The U.S. Treasury Department faces a complex task in enforcing its proposed digital asset reporting rules on foreign trading platforms. The regulations, introduced in late August, primarily address domestic transactions, leaving potential difficulties in enforcing reporting requirements on foreign digital asset brokers, especially those operating cryptocurrency trading platforms.
One potential avenue for the Treasury to
On September 8, 2023 the IRS announced a sweeping effort to focus enforcement efforts on high-income individuals, partnerships, and corporations. On September 20, 2023 the IRS announced that it will establish a special passthrough organization to help audit initiatives for high-income individuals and complex partnerships. Government officials have signaled that internal briefings are starting for
An interesting recent Tax Court decision seems to indicate that taxpayers have clear autonomy with regards to judicial review as well as retracting judicial review of “seriously delinquent tax debt.”
In Pugh v. Commissioner, the IRS certified Pugh to the Secretary of State under I.R.C. § 7345 as an individual with a “seriously delinquent
The tax community is currently embroiled in a heated debate over proposed IRS guidelines concerning timing provisions, the broad scope of individuals eligible to approve penalties and exemptions related to automated penalty calculations.
At the heart of the controversy lies Section 6751(b), which mandates that the immediate supervisor of a revenue agent must personally provide
For some time, the IRS has cautioned taxpayers about filing false or fraudulent ERC claims. More recently, on September 14, 2023, the IRS issued a News Release, IR-2023-169, indicating that it would no longer process ERC claims from September 14, 2023, through “at least” December 31, 2023. Significantly, this only relates to new ERC
On September 8, 2023, the IRS announced a multitude of compliance initiatives aimed at high-income taxpayers, partnerships, digital assets, FBARs and labor brokers. According to the announcement, the IRS has finalized its “top-to-bottom review” of current enforcement efforts and intends to zero in on these matters in the near future. As expected, the impetus for change—according to the announcement—was Congress’s decision to provide the IRS with additional funding through its passage of the Inflation Reduction Act (IRA).
A hearing is scheduled for September 11, 2023 for interested persons and organizations to provide testimony on proposed regulations on the timing and approval process for penalties. Section 6751(b) provides that:
No penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate.
The timing of when the approval is required by Section 6751(b) has been the subject of significant litigation. The Second Circuit in Chai v. Commissioner concluded that Congress enacted section 6751(b) to “prevent IRS agents from threatening unjustified penalties to encourage taxpayers to settle.” This has caused a lot of litigation in both the Tax Court and U.S. District Courts such that there are currently two different standards on timing of when such supervisory approval is required. If supervisory approval is to meet the goal of not being used as an unfair “bargaining chip” it must be required before such unwanted behavior can occur. Many groups have submitted comments asking for supervisory approval to be done earlier in the examination process than the proposed regulations require and that approval be done by a direct supervisor and not just anyone with penalty approval rights within the IRS.
Providers of digital asset services would be subjected to tax reporting regulations akin to those governing brokers of securities and analogous financial instruments, as outlined in the inaugural set of proposed regulations delineating protocols for assets like cryptocurrency and nonfungible tokens. These guidelines, disseminated by the Internal Revenue Service on Friday, introduce the requirement for digital asset brokers to submit information returns and payee statements relating to asset sales conducted on behalf of customers during specific transactions, in accordance with Internal Revenue Code Section 6045.
Additionally, the comprehensive 282-page proposal recommended that brokers incorporate gain or loss details and basis information for sales occurring on or after January 1, 2026, under specific circumstances. This provision is designed to equip customers with the requisite information for compiling their tax returns.
The effective date of these regulations is slated for transactions from the preceding year, with enforcement beginning in 2026.
Law360 covered the topic in an article on August 25, 2023 where Gray Reed Partner Joshua Smeltzer was one of the experts interviewed. Board Certified in Tax Law by the Texas Board of Legal Specialization, Joshua uses his experience as a former litigator for the U.S. Department of Justice to defend clients in tax audits, tax appeals, and litigation in Federal District Court, U.S. Tax Court, the U.S. Court of Federal Claims, and tax issues in U.S. Bankruptcy Court.
The Foreign Account Tax Compliance Act (FATCA) has resulted in a massive influx of financial information to the IRS over the past 13 years, but the extent of this data remains unknown. Despite expectations of significant revenue, FATCA has not met its financial goals, and the IRS is grappling with the challenge of effectively utilizing the data it has received from partner jurisdictions to enforce tax compliance. Tax Notes covered the topic in an article on August 23, 2023. Gray Reed Partner Joshua Smeltzer was one of the experts interviewed. Board Certified in Tax Law by the Texas Board of Legal Specialization, Joshua uses his experience as a former litigator for the U.S. Department of Justice to defend clients in tax audits, tax appeals, and litigation in Federal District Court, U.S. Tax Court, the U.S. Court of Federal Claims, and tax issues in U.S. Bankruptcy Court.
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Some of the funding will be used to help narrow the field of taxpayers potentially selected for audit, as the agency has been given a mandate to go after wealthy taxpayers, said Joshua D. Smeltzer of Gray Reed. “It will be difficult to target improvements in enforcement directly to FATCA because . . . dissecting enforcement increases on a granular level is just too hard,” Smeltzer said. However, because many more taxpayers in middle- and high-income brackets have worldwide finances, “the efforts by the IRS for FATCA enforcement will increase as well,” he said.
For some time, promoters have shopped around an arrangement known as a “section 643(b) trust,” known alternatively as a “non-grantor, irrevocable, complex, discretionary, spendthrift trust.” On August 9, 2023, IRS Chief Counsel issued a Memorandum that shoots down many of the contentions raised by the promoters relating to the tax benefits of these arrangements. The full Memorandum can be found here. Taxpayers who have entered into these types of arrangements should take careful note of the IRS Chief Counsel Memorandum and should discuss its implications with a tax professional.