Wednesday, November 23, 2022

If You Like Your Freedom Then You Should Not Evade Your Taxes

This October's DoJ Tax Division's highlights includes: 

John Everson, who owned an electrical engineering business in Ohio, was convicted of tax evasion. Everson tried to conceal more than $1.3 million of income he earned from his business by instructing clients to make payments to a trust he controlled. Everson then used the money in the trust to pay personal expenses. Everson's conduct caused a tax loss of more than $500,000.

Scott Chappelle, a real estate developer in Michigan, was sentenced to 38 months for obstructing the IRS' attempts to collect his unpaid withholding and income taxes. Chappelle admitted he kept the taxes he withheld from his employees' wages but when the IRS tried to collect those taxes, Chappelle made false statements about his and his companies' assets to avoid having to pay the IRS.

Eugene R. Britt III, a bar and restaurant owner, pleaded guilty to tax evasion. Brit disguised his ownership in three bars and restaurant, skimmed cash from the gross receipts of the businesses and failed to report that income for approximately two decades.

Zeki Donuk, who operated a New Jersey construction business, was charged with tax evasion, employment tax crimes, filing false tax returns and making false statements in bankruptcy. According to the indictment, Donuk cashed checks payable to his business instead of depositing them into the business's account and didn't report the income on either the business or his personal returns. In addition, for at least a year Donuk failed to withhold employment taxes from his employees or file employment tax returns.

Clarence A. Joles Sr., the owner of an asphalt paving business, pleaded guilty to filing a false tax return. Joles admitted that he deposited his business's gross receipts into nine different bank accounts but failed to give his tax preparer the records from some of those accounts. This caused Joles to underreport his business income by more than $1 million.

Ronald Ray Wilson, a former member of the Texas House of Representatives, pleaded guilty to evading payment of taxes. In 2008 and 2011, Wilson stipulated to two Tax Court decisions finding that he owed taxes to the IRS. Subsequently, Wilson used his law firm's client trust account to conceal his income to avoid paying the stipulated amounts. Wilson also tried to conceal his pension and other assets causing a tax loss of approximately $794,632.

Joseph Garza, an attorney, was indicted by a federal grand jury in Dallas on charges of wire fraud and helping his clients file false tax returns. According to the indictment, from 2012 to 2021 Garza promoted a tax shelter that allowed his high-income clients to claim fraudulent tax deductions. The indictment alleges that Garza directed his clients to transfer funds into shell companies that then returned the money to the clients. To conceal the circular flow of funds, Garza allegedly commissioned fictitious business valuation reports, created invoices for fake business expenses and drafted sham contracts. Garza's scheme allegedly allowed his clients to hide approximately a billion dollars from the IRS and caused a tax loss exceeding $200 million.

 Thinking Not Paying Your Taxes?

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You Better Thank Again, if You Like Your Freedom!

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  Contact the Tax Lawyers at
Marini & Associates, P.A. 

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or Toll Free at 888-8TaxAid (888-882-9243





Monday, November 21, 2022

Corporation's Secretary Liability For Company's Tax Penalties Upheld by 11th Circ.

According to Law360The Eleventh Circuit upheld a Florida jury's decision that a corporate secretary was responsible for the failure of her father's air conditioning company to pay employment taxes, saying jurors reasonably concluded that she had authority within the company. 

Evidence showed that in her role at Scott Air Inc., Ashley Scott satisfied the Internal Revenue Service's definition of a responsible person in that she held a corporate office, controlled the company's finances and had power to make payments from company accounts, a three-judge panel said in a per curiam opinion.

"The Bottom Line Is The Record Contained Evidence That Scott Knew About The Company's Unpaid Payroll Taxes And Failed
To Pay Them, Even Though She Wrote Checks To Satisfy Similar Obligations During The Same Time Frame," The Opinion Said.

Three rounds of jury trials had resulted in an overall reduction of Scott's responsibility to pay IRS penalties for the company's tax failures, from a total of 13 quarters for which she was considered responsible to 2. 

The IRS assessed Scott $680,000 in trust-fund penalties in 2010 for the company's failure to pay employment taxes over 13 quarters from 2004 to 2007, according to court filings. Scott appealed the decision twice, saying both times that the jury didn't have enough evidence to find that she was the person who should be considered responsible for paying the company's employment taxes, according to court filings.

The Eleventh Circuit 
sided with Scott in 2019, ordering a jury to reconsider its finding that Scott should pay nearly $620,000 of the penalties, saying the lower court did not clarify the legal authority of a corporate secretary.

  • The panel said that in addition to being a corporate officer of the company, Scott had power to spend its money. She admitted she could shop for supplies of up to $1,000 without her father's permission, according to the opinion. Scott was also in charge of the company's payroll and paid its unemployment taxes and child-support withholdings on the behalf of some employees.
  • Scott also signed the company's payroll tax returns during the two quarters she was found responsible, the panel said.

Have an IRS Responsible Party Penalty Problem?

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Want to Know:

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Friday, November 18, 2022

IRS Says That Hundreds of Crypto Criminal Tax Cases Are Coming Soon & They Are Hiring of 360 Special Agents For Crypto Currency

On November 14, 2022 we posted IRS CI Had a 90.6% Conviction Rate on Prosecuted Cases of Tax Evasion & Tax Fraud, where we discussed that IRS-CI released its 2022 Annual Report on November 3, 2022. 

As it relates to Crypto Currency, the report indicates that there where significant prosecutions in 2022 and identifies cryptocurrency as an area of top priority in 2023. 

Following the publication, CI Chief Jim Lee made clear that the division will continue to closely scrutinize crypto transactions and

Taxpayers With A Potential Crypto Currency Issue
Should Consider Resolving Matters Now, Before IRS
Agents Target Them In Criminal Prosecutions.

Are you making out points out that in 2023, CI will establish the advanced collaboration and data center (ACDC) to provide centralized access the data and resources to effectively support CI's mission of the deterring tax and financial crime. ACDC will enhance CI's abilities to access, investigate, and analyze information regarding Crypto Currency (tracing, monitoring, tax basis calculating).

Bolstered by the prominent placement of reporting language on the front of Form 1040, law enforcement can be expected to bring more criminal tax cases against those who fail to disclose transactions involving digital assets. 

Lee Publicly Announced On A Recent Call With Bloomberg Tax That The Division Already Has Hundreds Of Crypto-related Cases For Which It Expects To Bring Charges.

This is a significant announcement for all companies or individuals operating in the cryptocurrency space or who have engaged in digital asset transactions. 

Lee Has Announced Plans To Hire More Than 500 New
IRS Employees, Including 360 New Special Agents.

In light of the ambitious hiring plan, failure by taxpayers to report digital asset transactions is more likely to be scrutinized by the division. 

The IRS has been open about its aggressive stance on enforcement, willingness to bring cases and the types of cases it is prioritizing. Now more than ever, it is imperative for companies and individuals to take steps to comply with all applicable laws and regulations and ensure they have competent counsel in the event they become the target of an investigation.

Have a Virtual Currency Tax Problem?


Value Your Freedom?

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Contact the Tax Lawyers at
Marini & Associates, P.A. 
 for a FREE Tax Consultation Contact us at or
or Toll Free at 888-8TaxAid (888 882-9243). 

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Monday, November 14, 2022

Tax Effect of Crypto Exchange Filing Bankruptcy

As another major cryptocurrency trading platform succumbs to market instability and files for bankruptcy in what has been a cataclysmic year for the industry, questions loom surrounding the tax implications for affected stakeholders.

On November 11, offshore crypto exchange FTX Trading Ltd. and the companies are known as the FTX Group, filed for Chapter 11 bankruptcy in the District of Delaware. Sam Bankman-Fried has resigned from his post as CEO, replaced by John Ray III, the group announced in a release posted on social media.

"The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders," said Ray in the statement. He went on to ask for patience during the abrupt transition. Stakeholders are advised to monitor docket filings "over the coming days" for more details, Ray said.

Earlier this year, other exchanges like Celsius Network and Voyager Digital proceeded with their own bankruptcy filings. With FTX joining what is quickly becoming a crypto graveyard, stakeholders are left wondering when, or if, they will receive payouts. 

Since There Is Little To No Precedent For Large-Scale Bankruptcy In The Industry, The Tax Consequences
For Investors And Other Stakeholders Are Unclear Due
To The Nature Of The Technologies Surrounding
Cryptocurrency And Their Classification As Property.

During bankruptcy proceedings, it will be decided which customers would be eligible as creditors and even as a creditor, the customer should be considered an unsecured creditor. 

It remains to be seen if payouts would come in the form of crypto, or fiat currency, and how much and it is less clear is the timing of when assets would be valued. 

Over the course of 2022, cryptocurrency prices have dramatically declined. At the time of writing, Bitcoin, the most prominent stablecoin, is valued at less than $17,000. Bitcoin hit its all-time peak at approximately $69,000 in November 2021 and has steadily fallen since, an industry-wide downward trend.

Also unknown at this time is when losses of crypto assets will be assessed. If an exchange that has filed for bankruptcy pauses withdraws on its platform, customers are unable to access their assets. Yet, they have not yet incurred a loss, even though their assets are in locked in the exchange. A loss should not likely be recognized until after bankruptcy process concludes, as a loss cannot be deducted until it is finalized. 

“If your funds become totally worthless and irrecoverable, you may be eligible to write them off as a nonbusiness bad debt on your taxes,” said Shehan Chandrasekera, a certified public accountant, lead tax strategist at, a digital currency tax software company that helps clients track their crypto across virtual wallet addresses and manage their tax obligations.

You can think of a nonbusiness bad debt as a type of loss resulting from a debt extended to another party, which has been rendered totally worthless and irrecoverable. CPA Lewis Taub stressed to CNBC that there must be a complete loss of all that was lent to the platform in order for the debt to be considered deductible. Partial losses don’t count. 

The Freezing Of Accounts, Or Limited Withdrawals By
Crypto Platforms, Does Not Constitute A Total Loss.

At this stage, many of the crypto platforms are still calling the freezes “temporary” as they figure out how to shore up some liquidity, whether through restructuring or securing additional lines of credit.

Chandrasekera says that a debt falls into this category of “totally uncollectible” only after all attempts at collection have failed. So technically, none of the crypto funds on deposit at these platforms are completely worthless. “It’s also deemed worthless if the borrower files for bankruptcy and the debt is discharged,” Chandrasekera explained.

However, Taub Told CNBC That Even If A Platform Declares Bankruptcy, The Holders May Still Get Something In Bankruptcy Court, So It’s Still Not A Total Loss.

Voyager Digital, for example, filed for Chapter 11 bankruptcy, but it’s not yet clear whether users will be able to recover some of their losses through this process.

Determining whether the cash you have given to a crypto platform constitutes a loan isn’t always straightforward. For example, crypto coins and stocks, both of which are considered to be nondebt instruments, do not qualify for this write-off.

“In order to have a nonbusiness bad debt, there needs to be an actual debtor-creditor relationship. So to the extent that crypto was loaned to a platform, that criteria is met,” said Taub, who is the director of tax services at Berkowitz Pollack Brant, to Take Celsius. It spells out in its terms and conditions that any digital asset transferred to the platform constitutes a loan from the user to Celsius.

Not all platforms are this transparent in their terms and conditions, however. Neither Voyager nor BlockFi clearly describe the relationship that the user has with the platform, according to Chandrasekera.

Should the crypto lending platform meet the aforementioned criteria, an individual can report the initial value of the cryptocurrency (that is, the cost basis) when it was first lent to the platform as a short-term capital loss. There are certain capital loss limitations to keep in mind, namely the fact that nonbusiness bad debt is always considered a short-term capital loss.

As for the actual mechanics of reporting nonbusiness bad debt, the deduction goes on Form 8949 as a short-term capital loss. That’s where a user also files their crypto and stock gains and losses.

Chandrasekera notes that you have to attach a “bad debt statement” to the return explaining the nature of this loss, as well. Among other details, that must include “efforts you made to collect the debt and why you decided the debt was worthless.” 

The IRS warns that if you later recover or collect some of the bad debt you’ve deducted, you might have to include it in your gross income.

Taub says that these days — to the extent that there are potential losses on actual holdings of crypto, he is advising clients to take advantage of the fact that “wash sale rules” do not apply to crypto. He tells CNBC that investors should really be watching their portfolio to consider “harvesting losses” to offset capital gains on other investments.

Because the IRS classifies digital currencies like bitcoin as property, losses on crypto holdings are treated much differently than losses on stocks and mutual funds, according to former Onramp Invest CEO Tyrone Ross. With crypto tokens, wash sale rules don’t apply, meaning that you can sell your bitcoin and buy it right back, whereas with a stock, you would have to wait 30 days to buy it back.

This nuance in the tax code is huge for crypto holders in the U.S., primarily because it paves the way for tax-loss harvesting.

This is a strategy that is catching on among CoinTracker users, according to Chandrasekera.

Have an IRS Tax Problem?

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 Contact the Tax Lawyers at
Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at: or
Toll Free at 888 8TAXAID (888-882-9243) 

22 OECD Jurisdictions To Share Gig Economy Tax Data

According to Law360Officials from 22 jurisdictions have agreed to exchange information collected by digital platform operators through a global framework that would help countries tax income earned through the app-based gig economy, the Organization for Economic Cooperation and Development said on November 10, 2022.

The government officials signed a multilateral competent authority agreement, or MCAA, that will allow jurisdictions to automatically exchange information annually regarding income earned through the gig economy, such as earnings from items sold through digital platforms, according to the Paris-based OECD. The jurisdictions signed the MCAA on Wednesday in Seville, Spain, during an annual meeting held by the OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes.

The Signing Marks The Latest Steps In Policymakers' 
Efforts To Broaden Transparency In The Gig Economy, 
Where Multinational Platforms, As Well As The
Independent Workers Who Earn A Living On Them,
Have Proven Vexing For Governments To Track And Tax.

After beginning 
a gig economy project in 2019, the OECD in July 2020 issued model rules that would require online platforms such as Uber and Airbnb to report the tax information of sellers on their networks.

Recommended rules to help countries collect and exchange this information were released in July 2021 by the OECD, which followed up in late March with a user guide for tax administrations. The organization noted at the time that its model rules were developed in response to calls for a global reporting framework for income arising from activities carried out on digital platforms, including accommodation, transportation and sales.

"Activities Facilitated By Platforms May Not Always
Be Visible To Tax Authorities Or Self-Reported
By Taxpayers," The OECD Said.

"At the same time, the platform economy also permits increased access to information by tax administrations, as it brings activities previously carried out in the informal cash economy onto digital platforms."

The OECD noted Thursday that 15 jurisdictions also signed a separate MCAA that would allow them to share information collected from intermediaries that have identified arrangements designed to circumvent the organization's cross-border data exchange system for individual taxpayers' financial information. According to the OECD, the newly signed accord against CRS avoidance "will allow tax authorities to ensure compliance of both the taxpayers and the intermediaries involved in such arrangements and structures."

Have an IRS Tax Problem?

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 Contact the Tax Lawyers at
Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at: or
Toll Free at 888 8TAXAID (888-882-9243) 

Friday, November 11, 2022

Zelle Says It is ‘Not Subject’ to IRS Reporting

On September 7, 2022 we posted  Reminder PayPal, Venmo & Third-Party Payment Networks Start Reporting to the IRS Payments > $600 Starting in 2022, where we discussed that Third-party payment networks, such as PayPal and Venmo, beginning January 1, 2022, they and all third-party payment processors in the United States are required to report payments received for goods and services of more than $600 a year. 

Now Zelle Says It is ‘Not Subject’ to IRS Reporting.

While users of Zelle are required to declare their earnings, Zelle itself said it does not have to declare transactions made through the payment service because it is a network that does not hold the funds, Bloomberg reported Monday (Nov. 7). 

That contrasts with third-party payment processors like Venmo and PayPal that are required to issue 1099-K forms in some circumstances under an IRS rule that went into effect Jan. 1, according to the report.

For that reason, many small businesses that would otherwise receive 1099-K forms are asking to get paid via Zelle so that the forms are not issued and in hopes that they will not pay taxes on that income, the report stated.

Although individual and small businesses are required to declare income above specified levels, the IRS has found that Americans report less than half of the income that is not reported for them on a 1099-K or a W2, per the report. 

Reached for comment, a Zelle spokesperson told PYMNTS via email: “If payments received on the Zelle Network are taxable, it is a taxpayer’s responsibility to report them to the IRS. If anyone has questions about their tax obligations, they should consult with a tax professional.” 

The spokesperson also shared a link to an 
FAQ page on Zelle’s website that is dedicated to the issue. 

IRS rule that took effect in January was a big change for those who use services like PayPal, Venmo or Square to conduct business. 

Previously, payment apps only had to send the IRS a Form 1099-K for accounts with at least 200 business transactions within a year if they totaled at least $20,000 in gross payments. Now they must do so if the transactions add up to at least $600.

Have an IRS Tax Problem?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

for a FREE Tax HELP Contact us 
at: or
Toll Free at 888 8TAXAID (888-882-9243)