IRS Dispels Common Myths About Tax Refunds

With the April 18 tax-filing deadline closing in for most taxpayers, the Internal Revenue Service wants to dispel some new and common myths about getting refund details or speeding up tax refunds in IR-2022-80. A number of these myths circulate on social media every tax season.

Seven Common Myths About Tax Refunds:

Myth 1: Calling the IRS or visiting an IRS office speeds up a refund
Many taxpayers mistakenly believe the commonly held myth that speaking with the IRS by phone or visiting in-person at an IRS Taxpayer Assistance Center will expedite their tax refund. The best way to check the status of a refund is online through the “Where’s My Refund?” tool at IRS.gov or via the IRS2Go mobile app. Alternatively, those without internet access can reach “Where’s My Refund?” by calling the automated refund hotline at 800-829-1954. IRS Taxpayer Assistance Centers operate by appointment and inquiring about a tax refund’s status does not expedite the process.

Myth 2: Taxpayers need to wait for their 2020 return to be processed before filing their 2021 return, or that all refunds are delayed due to the number of 2020 returns the IRS still needs to process.
The reality is that taxpayers generally will not need to wait for their 2020 return to be fully processed to file their 2021 tax returns. They should file when they’re ready. People with unprocessed 2020 tax returns, should enter $0 (zero dollars) for last year's AGI on their 2021 tax return when electronically filing.

Myth 3: Taxpayers can get a refund date by ordering a tax transcript
Ordering a tax transcript will not inform taxpayers of the timing of their tax refund, nor will it speed up a refund being processed. Taxpayers can use a transcript to validate past income and tax filing status for mortgage, student and small business loan applications and to help with tax preparation. But the “Where’s My Refund?” tool is the fastest and most accurate way to check the status of a refund.

Myth 4: “Where’s My Refund?” must be wrong because there’s no deposit date yet
While the IRS issues most refunds in less than 21 days, it’s possible a refund may take longer for a variety of reasons, including when a return is incomplete or needs further review. Delays can be caused by simple errors like an incomplete return, transposed numbers or when a tax return is affected by identity theft or fraud. The “https://www.irs.gov/refunds” tool only updates data once a day – usually overnight.

Myth 5: “Where’s My Refund?” must be wrong because a refund amount is less than expected
Different factors can cause a tax refund to be larger or smaller than expected. Situations that may decrease a refund can include corrections to any Recovery Rebate Credit or Child Tax Credit amounts, delinquent federal taxes or state taxes and past due child support. The IRS will mail the taxpayer a letter of explanation if these adjustments are made. The Department of Treasury's Bureau of the Fiscal Service may also send a letter if all or part of a taxpayer’s refund was used to pay certain financial obligations.

Myth 6: Calling a tax professional will provide a better refund date
Contacting a tax professional will not speed up a refund. Tax professionals cannot move up a refund date nor do they have access to any "special" information that will provide a more accurate refund date. The “Where’s My Refund?” tool provides taxpayers with the same accurate and timely information that a tax professional, or even an IRS telephone assistor can access.

Myth 7: Getting a refund this year means there's no need to adjust tax withholding for 2022
Taxpayers should continually check their withholding and adjust accordingly. Adjusting tax withholding with an employer is easy, and using the Tax Withholding Estimator tool can help taxpayers determine if they are withholding the right amount from their paycheck. Taxpayers who experience a life event like marriage or divorce, childbirth, an adoption, home purchase or major income change are encouraged to check their withholding. Withholding takes place throughout the year, so it's better to take this step as soon as possible.

Have an IRS Tax Problem?

 Contact the Tax Lawyers at

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or Toll Free at 888 8TAXAID (888-882-9243) 

 

TIGTA - Additional Actions Are Needed to Address Non-Filing and Non-Reporting Compliance Under FATCA

According to TIGTA Report Number: 2022-30-019, additional actions are needed to address non-filing and non-reporting compliance under FATCA.

Due To Resource Limitations, The IRS Has Significantly Departed From Its Original Comprehensive FATCA Compliance Roadmap In Favor Of A More Limited Compliance Effort.

As part of its effort, the Large Business and International (LB&I) Division established two campaigns to identify noncompliance with the individual and FFI provisions of FATCA. 

The chart below reflects nearly $574 million of FATCA-related implementation and maintenance costs compared against the LB&I Division’s campaign compliance results from the IRS’s systemic approach to address FATCA noncompliance, as well as FATCA-related assessments from field examinations.

Campaign 896 - Offshore Private Banking (related to individual taxpayers) has been able to complete a review of FATCA forms filed for Tax Years 2017 and 2018; the LB&I Division issued 830 “education letters” and five “soft letters” (soft letters do not necessarily result in compliance action) for Tax Year 2018. 

Initially, Campaign 896 Focused Only On Taxpayers Who
Have Underreported Their Foreign Assets On The
Forms 8938 And More Recently Started To Plan To
Address Taxpayers Who Have Not Filed Forms 8938.

IRS data show there are over 330,000 U.S. taxpayers from 2016 to 2019 who failed to file Form 8938, each with foreign accounts over $50,000. Potentially, these taxpayers would have owed at least $10,000 each in FATCA-related penalties, for a total of $3.3 billion in penalties. A portion of this population could be due to errors in IRS data, misreporting, or failure to file due to reasonable cause, which would reduce the total subject to penalties.

Campaign 975 - FATCA Filing Accuracy (related to the FFIs) has been able to fully review only Tax Year 2016 cases. For Tax Year 2016, the IRS concluded that the majority of the FFIs identified for potential noncompliance were in fact compliant. Only 12 “soft letters” were sent out between November 2019 and October 2020.

TIGTA made six recommendations to help the IRS address non-filing and non-reporting compliance under FATCA. The IRS agreed to consider expanding the scope of Campaign 975 to address noncompliance by the FFIs from Intergovernmental Agreement countries, and to establish goals, milestones, and timelines for FATCA campaigns. IRS officials indicated that they have already implemented most of the other recommendations; however, they did not agree to issue a notice to countries with Model 1 Intergovernmental Agreements

 Have an IRS Tax Problem?

 Contact the Tax Lawyers at

Marini & Associates, P.A. 

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

 

IRS Targets Expatriates With Unreported Crypto Currency Gains

According to Law360, Individuals who, over the past decade, amassed a small fortune in virtual currencies or other assets, who then expatriated from the United States without subjecting those assets to the expatriation tax, may feel like they have successfully flown under the radar of IRS’ civil and criminal tax enforcement.

Recent IRS Enforcement Initiatives, However, Including The IRS 2019 Expatriate Compliance Campaign And Its 2018 Virtual Currency Compliance Campaign, Suggest That The IRS Has Not Been Idle And Is Now Publicly And Officially On The Hunt.

Although a wait-and-see approach might have sufficed in the past, now, more than ever, potentially noncompliant expatriates should consult experienced counsel to evaluate and address their civil and criminal tax exposure in light of the IRS’ new tax enforcement priorities. 

In 2008, Congress created a new tax regime, popularly dubbed the exit tax, that provides for a so-called mark-to-market tax on property of United States citizens and certain long-term permanent residents seeking to expatriate from the United States.

In essence, the exit tax creates a taxable event covering all property belonging to a covered expatriate on the day before that person officially exits the United States, whether or not the covered expatriate’s property was actually sold. Under the exit tax, and subject to a few exceptions, all of a covered expatriate’s property is treated as sold at its fair market value on the day before that person’s official exit date, any gain arising from the deemed sale that exceeds a threshold amount (e.g., $725,000 in 2019) must be reported as taxable income and the corresponding taxes must be paid to the United States. 

Prior to 2014, when the price of one bitcoin fluctuated between less than $0.01 in 2009 all the way up to over $1,100.00 in 2013, it was unclear if and how virtual currency should be treated for federal income tax purposes. 

In 2014, however, the IRS issued Notice 2014-21, explaining that virtual currency is treated as property for federal income tax purposes and that longstanding tax principles applicable to transactions involving property in general also apply to virtual currency. Because virtual currency is “taxable by law just like transactions in any other property,” covered expatriates who failed to address the exit tax consequences arising from the deemed sale of all their virtual currencies (and other assets) upon expatriation have likely failed to meet their federal tax obligations. 

Virtual currencies have been on the IRS’ radar since as early as 2014, public reports of IRS’ enforcement efforts into virtual currencies did not gain widespread public traction until late 2016. In November 2016, the U.S. Department of Justice, Tax Division announced that the IRS intended to serve John Doe summonses on Coinbase Inc., a San Francisco-based cryptocurrency exchange platform, requesting information about U.S. taxpayers who engaged in virtual currency transactions between 2013 and 2015

Since then, the IRS has launched multiple initiatives targeting virtual currency transactions. For example, on May 1, 2017, the IRS Criminal Investigation Division created the Nationally Coordinated Investigations Unit, which has identified virtual currency as one of its three high priority initiatives. 

Taxpayers should check whether it is still possible to correct the tax return or file a Voluntary Disclosure in order to avoid any criminal proceedings and penalties, as well as administrative costs.

Have a Virtual Currency Tax Problem?

Value Your Freedom?

Contact the Tax Lawyers at

Marini & Associates, P.A. 

 

 for a FREE Tax Consultation Contact us at

www.TaxAid.com or www.OVDPLaw.com

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

IRS Is Focused on Crypto Currency Compliance!

The federal government and several other states have increased their focus on the regulation and taxation of cryptocurrency and other digital assets. 

On March 9, 2022, President Biden issued an executive order calling for evolution and alignment of the federal government’s approach to digital assets with key priorities to include: consumer and investor protection; financial stability; illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation. This call to action reflects the government’s desire to take more focused and coordinated steps to address the risks and cultivate the benefits of digital assets and their related technology.

From a federal tax perspective, the IRS began its focus on the taxation of “virtual” currency nearly a decade ago. Over the years, the IRS disseminated guidance in this area including IRS Notice 2014-21, IRB 2014-16 (and related FAQs), Rev. Rul. 2019-24, IRS Chief Counsel Memorandum 202114040, and others. These authorities generally provide that virtual currencies are treated as property (not fiat currency) for federal income tax purposes, and they describe how existing tax principals apply to various virtual currency transactions.

Furthermore, the IRS Priority Guidance Plan for 2021-2022, which outlines the IRS’s priorities for allocating resources to matters most important to taxpayers and tax administration, includes as its focus: (i) general guidance concerning virtual currency; and (ii) regulations regarding information reporting on virtual currency under Sec. 6045 of the Internal Revenue Code.

We have previously posted:

• IRS Cryptocurrency Enforcement and Stablecoins 
• Proposed FBAR Reporting For Crypto
• 2023 IRS Cryptocurrency Reporting Requirements
• Justice Announces First Director of National Cryptocurrency Enforcement Team
• IRS Seized $3.5B In Crypto In Fiscal 2021 and May Seize Billions More In 2022
• Cryptocurrency Is The IRS Criminal Investigation Unit's Primary Focus 

Both New York and New Jersey have joined a handful of states in addressing the tax treatment of virtual currencies from an income, sale/exchange and sales tax perspective. California Attorney General Rob Bonta recently acknowledged that crypto is an “area of concern.” 

The current tone of the rhetoric from our legislative and executive branches suggests that tax authorities will continue to focus more on providing detailed rules applicable to taxation, reporting, and compliance with respect to digital assets.

Taxpayers should check whether it is still possible to correct the tax return or file a Voluntary Disclosure in order to avoid any criminal proceedings and penalties, as well as administrative costs.

Have a Virtual Currency Tax Problem?

Value Your Freedom?

Contact the Tax Lawyers at

Marini & Associates, P.A. 

 

 for a FREE Tax Consultation Contact us at

www.TaxAid.com or www.OVDPLaw.com

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

IRS Cryptocurrency Enforcement and Stablecoins

Cryptocurrencies have garnered an increasing amount of attention from the IRS in the last several years. Guidance documents have been issued to clarify the tax treatment of cryptocurrency, and enhanced enforcement efforts have been undertaken to ensure taxpayer compliance with tax reporting obligations. 

Recently, a Type of Cryptocurrency Known as “Stablecoins”
Has Experienced Rapid Growth, Becoming The Fastest Growing Segment Of Cryptocurrency With Market Capitalization Surpassing $30 Billion as of January 2021.

As their name implies, “stablecoins” are designed to avoid the price instability that often accompanies more traditional types of cryptocurrency, such as Bitcoin. With their increasing popularity, determining the proper tax treatment and reporting of stablecoins is becoming a more pressing issue for tax policymakers and practitioners. Stablecoins are digital currencies that are price-stabilized by collateralizing and/or pegging them to an underlying, more stable asset such as the U.S. dollar (USD) or gold. Traditional cryptocurrencies such as Bitcoin, Ether, Ripple, and many others have long been plagued by extreme price volatility. 

Stablecoins use collateral to reduce volatility while retaining other benefits of digital currencies such as liquidity, transparency, and immutability through cryptography, encryption, and hashing. Users can conduct transparent peer-to-peer transactions, eliminating middlemen and many, if not all, of the fees typically associated with financial transactions. Because stablecoins are digital currencies that function on blockchain technology, they support real-time transactions and are available for use by anyone, anywhere in the world.

Stablecoins are generally differentiated based on the collateral used to reduce volatility in their price. Categorization based on collateral results in four general types of stablecoins:

1. Fiat-collateralized stablecoins.
2. Commodity-collateralized stablecoins.
3. Cryptocurrency-collateralized stablecoins.
4. Algorithmic (non-collateralized) stablecoins.

While fiat currencies such as the USD have served the role of money for centuries, there is increasing demand for global electronic payment systems to augment or even replace centralized, fiat-based systems. .

Businesses and consumers do not want to be exposed to unnecessary currency risk when transacting in cryptocurrencies. Businesses will not pay someone a salary in Bitcoin if the exchange rate between the salary in USD and Bitcoin is constantly fluctuating. Most who would consider using cryptocurrencies are not interested in speculating. Users want a store of value on a censorship-resistant ledger, escaping the local banking system, currency controls, or a collapsing economy. To date, cryptocurrencies such as Bitcoin and Ethereum have not been able to offer that.

To solve the volatility problem of cryptocurrencies, in late 2014, an organization called Tether Limited issued the first successful stablecoin, Tether, that was collateralized by USD (and later other fiat currencies and even gold). While extremely successful, Tether has been the subject of controversy and government investigations. Much of the controversy centers around whether Tether maintained the promised 1-1 collateralization ratio of Tether to USD.

Taxpayers should check whether it is still possible to correct the tax return or file a Voluntary Disclosure in order to avoid any criminal proceedings and penalties, as well as administrative costs.

Have a Virtual Currency Tax Problem?

Value Your Freedom?

Contact the Tax Lawyers at

Marini & Associates, P.A. 

 

 for a FREE Tax Consultation Contact us at

www.TaxAid.com or www.OVDPLaw.com

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

California Woman Agree To $930K Settlement In $2.3M FBAR Case

According to Law360, a California woman accused of failing to report her foreign bank accounts will settle penalties of $2.3 million for just under $1 million under a proposal accepted by her and the U.S., according to federal court documents in the case of U.S. v. Fariba Ely Cohen, case number 2:17-cv-01652, in the U.S. District Court for the Central District of California, Western Division.

Fariba Ely Cohen agreed to pay the U.S. $929,900 by Jan. 31, 2024, to settle allegations that she failed to report her Luxembourg bank account, according to the judgment, presented Wednesday April 6, 2022 to the U.S. District Court. Cohen had been assessed a penalty of $1.5 million for the 2008 tax year. Late payment penalties and interest pushed her liability to $2.3 million.

Cohen argued she did not understand her obligations to file reports of foreign bank and financial accounts, or FBARs. 

In Addition, The Government Could Not Show She Signed
Her Income Tax Return or Failed To Acknowledge Her
Ex-Husband's Role In Managing Their Finances, She Said.

Cohen had filed for summary judgment, arguing the penalty against her should have been capped at $100,000. The court ruled against her, stating a 2004 statute superseded the 1986 amendment to a U.S. Treasury regulation capping penalties at $100,000. The 2004 statute allows the agency to collect the greater of either $100,000 or 50% of the account balance that was not reported.

Have an FBAR Penalty Problem?  

 

 

 Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax Consultation at: 

www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243

3 Groups Urge Supreme Court To Review Non-Willful FBAR Penalty

According to Law360, whether a foreign bank account reporting penalty is assessed Per Unreported Account or Per Unfiled Form should be determined by the U.S. Supreme Court, tax and business groups said, arguing a circuit split on the issue warrants high court intervention.

In amicus briefs filed on April 1, 2022, the U.S. Chamber of Commerce, Center for Taxpayer Rights and American College of Tax Counsel told the Supreme Court it should resolve the divergent findings by two appeals courts on the proper application of the penalty for a person or business' nonwillful failure to disclose foreign accounts.

While the Ninth Circuit determined that the penalty for a person's nonwillful failure to disclose foreign accounts is assessed on a per-year basis, the Fifth Circuit found in Alexandru Bittner's case that he was liable for the penalty for each account that he failed to disclose.

This Circuit Split, Plus Some Differing Conclusions Arrived To By Several District Courts On The Issue, Creates Significant Uncertainty For Taxpayers And Can Only Be Fixed By The Supreme Court, The Three Groups Argued.

"The arguments for these conflicting interpretations have been fully aired, and further percolation would only allow uncertainty to continue to be a drain on our economy," the chamber said in its brief. "There is no good reason to delay review."

The American College of Tax Counsel likewise noted that "the lower courts have thoroughly analyzed this issue." "Waiting for further decisions will only add to the uncertainty," the ACTC's brief said. "In light of the diametrically opposed and irreconcilable positions taken, there is a clear need for the court to step into the fray."

The three tax and business groups filed their briefs in Bittner's dispute over the correct application of the maximum penalty for nonwillful failures to timely file FBAR forms, an issue that has divided the Fifth and Ninth Circuits and district courts in New Jersey and Connecticut. Anyone who has foreign bank accounts with balances exceeding $10,000 is required to file a single form disclosing the accounts, and that filing is due April 15 the year following the calendar year being disclosed.

Bittner, a Texas resident with citizenship in Romania, had been assessed $2.7 million in penalties in 2017. The Internal Revenue Service sued him in 2019 seeking to collect the funds, but a Texas federal judge ruled that Bittner was liable for nonwillful penalties at a $10,000 maximum per year and rejected the government's argument that he should be on the hook for a penalty per account.

The Fifth Circuit disagreed, though, saying in its November opinion that the penalty applied for each failure to file an annual FBAR was inconsistent with the Bank Secrecy Act, which requires the disclosures, and its corresponding regulations. That decision departed from one by the Ninth Circuit in U.S. v. Jane Boyd, which found that Boyd committed a single violation in failing to file an FBAR reporting her accounts, making her liable for a $10,000 penalty rather than a $50,000 sum for each of her five accounts.

In Their Three Briefs, The Chamber, Center And ACTC Told
The Supreme Court That The Lack Of Uniformity

In The Application Of This Penalty Has Negative
Consequences For Taxpayers And For Business Conditions.

Both the chamber and center said in their briefs that the Fifth Circuit's decision has "draconian" results, as it can result in harsh penalty amounts with no direct connection to the harm done to the government by a person's unintentional failure to file an FBAR.

"Imposing the nonwillful FBAR penalty 'per-account,' as endorsed by the Fifth Circuit, renders this penalty regime draconian, disproportionately affecting groups of taxpayers for reasons entirely unrelated to their offending conduct," the center said.

"The amicus briefs reflect the views of every major stakeholder affected by this issue, including corporations, experts and scholars, consumers and practitioners," Geyser said. "Those briefs deftly underscore the immediate need to correct the IRS' overreach and restore national consistency on this important question."

ACTC representative Caroline D. Ciraolo of Kostelanetz & Fink LLP said it's "hopeful that the court will grant the petition."

"As we noted in our brief, U.S. persons are entitled to clear, unambiguous and reasonable interpretations of penalty statutes," Ciraolo said Monday.

Have an FBAR Penalty Problem?  

 

 

 Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax Consultation at: 

www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243