Jed M. Silversmith, David J. Moise, Jill E. Misener, and Jeffrey M. Rosenfeld
Taxpayers who own virtual currency should be prepared to respond to IRS inquiries regarding their virtual currency holdings and, if necessary, substantiate their reporting of these investments on their federal tax returns.
On July 26, 2019, the Internal Revenue Service (“IRS”) announced that it was in the process of contacting 10,000 taxpayers about the need to accurately report virtual currency on their tax returns. The IRS stated the letters are “educational” in nature and provide information about how to correct past reporting errors. The announcement quoted IRS Commissioner Chuck Rettig as saying that “[t]axpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties.”
The proper reporting of virtual currency on tax returns has been an ongoing focus of the IRS. Notably, in July 2018, the IRS announced a compliance campaign for taxpayers who fail to accurately report virtual currency. A compliance campaign is an issue-based examination meaning that the IRS conducts a narrow review of the tax returns focusing solely on one issue—in this case, unreported gains from the sale of virtual currency.
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Ariel S. Glasner and Bridget Mayer Briggs
This is the sixth installment in a series of articles. For more background on this topic, please read our first article in the series, An Introduction to Financial Technology; our second article, The FinTech Revolution: Enforcement Actions Brought against FinTech Companies and Their Implications; our third article, The FinTech Revolution: The Impact of Blockchain Technology on Regulatory Enforcement; our fourth article, The FinTech Revolution: Complying with Anti-Money Laundering Laws to Avoid Regulatory Enforcement Actions; and our fifth article, The FinTech Revolution: How Data Breaches Can Result in Regulatory Enforcement Actions.
As the FinTech industry rises in popularity, the number of digital transactions—also known as e-commerce—is sky-rocketing, creating ever-greater opportunities for fraud.1 These vulnerabilities are compounded by an expansion in the range and assortment of digital transactions. As a result, there is a critical need for companies in the FinTech industry to ensure that they have sound and comprehensive fraud prevention strategies, policies, and programs in place.
People seeking to engage in fraudulent schemes or artifices are attracted to an industry that is on the cutting edge of technological development where they see opportunities to exploit weaknesses in data protection. Identity theft (the misappropriation of someone else’s identity by targeting his or her personal information), and “phishing” (using fraudulent communications such as websites, text messages, and e-mails to induce people to part with their personal information), are two of the more common types of fraudulent devices that are employed, in addition to other sophisticated fraudulent schemes.2 Continue reading “The FinTech Revolution: Fraud Prevention in the FinTech Space”
Ariel S. Glasner and Bridget Mayer Briggs
This is the fifth installment in a series of articles. For more background on this topic, please read our first article in the series, An Introduction to Financial Technology; our second article, The FinTech Revolution: Enforcement Actions Brought against FinTech Companies and Their Implications; our third article, The FinTech Revolution: The Impact of Blockchain Technology on Regulatory Enforcement; and our fourth article, The FinTech Revolution: Complying with Anti-Money Laundering Laws to Avoid Regulatory Enforcement Actions.
As news reports of corporate data breaches have become commonplace, companies must be proactive in preventing security breaches and prepared to take appropriate action in the event one occurs. This mantra is particularly true for FinTech companies that, by the very nature of their business, regularly collect customers’ personally identifiable information (“PII”) and other sensitive data. A failure to adequately protect this information, or to disclose the occurrence of a data breach, exposes companies to the very real possibility of government enforcement action.
We have noted previously that a FinTech company that falsely represents its data security practices is subject to an enforcement action by the Consumer Financial Protection Bureau for violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.1 In addition, FinTech companies that sell securities—whether publicly or in a private placement—must comply with applicable securities regulations when it comes to data breaches and their attendant disclosure. Continue reading “The FinTech Revolution: How Data Breaches Can Result in Regulatory Enforcement Actions”