IRS REMINDS TAXPAYERS TO REPORT VIRTUAL CURRENCY TRANSACTIONS

NSTPDigital Currency, Internal Revenue Service (IRS)

The Internal Revenue Service reminds taxpayers that income from virtual currency transactions is reportable on their income tax returns. Virtual currency transactions are taxable by law just like transactions in any other property. The IRS had issued guidance in IRS Notice 2014-21 to addresses transactions in virtual currency, also known as digital currency. Taxpayers who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest. Virtual currency, as generally defined, is a digital representation of value that functions in the same manner as a country’s traditional currency. There are currently more than 1,500 known virtual currencies. Because transactions in virtual currencies can be difficult to trace and have an inherently pseudo-anonymous aspect, some taxpayers may be tempted to hide taxable income from the IRS. Notice 2014-21 provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that: A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property. Payments using virtual … Read More

NATIONAL TAXPAYER ADVOCATE DELIVERS ANNUAL REPORT TO CONGRESS; DISCUSSES TAX REFORM IMPLEMENTATION AND UNVEILS “PURPLE BOOK”

NSTPCongress, Taxpayer

National Taxpayer Advocate Nina E. Olson today released her 2017 Annual Report to Congress, describing challenges the IRS will face as it implements the recently enacted tax reform legislation and unveiling a new publication, “The Purple Book,” that presents 50 legislative recommendations intended to strengthen taxpayer rights and improve tax administration. The report also examines a wide range of other tax administration issues, including the IRS’s administration of the private debt collection program, the agency’s increasing emphasis on online taxpayer accounts, and its implementation of a recent law that would deny or revoke the passports of taxpayers with significant tax debts. Implementation of Tax Reform Legislation The IRS has not yet developed a final cost estimate to implement the new law, but a preliminary estimate from earlier in the year projected the agency would require additional funding of $495 million in fiscal years 2018 and 2019. Implementation challenges include programming and systems updates, answering taxpayer phone calls, drafting and publishing new forms and publications, revising regulations and issuing other guidance, training employees on the new law and guidance, and developing the systems capacity to verify compliance with new eligibility and documentation requirements. As one example of the challenges, the new … Read More