Tax Blog/Blawg

I suspect that the answer of most readers will be "why would I want the IRS to find me in any event?" In fact, I can recall one client who actually asked me to have him removed from what he described as "the IRS mailing list."

Believe it or not, while it's always nice to be left alone, there are situations where it is important that the IRS have your correct address. For instance, what if there's a refund you're due, and the IRS is about to send you a check? Similarly, if you are in an audit or owe the IRS money, there are a variety of notices that the Internal Revenue Code requires the IRS to send to your "last known address," and if it sends them to that address, but you do not receive them, you will miss the opportunity to respond, as the law does not require that you actually receive the documents for them to be effective.

In a high profile summons enforcement case brought by the Internal Revenue Service against Coinbase, Inc. (United States v. Coinbase Inc., No. 3:17-cv-01431 (N.D. Cal. 2017)), a virtual currency exchange for traders of popular digital cryptocurrencies like Bitcoin, Ethereum and Litecoin, the Internal Revenue Service sought the production by Coinbase of all of its customer records involving Bitcoin transactions from 2013 through 2015.  The number of customers potentially susceptible to such a broad summons request was estimated at just under 500,000.

The U.S ...

Is the IRS getting closer to ferreting out “quiet disclosures” by taxpayers who chose that route to address the problem of previously unreported offshore accounts rather than by participating in the Service's offshore voluntary disclosure program (OVDP)?  That’s the conclusion of an increasing number of tax professionals and if taxpayers in this predicament weren't already worried, they should be.

A quiet disclosure involves the filing of new or amended tax returns that report offshore income, and FBARs (Report of Foreign Bank and Financial Accounts) that provide other ...

Choice of entity is one of the first and most important tax-planning decisions that any entrepreneur must make. Conventional wisdom holds that most entrepreneurs should organize their businesses as “pass-through” entities – primarily limited liability companies, partnerships, subchapter S corporations, or sole proprietorships. Pass-through entities are not themselves taxable. Rather, all of their income is “passed through” and taxable to their owners. By contrast, operating a business in the other main form – a corporation – subjects the business’s ...

On March 25, the Supreme Court accepted certiorari in U.S. v. Gary Woods.  (Supreme Court order) The issue presented to the Court arose from a split in the Circuits over whether a taxpayer can avoid the valuation misstatement penalties of section 6662(e) and (h) by conceding that there was no economic substance to its return position (and thus that the valuation misstatement was not the basis for its tax deficiency).  Compare, e.g., Todd v. Commissioner, 862 F.2d 540 (5^th Cir. 1988) (no penalty imposed under predecessor of section 6662), with e.g., Gustashaw v. Commissioner, 110 ...

With the looming increase in tax rates on investment income and capital gains in particular, a large number of stock market investors have been selling long-term positions to lock in the 2012 rate, which currently tops out at 15%.  Come January 1,2013, gain on the same sale could be taxed at a rate as high as 23.8%, consisting of a long-term capital gains tax rate of 20% plus a Medicare surtax of 3.8% imposed on joint filers with AGI greater than $250,000 and single filers with AGI greater than $200,000.  (See Internal Revenue Code § 1411).

A question attracting attention as the year draws to a ...

Late late year, we asked what's next for foreign bank account holders after OVDI?  Although the answer to this question continues to evolve, it is becoming increasingly clear that the risks of detection have only grown – and will continue to do so.  The latest news on this front comes from Business Week, which reported Sunday that the IRS has requested account holder information from Liechtenstein's second largest bank, LLB.  Specifically, the IRS has asked for information pertaining to accounts holding $500,000 or more anytime since 2004.  Current and former LLB account holders who ...

Beginning with the 2011 tax year (i.e., for returns filed April 17, 2012 or later), individual taxpayers will be required to file Form 8938 if he or she has an interest in a “specified foreign financial asset” (“SFFA”) (click for additional information on FATCA requirements) that has a value exceeding a certain threshold.  A Taxpayer has an interest in a SFFA if any income, gains, losses, deductions, credits, gross proceeds or distributions from the asset would be required to be reported on the income tax return.

The reporting thresholds differ depending on whether the ...

The Hiring Incentives to Restore Employment Act of 2010 (“HIRE Act”) enacted the Foreign Account Tax Compliance Act (“FATCA”).  P.L. 111-47.  FATCA greatly increases disclosure requirements and penalties on taxpayers with foreign accounts and assets.  These reporting requirements will affect individuals beginning with the 2011 tax year, and are expected to apply to certain domestic entities beginning with the 2012 tax year.

FATCA reporting is in addition to the Form T.D. F 90-22.1, Report of Foreign Bank Accounts (“FBAR”) requirements and other foreign reporting ...

Life grants few chances at true redemption. The Internal Revenue Code, likewise, is not known for facilitating taxpayer salvation. Sure, under certain circumstances, taxpayers have an opportunity to file late tax-related elections to rectify an oversight, and other forms of clemency exist. However, the general rule is that taxpayers are stuck with a position once they take it on a tax return filed the IRS. One obscure exception to this rule is the qualified amended return (“QAR”), which can be a powerful self-help remedy for taxpayers who experience the “oh-shoot” moment ...