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Key Takeaways | Cryptocurrency Global Tax Enforcement: What Investors and Companies in the Industry Need to Know NOW

During a recent program discussing the latest government enforcement efforts related to cryptocurrency, we spoke with Gary Alford, one of the leading Internal Revenue Service (IRS) agents in their crypto enforcement efforts, Perry Carbone, Chief of the White Plains Office (US Attorney’s Office – SDNY) and Andy Cole, former Director of Specialist Investigations at HM Revenue & Customs in the United Kingdom, about how investors and companies in the virtual currency industry should address enforcement actions. Below are key takeaways from the conversation.

ENHANCED ENFORCEMENT – UNITED STATES

  • The time to act is now. The IRS and the US Department of Justice (DOJ) are collecting virtual currency data at a rapid pace while simultaneously moving forward with tax enforcement cases. The IRS Criminal Investigation (IRS-CI) revamped its operations to “do more with less” using new technology that will move investigations at a faster pace.
  • The IRS joined its civil and criminal units through Operation Hidden Treasure and is also working with outside experts in the field—along with specially-trained IRS agents—to pursue tax enforcement and asset seizure. This is a key agenda item for the US Department of the Treasury and is not going away any time soon.
  • The IRS and the DOJ expect taxpayers to comply voluntarily with all tax obligations. Despite these recent developments, US taxpayers have limited guidance from the IRS. Engaging with professionals in the space to evaluate the options available to taxpayers is crucial to assessing and ensuring compliance with cryptocurrency taxation.

INTERNATIONAL EFFORTS

  • Global collaboration is nothing new, but it is now on the rise. Agencies around the world are enhancing their cross-border information and resource sharing to investigate tax crimes efficiently and effectively. The J5, an important component of this global collaboration, is prepared to pool some of the world’s most sophisticated data analytical tools so that intelligence can be screened, searched and/or identified.
  • The Organisation for Economic Co-operation and Development (OECD) and its governing body will likely start requiring cryptocurrency exchanges to collect customer due diligence information. The window of anonymity around cryptocurrency transactions has closed rapidly in recent years.
  • The global Common Reporting Standard (CRS) has been in force since 2017. Under the CRS, tax authorities of over 100 countries (including most of the traditional “tax havens”) automatically exchange tax, account and payment information with each other in order to assist in tax collection and enforcement action.

FOR INDIVIDUALS

  • Moving forward, the “knowledge and willfulness” element needed for criminal cases will be much easier for the DOJ to prove because the “virtual currency question” is now at the top of Form 1040. The prominent location of this question is “a game changer” for criminal tax prosecutions.
  • Cryptocurrency tax crimes are no longer “add on” charges to other criminal prosecutions, such as narcotics or fraud crimes. The DOJ expects to bring independent cryptocurrency criminal tax cases and take these prosecutions to “the next level,” including prosecutions of more routine tax matters.
  • Individuals serving as board members on behalf [...]

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Weekly IRS Roundup July 19 – July 23, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 19, 2021 – July 23, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

July 19, 2021: The IRS issued a news release announcing an enhancement to its online account systems, specifically that tax professionals and taxpayers may now initiate and execute a Power of Attorney or Tax Information Authorization online in lieu of using Forms 2848 and 8821, respectively.

July 20, 2021: The IRS issued a news release urging tax professionals to use multi-factor authentication technology to protect taxpayers’ information from identity and data theft.

July 21, 2021: The IRS issued proposed regulations expanding electronic filing requirements with respect to various business tax returns and statements, pursuant to the Taxpayer First Act of 2019 provisions and related legislation.

July 21, 2021: The IRS issued a news release announcing that, in partnership with local civic organizations, events will be held in several cities across the country on July 23 – 24, 2021, to assist eligible families in registering for advance payments of the Child Tax Credit.

July 21, 2021: The IRS issued a news release announcing the disbursement of more than 2.2 million Economic Impact Payments worth more than $4 billion, bringing the total amount of disbursements under the American Rescue Plan Act of 2021 to more than 171 million payments worth more than $400 billion.

July 23, 2021: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Le Chen in our Washington, DC, office for this week’s roundup.




Weekly IRS Roundup July 12 – July 16, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 12, 2021 – July 16, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

July 12, 2021: The IRS issued a news release announcing the launch of a Spanish-language version of the Child Tax Credit Eligibility Assistant, an online tool designed to assist families in determining their eligibility for advance payments of the Child Tax Credit.

July 13, 2021: The IRS issued a news release announcing the imminent issuance of another round of tax refunds to taxpayers who paid taxes on unemployment compensation in 2020, pursuant to the retroactive exclusion of such compensation from 2020 taxable income under the American Rescue Plan Act of 2021.

July 14, 2021: The IRS issued a news release announcing the start of a summer campaign by the Security Summit, a partnership between the IRS, state tax agencies and private organizations to raise awareness within the tax community about identity theft and data security.

July 15, 2021: The IRS issued Revenue Ruling 2021-14, providing various prescribed interest rates for federal income tax purposes for August 2021.

July 15, 2021: The IRS issued Notice 2021-44, providing the monthly update to certain interest rates used for pension plan funding and distribution purposes.

July 15, 2021: The IRS issued a news release announcing the disbursement of the July round of advance payments of the Child Tax Credit, consisting of approximately 35 million payments worth approximately $15 billion.

July 16, 2021: The IRS issued Revenue Procedure 2021-30, updating the procedures for the correction programs under the Employee Plans Compliance Resolution System (EPCRS), a program for retirement plans to come into compliance with certain requirements under sections 401, 403 and 408 of the Code.

July 16, 2021: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Le Chen in our Washington, DC, office for this week’s roundup.




Weekly IRS Roundup July 5 – July 9, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 5, 2021 – July 9, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

July 6, 2021: The IRS—in conjunction with the US Department of Labor and the US Department of Health and Human Services—released temporary regulations implementing provisions of the No Surprises Act, enacted as part of the Consolidated Appropriations Act, 2021 and designed to protect persons with health insurance from “surprise” medical bills for certain medical services. The IRS separately released proposed regulations with respect to a subset of the temporary regulations, containing the same text.

July 6, 2021: The IRS issued a set of FAQs and an associated news release, answering questions regarding COVID-related grants provided to certain transportation companies under the Coronavirus Economic Relief for Transportation Services (CERTS) Act.

July 7, 2021: The IRS issued a news release reminding taxpayers that, in partnership with local civic organizations, special events will be held in 12 cities on July 9 – 10, 2021, to assist eligible families in registering for advance payments of the Child Tax Credit.

July 9, 2021: The IRS issued Notice 2021-38 and an accompanying news release, providing guidance regarding the requirements (as enacted under section 432(k) of the Code as part of the American Rescue Plan Act of 2021) for certain multiemployer pension plans to obtain special financial assistance under section 4262 of the Employee Retirement Income Security Act of 1974 (ERISA), as enacted by the same Act.

July 9, 2021: The IRS issued a news release announcing that July 13, 2021, is the final day to register for the 2021 IRS Nationwide Tax Forum, an annual series of continuing education seminars for tax professionals to be held virtually from July 20, 2021 through August 19, 2021.

July 9, 2021: The IRS issued a news release reminding taxpayers of the resources available on irs.gov to assist with answering tax questions.

July 9, 2021: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Le Chen in our Washington, DC, office for this week’s roundup.




Cryptocurrency Global Tax Enforcement: What Investors and Companies in the Industry Need to Know NOW

On June 28, 2021, McDermott held a webinar presentation titled “Cryptocurrency Global Tax Enforcement: What Investors and Companies in the Industry Need to Know NOW.”

Topics during this webinar included:

  • How to address the tax consequences of past virtual currency transactions, including potential voluntary disclosure considerations.
  • How to protect your business from a US Department of Justice (DOJ) or UK investigation, including compliance updates to address this risk.
  • Law enforcement perspectives and updates from the IRS, DOJ and a former high-level director at HM Revenue & Customs.
  • How to respond to an IRS letter, including potential civil resolutions.
  • How to respond to a DOJ or a UK Serious Fraud Office (SFO) inquiry, summons, subpoena, search warrant or a whistleblower complaint.

A link to the webinar is available here. A link to the webinar’s slides is available here.




Weekly IRS Roundup June 21 – June 25, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of June 21, 2021 – June 25, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

June 22, 2021: The IRS issued a news release announcing the launch of two online tools regarding the Child Tax Credit, as expanded by the American Rescue Plan Act of 2021: The Child Tax Credit Eligibility Assistant, which assists families in determining whether they are eligible for advance payments of the credit, and the Child Tax Credit Update Portal, which assists families in monitoring their credit payments.

June 23, 2021: The IRS issued a news release announcing the release of the Electronic Tax Administration Advisory Committee’s (ETAAC) annual report to Congress, which focuses on the prevention of identity theft and refund fraud.

June 23, 2021: The IRS issued a news release announcing that, in partnership with local civic organizations, special events will be held in 12 cities in late June and early July to assist eligible families in registering for advance payments of the Child Tax Credit.

June 24, 2021: The IRS issued Notice 2021-40, extending, through June 30, 2022, earlier relief that temporarily removed the requirement that certain elections and consents under pension and employee benefit plans be made in the physical presence of a plan representative or notary public.

June 24, 2021: The IRS issued a news release with more information regarding the Child Tax Credit Eligibility Assistant and urging families to use the tool to determine whether they qualify for advance payments of the Child Tax Credit.

June 24, 2021: The IRS issued a news release announcing the release of the Data Book, which details its activities during Fiscal Year 2020, particularly its activities in response to the COVID-19 pandemic.

June 25, 2021: The IRS issued Revenue Procedure 2021-22, setting forth requirements for 2021 regarding the use of substitutes for official IRS forms with respect to certain employment tax returns and associated schedules.

June 25, 2021: The IRS issued Revenue Procedure 2021-27, setting forth requirements for 2021 regarding the use of substitutes for official IRS forms with respect to certain information returns.

June 25, 2021: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Le Chen in our Washington, DC, office for this week’s roundup.




Weekly IRS Roundup June 14 – June 18, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of June 14, 2021 – June 18, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

June 14, 2021: The IRS issued a news release unveiling updates to its online Non-Filer Sign-Up Tool, expanding the scope of the tool to assist families who do not normally file tax returns to register for and receive monthly advance payments of the Child Tax Credit (as expanded by the American Rescue Plan of 2021).

June 15, 2021: The IRS issued Revenue Ruling 2021-12, providing various prescribed interest rates for federal income tax purposes for July 2021.

June 16, 2021: The IRS issued corrections to final regulations published on January 5, 2021, regarding simplified accounting rules for small businesses under sections 263A, 448, 460 and 471 of the Code.

June 16, 2021: The IRS issued Notice 2021-37, providing the monthly update to certain interest rates used for pension plan funding and distribution purposes.

June 17, 2021: The IRS issued Revenue Procedure 2021-28, providing procedures for taxpayers to change to the alternative depreciation system of accounting under section 168(g) of the Code with respect to certain residential real property placed in service prior to 2018 as required by the Taxpayer Certainty and Disaster Tax Relief Act of 2020.

June 17, 2021: The IRS issued Revenue Procedure 2021-29, providing simplified procedures for certain partnerships to file amended partnership returns to comply with the procedures for tax accounting with respect to residential real property discussed in Revenue Procedure 2021-28.

June 18, 2021: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Le Chen in our Washington, DC, office for this week’s roundup.




Weekly IRS Roundup June 7 – June 11, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of June 7, 2021 – June 11, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

June 7, 2021: The IRS issued a news release announcing it has begun sending letters to inform more than 36 million American families of their potential eligibility to receive monthly Child Tax Credit payments beginning in July, pursuant to the expansion of the Child Tax Credit under the American Rescue Plan Act of 2021 (ARPA).

June 8, 2021: The IRS issued a news release, soliciting applications for 80 vacancies within its Procurement office, including vacancies for contract specialists who assist the IRS in the procurement and administration of third-party contracts.

June 8, 2021: The IRS issued a news release reminding taxpayers who make estimated tax payments that the second installment of estimated taxes for 2021 is due June 15, 2021.

June 9, 2021: The IRS issued a news release announcing the disbursement of more than 2.3 million Economic Impact Payments worth more than $4.2 billion, bringing the total amount of disbursements under ARPA to more than 169 million payments worth approximately $395 billion.

June 10, 2021: The IRS issued Notice 2021-36, announcing that the applicability date for certain regulations under sections 59A and 6038A of the Code, which set forth various reporting requirements with respect to qualified derivative payments (QDPs) for purposes of the base erosion and anti-abuse tax (BEAT), is delayed to the 2023 taxable year.

June 11, 2021: The IRS issued final regulations regarding the new mandatory 60-day postponement of certain tax deadlines due to a federally-declared disaster, enacted as section 7805A(d) of the Code by the Further Consolidated Appropriations Act, 2020.

June 11, 2021: The IRS issued Revenue Ruling 2021-11, providing the semi-annual Standard Industry Fare Level (SIFL) rates and terminal charges used in computing the value of noncommercial flights on employer-provided aircrafts for purposes of the taxation of fringe benefits under section 61 of the Code. The Revenue Ruling provides both unadjusted SIFL rates and SIFL rates adjusted for relief provided to the airline industry by COVID-related legislation.

June 11, 2021: The IRS issued an Action on Decision, announcing it would not acquiesce to TriNet Group, Inc. v. United States, 979 F.3d 1311 (11th Cir. 2020), which held that a professional employer organization (PEO) had “control of the payment of wages” to its clients’ employees and therefore the PEO—not its clients—was the “employer” (under section 3401(d) of the Code) eligible to claim Federal Insurance Contributions Act (FICA) tip tax credits with respect to such wages.

June 11, 2021: The IRS issued a news release and two sets of FAQs, providing assistance to families and small businesses claiming [...]

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Weekly IRS Roundup May 31 – June 4, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 31, 2021 – June 4, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

June 1, 2021: The IRS issued a news release, soliciting applications for the IRS Advisory Council, a forum consisting of representatives of the public to advise the IRS regarding various tax administration issues.

June 2, 2021: The IRS issued a news release, reminding taxpayers living and working abroad of the June 15, 2021, deadline for filing their 2020 US federal income tax returns.

June 4, 2021: The IRS issued Notice 2021-34, providing the applicable reference price and associated credit amount used in determining the marginal well production credit under section 45I of the Code.

June 4, 2021: The IRS issued Announcement 2021-11, announcing that the United States and Switzerland have entered into an arrangement listing the US and Swiss pension and retirement plans, which now include various US and Swiss individual retirement savings plans that may qualify for the exemption from withholding on dividends under the US-Switzerland tax treaty.

June 4, 2021: The IRS issued a news release, announcing the issuance of more than 2.8 million refunds to taxpayers who paid taxes on unemployment compensation in 2020, compensation that was retroactively excluded from 2020 taxable income by the American Rescue Plan Act of 2021.

June 4, 2021: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Le Chen in our Washington, DC, office for this week’s roundup.




Weekly IRS Roundup May 24 – May 28, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 24, 2021 – May 28, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

May 24, 2021: The IRS issued a news release, announcing that the 2021 IRS Nationwide Tax Forum—an annual series of continuing education seminars for tax professionals—will be held virtually from July 20, 2021, through August 19, 2021.

May 26, 2021: The IRS issued a news release, announcing the disbursement of more than 1.8 million Economic Impact Payments worth more than $3.5 billion, bringing the total amount of disbursements under the American Rescue Plan Act of 2021 to nearly 167 million payments worth approximately $391 billion.

May 27, 2021: The IRS issued Revenue Ruling 2021-10 and an accompanying news release, setting forth the overpayment and underpayment interest rates under section 6621 of the Code for Q3 of 2021.

May 28, 2021: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Le Chen in our Washington, DC, office for this week’s roundup.




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