IRS issues new guidance on tax and reporting rules for virtual currency

Press Release
FOR IMMEDIATE RELEASE

 

Virtual currency: IRS issues additional guidance on tax treatment and reminds taxpayers of reporting obligations

NEWPORT BEACH November 29, 2019 — As part of a wider effort to assist taxpayers and to enforce the tax laws in a rapidly changing area, the Internal Revenue Service today issued two new pieces of guidance for taxpayers who engage in transactions involving virtual currency.

Expanding on guidance from 2014, the IRS is issuing additional detailed guidance to help taxpayers better understand their reporting obligations for specific transactions involving virtual currency. The new guidance includes Revenue Ruling 2019-24 (here) and frequently asked questions (here).

The new revenue ruling addresses common questions by taxpayers and tax practitioners regarding the tax treatment of a cryptocurrency hard fork. In addition, a set of FAQs address virtual currency transactions for those who hold virtual currency as a capital asset.

"The IRS is committed to helping taxpayers understand their tax obligations in this emerging area," said IRS Commissioner Chuck Rettig. "The new guidance will help taxpayers and tax professionals better understand how longstanding tax principles apply in this rapidly changing environment. We want to help taxpayers understand the reporting requirements as well as take steps to ensure fair enforcement of the tax laws for those who don't follow the rules."

The new guidance supplements the guidance the IRS issued on virtual currency in Notice 2014-21 (PDF). The IRS is also soliciting public input on additional guidance in this area.

In Notice 2014-21, the IRS applied general principles of tax law to determine that virtual currency is property for federal tax purposes. The Notice explained, in the form of 16 FAQs, the application of general tax principles to the most common transactions involving virtual currency.

The IRS states it is aware that some taxpayers with virtual currency transactions may have failed to report income and pay the resulting tax or did not report their transactions properly. The IRS is actively addressing potential non-compliance in this area through a variety of efforts, ranging from taxpayer education to audits to criminal investigations.

For example, in July of this year the IRS began mailing educational letters to more than 10,000 taxpayers who may have reported transactions involving virtual currency incorrectly or not at all. Taxpayers who did not report transactions involving virtual currency or who reported them incorrectly may, when appropriate, be liable for tax, penalties and interest. In some cases, taxpayers could be subject to criminal prosecution.

Wilson Tax Law Group, APLC is an Orange County law firm specializing in Federal and State tax audits, internal compliance, FBAR, offshore bank account disclosures, and criminal tax, including appeals, trials, and collections. The Los Angeles and San Francisco Daily Journals have named Wilson Tax Law Group, APLC as one of the “Top 20 Boutique Firms in California”.

Newport Beach Main Office
1401 Dove Street Suite 630
Newport Beach, CA 92660
949.397.2292

Yorba Linda Branch Office
18281 Lemon Drive
Yorba Linda, CA 92886
714.463.4430

https://wilsontaxlaw.com

Press Relations
Wilson Tax Law Group, APLC
Newport Beach, California
949-397-2292

California Attorney, a Prior Tax Offender and Embezzler, Pleads Guilty to Tax Evasion

Press Release
FOR IMMEDIATE RELEASE

California Attorney, a Prior Tax Offender and Embezzler, Pleads Guilty to tax Evasion

NEWPORT BEACH November 23, 2019 -- James Roy McDaniel, 66, who pleaded guilty before United States District Judge S. James Otero to one count of tax evasion, is scheduled to be sentenced on February 3, 2020. At sentencing, McDaniel could receive a statutory maximum sentence of five years imprisonment.  Because this is his second criminal tax offense his chances of receiving a higher sentence are increased.

McDaniel was a licensed California attorney for more than two decades, until he pleaded guilty in late 2004 to one felony count of subscribing to a false income tax return. In 2005, McDaniel was sentenced to three years in federal prison for that crime, and he surrendered his license to practice law in California. In that case, McDaniel’s failure to report income resulted in a tax loss of $677,368 to the federal government, according to court documents. McDaniel’s additional income was the result of his embezzlement of over $1.6 million from two prominent families he represented as an attorney. McDaniel served time in state prison for the embezzlement.

The IRS subsequently assessed McDaniel more than $1.4 million in taxes, interest and penalties for the tax years 1997 through 2001, court papers state. According to the signed plea agreement, McDaniel willfully attempted to evade paying his debt to the IRS by creating two shell companies – Davis Bell Consulting LLC and James Roy Consulting LLC – where he directed payments for tax and estate planning consulting work he performed after being released from prison.

During a scheme that allegedly ran from May 2008 until December 2012, McDaniel attempted to mislead federal tax authorities and conceal his income by directing other people to sign documents identifying themselves as the sole managing members of the shell companies. As part of the scheme, McDaniel directed them to open bank accounts where he deposited checks for his tax and estate planning work.

McDaniel continued to earn income for tax and estate planning consulting work during each of calendar years 2008 to 2018, but willfully failed to report his income, and willfully failed to file tax returns with the IRS for tax years 2011 to 2018.  McDaniel admits that from 2012 through 2017, he received taxable income of at least $527,944, and subsequently owes unpaid taxes of $184,126, in addition to the $1.4 million previously assessed.

Commentator's suggest this may not be your typical tax crimes case.   The typical tax crime offender is a one-time offender and is not charged again after serving his time.  This is because they presumably  learned their lesson and will not commit tax crimes again. However, in this case, McDaniel seriously thumbed his nose at the government following his first conviction by purposefully failing to file tax returns and pay taxes for a period of approximately 8 years.  Moreover, McDaniel's arguably engaged in the illegal practice of law and violated the public trust by preparing estate plans for clients without an active law license. For these reasons, it makes sense why the government would proceed against McDaniel's a second time.

Wilson Tax Law Group, APLC is an Orange County law firm specializing in Federal and State tax audits, internal compliance, FBAR, offshore bank account disclosures, and criminal tax, including appeals, trials, and collections. The Los Angeles and San Francisco Daily Journals have named Wilson Tax Law Group, APLC as one of the “Top 20 Boutique Firms in California”.

Newport Beach Main Office
1401 Dove Street Suite 630
Newport Beach, CA 92660
949.397.2292

Yorba Linda Branch Office
18281 Lemon Drive
Yorba Linda, CA 92886
714.463.4430

https://wilsontaxlaw.com

Fareedeh Wilson
Press Relations
Wilson Tax Law Group, APLC
Newport Beach, California
949-397-2292

California Attorney, a Prior Tax Offender and Embezzler, Pleads Guilty to Tax Evasion

Press Release
FOR IMMEDIATE RELEASE

California Attorney, a Prior Tax Offender and Embezzler, Pleads Guilty to tax Evasion

NEWPORT BEACH November 23, 2019 -- James Roy McDaniel, 66, who pleaded guilty before United States District Judge S. James Otero to one count of tax evasion, is scheduled to be sentenced on February 3, 2020. At sentencing, McDaniel could receive a statutory maximum sentence of five years imprisonment.  Because this is his second criminal tax offense his chances of receiving a higher sentence are increased.

McDaniel was a licensed California attorney for more than two decades, until he pleaded guilty in late 2004 to one felony count of subscribing to a false income tax return. In 2005, McDaniel was sentenced to three years in federal prison for that crime, and he surrendered his license to practice law in California. In that case, McDaniel’s failure to report income resulted in a tax loss of $677,368 to the federal government, according to court documents. McDaniel’s additional income was the result of his embezzlement of over $1.6 million from two prominent families he represented as an attorney. McDaniel served time in state prison for the embezzlement.

The IRS subsequently assessed McDaniel more than $1.4 million in taxes, interest and penalties for the tax years 1997 through 2001, court papers state. According to the signed plea agreement, McDaniel willfully attempted to evade paying his debt to the IRS by creating two shell companies – Davis Bell Consulting LLC and James Roy Consulting LLC – where he directed payments for tax and estate planning consulting work he performed after being released from prison.

During a scheme that allegedly ran from May 2008 until December 2012, McDaniel attempted to mislead federal tax authorities and conceal his income by directing other people to sign documents identifying themselves as the sole managing members of the shell companies. As part of the scheme, McDaniel directed them to open bank accounts where he deposited checks for his tax and estate planning work.

McDaniel continued to earn income for tax and estate planning consulting work during each of calendar years 2008 to 2018, but willfully failed to report his income, and willfully failed to file tax returns with the IRS for tax years 2011 to 2018.  McDaniel admits that from 2012 through 2017, he received taxable income of at least $527,944, and subsequently owes unpaid taxes of $184,126, in addition to the $1.4 million previously assessed.

Commentator's suggest this may not be your typical tax crimes case.   The typical tax crime offender is a one-time offender and is not charged again after serving his time.  This is because they presumably  learned their lesson and will not commit tax crimes again. However, in this case, McDaniel seriously thumbed his nose at the government following his first conviction by purposefully failing to file tax returns and pay taxes for a period of approximately 8 years.  Moreover, McDaniel's arguably engaged in the illegal practice of law and violated the public trust by preparing estate plans for clients without an active law license. For these reasons, it makes sense why the government would proceed against McDaniel's a second time.

Wilson Tax Law Group, APLC is an Orange County law firm specializing in Federal and State tax audits, internal compliance, FBAR, offshore bank account disclosures, and criminal tax, including appeals, trials, and collections. The Los Angeles and San Francisco Daily Journals have named Wilson Tax Law Group, APLC as one of the “Top 20 Boutique Firms in California”.

Newport Beach Main Office
1401 Dove Street Suite 630
Newport Beach, CA 92660
949.397.2292

Yorba Linda Branch Office
18281 Lemon Drive
Yorba Linda, CA 92886
714.463.4430

https://wilsontaxlaw.com

Fareedeh Wilson
Press Relations
Wilson Tax Law Group, APLC
Newport Beach, California
949-397-2292

IRS Increases Enforcement of Syndicated Conservation Easements

Press Release
FOR IMMEDIATE RELEASE

 

IRS Increases Enforcement Action on Syndicated Conservation Easements

NEWPORT BEACH November 18, 2019 -- While speaking at the American Institute of CPAs (AICPA) 2019 National Tax Conference in Washington, D.C., IRS Commissioner, Rettig, and IRS Chief Counsel, Desmond, both separately underscored the IRS’s increased enforcement efforts toward abuses of certain tax-advantaged land transactions under Code Sec. 170(h)..

Rettig stated that the IRS appreciates the value of conservation easements, but it does not appreciate the activities that have gone on with respect to the syndicated conservation easements -- there are some artificial appraisals there… some fatal flaws.

Rettig, reiterating the IRS’s tough stance on the matter, as noted in IRS press release dated November 12, said that the IRS is not going to "stand down." The information issued in the November 12 news release was "fair warning," Rettig said. Likewise, IRS Chief Counsel, Desmond, stressed that the challenges surrounding syndicated conservation easements are an "institutional concern" for the IRS... "one that we will be responding to," Desmond emphasized.

The related increase in audits and investigations cover billions of dollars of potentially inflated deductions as well as hundreds of partnerships and thousands of investors, according to the IRS. "We will not stop in our pursuit of everyone involved in the creation, marketing, promotion and wrongful acquisition of artificial, highly inflated deductions based on these aggressive transactions," Rettig said.

Wilson Tax Law Group, APLC is an Orange County law firm specializing in Federal and State tax audits, internal compliance, FBAR, offshore bank account disclosures, and criminal tax, including appeals, trials, and collections. The Los Angeles and San Francisco Daily Journals have named Wilson Tax Law Group, APLC as one of the “Top 20 Boutique Firms in California”.

Newport Beach Main Office
1401 Dove Street Suite 630
Newport Beach, CA 92660
949.397.2292

Yorba Linda Branch Office
18281 Lemon Drive
Yorba Linda, CA 92886
714.463.4430

https://wilsontaxlaw.com

Fareedeh Wilson
Press Relations
Wilson Tax Law Group, APLC
Newport Beach, California
949-397-2292

IRS updates guidance for deductible business, charitable, medical and moving expenses

IR-2019-183, November 14, 2019




WASHINGTON — The Internal Revenue Service today issued guidance for taxpayers with certain deductible expenses to reflect changes resulting from the Tax Cuts and Jobs Act (TCJA).

Revenue Procedure 2019-46 (PDF), posted today on IRS.gov, updates the rules for using the optional standard mileage rates in computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes.

The guidance also provides rules to substantiate the amount of an employee's ordinary and necessary travel expenses reimbursed by an employer using the optional standard mileage rates. Taxpayers are not required to use a method described in this revenue procedure and may instead substantiate actual allowable expenses provided they maintain adequate records.

The TCJA suspended the miscellaneous itemized deduction for most employees with unreimbursed business expenses, including the costs of operating an automobile for business purposes. However, self-employed individuals and certain employees, such as Armed Forces reservists, qualifying state or local government officials, educators and performing artists, may continue to deduct unreimbursed business expenses during the suspension.

The TCJA also suspended the deduction for moving expenses. However, this suspension does not apply to a member of the Armed Forces on active duty who moves pursuant to a military order and incident to a permanent change of station.

For more information contact Joseph P. Wilson at 949-397-2292 or wilson@wilsontaxlaw.com. Mr. Wilson represents clients throughout California and the Globe, involving local, state, federal and international civil tax disputes, IRS audits and appeals, tax litigation and criminal tax defense. Mr. Wilson is the Managing Shareholder at Wilson Tax Law Group, APLC, former Member of the Executive Committee of the Taxation Section, California Lawyers’ Association, a former IRS Attorney, a former Assistant United States Attorney, and a former Tax Attorney in the Legal Division of the California Franchise Tax Board.

Steps to take now for 2020 filing Season

With 2019 almost over there are steps to take now for the 2020 filing season.

Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a refundable federal income tax credit for working people with low to moderate incomes who meet certain eligibility requirements. Because it's a refundable credit, those who qualify and claim EITC pay less federal tax, pay no tax or may even get a tax refund. EITC can mean a credit of up to $6,557 for working families with three or more qualifying children. Workers without a qualifying child may be eligible for a credit up to $529.

In addition to other requirements, to get the credit, people must have earned income and file a federal tax return — even if they don't owe any tax or aren't otherwise required to file.

Taxpayers should seek the advice of a tax professional to determine if they are eligible for EITC, determine if their child or children meet the tests for a qualifying child and estimate the amount of their credit.

Child Tax Credit
Taxpayers can claim the Child Tax Credit if they have a qualifying child under the age of 17 and meet other qualifications. The maximum amount per qualifying child is $2,000. Up to $1,400 of that amount can be refundable for each qualifying child. So, like the EITC, the Child Tax Credit can give a taxpayer a refund even if they owe no tax.

The qualifying child must have a valid Social Security number issued before the due date of the tax return, including extensions. For tax year 2019, this means April 15, 2020, or if a taxpayer gets a tax-filing extension, Oct. 15, 2020.

The amount of the Child Tax Credit begins to reduce or phase out at $200,000 of modified adjusted gross income, or $400,000 for married couples filing jointly.

Credit for Other Dependents
This credit is available to taxpayers with dependents for whom they cannot claim the Child Tax Credit. These include dependent children who are age 17 or older at the end of 2019 or parents or other qualifying individuals supported by the taxpayer.

IRS Publication 972, Child Tax Credit, available now on IRS.gov, has further details and will soon be updated for tax year 2019.

Education Credits
Two credits can help taxpayers paying higher education costs for themselves, a spouse or dependent. The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) are claimed on IRS Form 8863, Education Credits. The AOTC is partly refundable.

Among other requirements, to get either credit, the taxpayer or student usually must receive Form 1098-T, Tuition Statement, from the school attended. Some exceptions apply. See the instructions to IRS Form 8863 for details.

Interactive Tax Assistant
The IRS has an Interactive Tax Assistant (ITA) to help people determine if they can claim any of these credits. The ITA also provides answers to general questions on filing status, claiming dependents, filing requirements and other topics. While useful it doesn't guarantee the IRS will allow someone to claim the credit if they believe it should be disallowed. Thus, its best to seek the advice of a tax professional if you have any questions about these tax items.

Filing electronically is easy, safe and the most accurate way to file your tax return. There are a variety of free electronic filing options for most taxpayers including using IRS Free File for taxpayers with income below $66,000, or Fillable Forms for taxpayers who earn more. Taxpayers who generally earn $56,000 or less can have their return prepared at a Volunteer Income Tax Assistance site. Tax Counseling for the Elderly sites offer free tax help for all taxpayers, particularly those who are 60 years of age and older.

Contact Joseph P. Wilson at 949-397-2292 or wilson@wilsontaxlaw.com. Mr. Wilson represents clients throughout California and the Globe, involving local, state, federal and international civil tax disputes, tax litigation and criminal tax defense. Mr. Wilson is the Managing Shareholder at Wilson Tax Law Group, APLC, former Member of the Executive Committee of the Taxation Section, California Lawyers’ Association, a former IRS Attorney, a former Assistant United States Attorney, and a former Tax Attorney in the Legal Division of the California Franchise Tax Board.