Former commissioner Rettig specifically highlighted new cryptocurrency disclosure obligations on the Form 1040 tax return and had it listed on the IRS' Dirty Dozen list.

What Information Will I Need For A Cryptocurrency Audit?

During an audit, it’s likely that the IRS will ask you for the following information:

• All blockchain addresses and wallet IDs that you own/control
• All crypto exchanges and wallets you are using, as well as your user IDs, email addresses, and IP addresses related to those accounts.

You’ll also need the following information on each one of your cryptocurrency transactions:

• The date and time each unit of your cryptocurrency was acquired
• The fair market value of each cryptocurrency at the time of acquisition
• The date and time of each time you disposed of your cryptocurrency
• The fair market value of each cryptocurrency at the time of disposal, and what you’ve received in exchange for each cryptocurrency
• The accounting method that you used to calculate your capital gains at each disposal event (FIFO, LIFO, or HIFO)

How Do You Hold Your Cryptocurrency?

A cryptocurrency wallet that cannot be compromised because it is not connected to the Internet. Also called a "hardware wallet" and "offline wallet," the cold wallet stores the user's address and private key and works in conjunction with compatible software in the computer. Contrast with a "hot wallet," which resides in the user's desktop or mobile device or in a cloud-based service, all of which are online to the Internet and can be hacked.

While you may think this information is not discoverable, you should think again. The IRS not only requires reporting of cryptocurrency by exchanges, but it has also frequently summoned the information on accounts > $20,000, as recently as Aug. 15, 2022 when it issued a John Doe summons to SFOX seeking the identities of U.S. taxpayers who have used cryptocurrency.

Review the Crypto Audit IDR

When you receive a notice of examination from the IRS, you will also receive an IDR (Information Document Request). Some IDRs are relatively short and others can be more extensive. Therefore, when you are under a crypto audit, the first step is to evaluate the IDR to determine what the IRS is asking for, so that you can make notes as to what you’ll need to respond and prepare a strategy for how to respond.

How Far Back Does A Cryptocurrency Audit Go?

Audits include all tax returns that are filed in the last three years for overstatement of deductions or six years for substantial understatement of income. (Though they typically don’t go back further than six years). If no return was filed, or a fraudulent return is filed, there is no limit to how far back the IRS can audit.

Frequently Asked Questions

• Can you get audited for cryptocurrency? Yes. If the IRS has reason to believe that you are underreporting your crypto taxes, it is likely that they will initiate an audit.
• How long does a crypto tax audit typically take? The maximum length of an audit is generally 3 years. However, the length of a crypto tax audit can vary heavily depending on the specifics of your situation.
• How do you avoid a cryptocurrency tax audit? To minimize your chances of being audited, be sure to accurately report your cryptocurrency capital gains and income across all your wallets and exchanges.

• Which Crypto Exchanges Do Not Report To The IRS? To legally operate in the United States, all major cryptocurrency exchanges are required to abide by relevant IRS reporting requirements.
• More FAQ's regarding cryptocurrency? Go to the IRS webpage.

Unreported Cryptocurrency?

About 1–2 years ago, the IRS stated it would not be developing a stand-alone cryptocurrency voluntary disclosure program, and no such program currently exists. If you are out of cryptocurrency tax and reporting compliance, we can also advise you of the benefits of a domestic or offshore Voluntary Disclosure, which we handle on a regular basis.

Hybrid Offshore Accounts (Did You Report on Forms 114 & 8938)

Currently, holding cryptocurrency does not require you to file an FBAR (FinCEN 114). Similarly, it also does not require a Form 8938.

It's not clear whether an FBAR is part of reporting requirements for U.S. investors who have traded virtual currencies on internationally based exchanges. This is because there's no definitive guidance that accounts on exchanges count as "international bank accounts."

However, on December 31, 2020, the IRS released a statement saying that “FinCEN intends to propose to amend the regulations implementing the Bank Secrecy Act (BSA) regarding reports of foreign financial accounts (FBAR) to include virtual currency as a type of reportable account.” This regulation will apply to accounts on foreign crypto exchanges as well. Thus, a conservative approach would be to file an FBAR if at any time you held $10,000 or more in one or more internationally based accounts during the tax year.

Note that this total is not for a single account, but for all foreign accounts. For example, if you held $6,500 of ETH on Bitfinex (Taiwan) and $5,000 of LTC on KuCoin (Hong Kong), you might need to file an FBAR for each account.

Should I Seek The Help of A Tax Attorney Like TaxAid?

Yes, many investors choose to seek the help of a tax attorney that can advocate their tax positions before the IRS.

• If you choose to hire a tax professional, be sure that the tax attorney you work with has a strong background in cryptocurrency, like Marini & Associates, PA — TaxAid.com.
• We have experience in representing taxpayers with cryptocurrency tax issues.
• We know how to use various cryptocurrency tax software.
• The tax attorneys at Marini & Associates, PA (TaxAid.com), will meet with the IRS on your behalf, so you don't have to.
• If you are out of cryptocurrency tax and reporting compliance, we can also advise you of the benefits of a domestic or offshore Voluntary Disclosure, which we handle on a regular basis.

Have a Virtual Currency Tax Problem?

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).

Sources

1. CoinLedger
2. Lexology

Read more at: Tax Times blog

Receiving notice of an impending Florida sales tax audit can be daunting, but understanding the process and taking
the right steps can help you navigate it successfully.

Surviving a Florida sales tax audit requires careful preparation and professional assistance. Here's a comprehensive
guide to help you navigate the process:

Understanding the Audit Process

A Florida sales tax audit is typically triggered when a business's exempt sales ratio is out of line with industry
norms, or through random selection. The Florida Department of Revenue (DOR) will investigate potential violations of
Florida tax law, focusing on whether your business failed to remit all collected sales tax.

Notification and Preparation

The DOR initiates the audit process by issuing form DR-840, a Notice of Intent to Audit Books and Records. This
notice will indicate that the audit will commence 0 days from the issue date, although it cannot begin earlier than
60 days after the notice date.

Key steps upon receiving the notice:

1. Hire an experienced tax professional immediately.
2. Use the 60-day "homework" period to prepare for the audit.
3. Organize all relevant documentation to present a clear picture of your business's tax compliance.

Types of Audits

The DOR conducts two types of sales tax audits:

1. Desk Audit: Conducted at a DOR office.
2. Field Audit: Performed at your place of business.

What to Expect During the Audit

The auditor will compare your annual federal tax return to sales and use tax returns to identify any discrepancies.
They will examine:

• Fixed assets and commercial rent (subject to sales tax)
• Sample months to test exempt sales
• Federal income tax returns
• Florida tax returns
• General ledgers and journals
• Depreciation schedules
• Property records
• Cash receipt and disbursement journals
• Purchase and sales journals
• Sales tax exemption or resale certificates
• Documentation to verify amounts entered on tax returns

Post-Audit Process

After reviewing all records, the auditor will issue a DR-5 (Notice of Intent to Make Audit Changes). You have 0 days
to request a review of the results.

Tips for Surviving the Audit

1. Hire a professional: An experienced tax professional can help navigate the complex audit process and
   minimize potential assessments.
2. Be prepared: Organize all relevant documentation before the audit begins.
3. Understand your rights: The DOR cannot force you to begin the process or turn over information in less
   than 60 days.
4. Be cautious: While auditors may seem helpful, remember they are not your friends. Avoid inviting them to
   your workplace unnecessarily or giving them access to electronic records beyond the scope of the audit.
5. Know the timeline: The DOR can typically audit a business for a three-year period, or longer if you
   didn't file returns or filed substantially incorrect returns.

Remember, a Florida sales tax audit can range from a minor inconvenience to a serious issue with potentially grave
consequences. With proper preparation and professional guidance, you can navigate this process successfully and
minimize any potential negative outcomes.

Have a Florida Sales Tax Problem?

Sales Tax Problems Require

an Experienced Sales Tax Attorney

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)

James P. Sweeney Esq - State and Local tax counsel

Mr. Sweeney is a Tax Attorney with 40 years of experience in the areas of Tax Law, both Federal & State,
including Representation before the IRS and various State Taxing Agencies.

Mr. Sweeney is an accomplished attorney with a distinguished career that includes a rich background in tax law and a
remarkable tenure at Arthur Andersen's State and Local Tax Practice, including serving as the Northeast Region
Practice Leader and a National Office subject matter expert, where he shared a wealth of experience and expertise in
State and Local Tax law.

Read more at: Tax Times blog

Deceased nonresidents who were not American citizens are subject to U.S. estate taxation with respect to their
U.S.-situated assets.

U.S.-situated assets include American real estate, tangible personal property, and securities of U.S. companies. A
nonresident’s stock holdings in American companies are subject to estate taxation even though the nonresident held
the certificates abroad or registered the certificates in the name of a nominee.

Exceptions: Assets that are exempt from U.S. estate tax include securities that generate portfolio interest, bank
accounts not used in connection with a trade or business in the U.S., and insurance proceeds.

The most obvious device for reducing tax, is a tax treaty or convention between the United States and the country
from which the decedent originated or was domiciled. Estate tax treaties between the U.S. and other countries often
provide more favorable tax treatment to nonresidents by limiting the type of asset considered situated in the U.S.
and subject to U.S. estate taxation. Executors for nonresident estates should consult such treaties where
applicable.

At that point, if you wish to continue to pursue the deductibility of the debts and expenses, you are required to
prove both the expenses themselves and the fair market value of the assets which means, words that you don't like to
hear, an IRS audit! It is much easier to try to verify the value of the foreign assets as part of your due
diligence and avoid a confrontation with an estate tax attorney.

Executors for nonresidents must file an estate tax return, Form
706NA, United States Estate (and Generation-Skipping) Tax Return, Estate of a nonresident not a citizen of the
United States, if the fair market value at death of the decedent's U.S.-situated assets exceeds $60,000.

However, if the decedent made substantial lifetime gifts of U.S. property, and used the applicable $13,000 “unified
credit exemption” amount to eliminate or reduce any gift tax on the lifetime gifts, a U.S. estate tax return may
still be required even if the value of the decedent’s U.S. situated assets is less than $60,000 at the date of death
(due to the decrease in the “unified credit exemption” for the lifetime gifts). See Unified Credit (Applicable
Credit Amount) Section in Publication 559, Survivors,
Executors, and Administrators, and the Form
706NA Instructions for more information.

Read more at: Tax Times blog

According to Law360, A Baltimore attorney who manages a client's holding company is personally responsible for paying the entity's unpaid taxes, a Maryland federal judge said, finding that he approved and oversaw loan transactions that prompted the IRS to seek $2 million from the entity.

As director, president and treasurer of Lehcim Holdings Co., Isaac M. Neuberger is accountable because he transferred the company's assets knowing there was still an outstanding tax debt, which the Internal Revenue Service assessed after it disallowed the entity's loan interest deductions, U.S. Magistrate Judge Erin Aslan said in a memorandum decision Thursday.

Neuberger had helped conceptually develop a plan to make those transfers, directed that it include and exclude certain entities, monitored its progress and "overruled outside counsel's decision" to put the plan on hold, which makes him liable under the Federal Priority Statute, 31 U.S. Code Section 3713, Judge Aslan said.

"Other Courts Have Found Corporate Directors And
Officers Who Took Similar Actions With Similar
Fact Patterns Personally Liable," The Judge Said.

The unpaid taxes stemmed from an IRS finding that the unsecured loans the company borrowed from Nightingale Ventures — a British Virgin Islands-based entity with business ties to the Konigs and managed by Neuberger himself — were not bona fide. The agency later disallowed the claimed tax deductions on those loans in the company's returns for 2010 to 2015.

In the memorandum, the judge noted that Neuberger knew about the IRS examinations and 2020 collection notice but that Lehcim did not challenge the agency's final assessment. The IRS also attempted to levy other entities that held Lehcim assets, including Neuberger's law firm, which held money on behalf of the company.

The Neuberger case serves as a cautionary tale for attorneys and fiduciaries managing client funds or corporate entities, reminding them that federal tax claims often have priority over other obligations. 

The decision demonstrates the IRS’s ongoing willingness to enforce Section 3713 in civil actions, thrusting professionals like Neuberger into the spotlight for personal liability where federal interests are jeopardized. 

As enforcement priorities evolve, practitioners are reminded to rigorously assess tax claims against all other debts before approving substantial transactions on behalf of clients or entities.

  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