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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Joseph G. Poluka and Jed M. Silversmith
On April 15, 2019, the Internal Revenue Service (“IRS”) announced that it had just completed a two-week educational campaign focusing on employment tax issues. According to the IRS’s release, it dispatched Criminal Investigation (“CI”) agents to nearly 100 businesses that were showing signs of potential serious noncompliance. During these visits, business owners were informed about ways to catch up with back payroll taxes. During these meetings, the CI agents discussed how to stay current and the potential for civil and criminal penalties. The IRS also announced that, over those two weeks, it had taken several dozen legal actions against potential employment tax violators, including indicting twelve individuals and executing four search warrants. The IRS said that federal courts imposed criminal sentences in six cases in which defendants were convicted of crimes involving payroll tax violations. Continue reading “The IRS Announces Conclusion of Two-Week Campaign Focused on Employment Tax Compliance”
Jed M. Silversmith and Jeffrey M. Rosenfeld
Few Americans consider the United States to be a money laundering haven, but it is. Earlier this year, the European Parliament wrote:
“The USA is seen as an emerging leading tax and secrecy haven for rich foreigners, when in parallel it has reprimanded other countries for helping rich Americans hide their money offshore. It is difficult to estimate how much revenue the United States loses from tax avoidance and evasion, but some have suggested that the annual cost of offshore tax abuses may be around US $100 billion per year.”1
To combat U.S. money laundering by foreign citizens, the Internal Revenue Service (“IRS”) and the U.S. Department of Treasury Financial Crimes Enforcement Network (“FinCEN”) implemented new and strengthened existing reporting requirements for foreign individuals who have financial interests in the United States. Although these regulations are applied broadly, there has been very little discussion about their implementation in the United States. Presumably, there has been even less discussion abroad.
This article focuses on two new, wide-ranging regulatory requirements: 1) the requirement that foreign-owned entities, treated as “disregarded entities” for U.S. federal income tax purposes, file an IRS Form 5472, Information Return of a 25 Percent Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business; and 2) the requirement that all entities report beneficial ownership when opening a bank account. Failure to comply with these requirements may subject foreign nationals and U.S. individuals who do business with them to civil and criminal sanctions. Continue reading “New Treasury Regulations Impose Conflicting Requirements on Foreign Persons with U.S. Interests”