The Tax Laws, They Are A-Changin!
2021 is proving to be active with tax topics and changes to Tax Laws, COVID-related funding and relief opportunities, and Tax Compliance matters.
With tax year 2020 taxes now due, we wanted to remind you that if you have a tax bill you can’t pay, please contact us to review your options.
In This Issue
- Curious about the IRS and Biden Administration Tax Compliance and Revenue Funding Plans
- IRS Identity Verification Letters – What they mean and What to Do
- Everyone needs a Financial Plan
- Cryptocurrency Enforcement
- Upcoming Webinar: Medical Practice Profit Optimization
- Listen: Steve’s recent Podcasts
If you have any questions regarding the foregoing topics or any tax matter, we encourage you to contact us at 415-394-7200, 888-TAX-DEAL, or moskowitzllp.com for a conversation with Steve or another one of our attorneys at no charge to you.
Further, we will be posting Blog articles on these topics and upcoming legislation changes that will affect you under the IRS enforcement activities and the Tax Changes under the Biden presidency. We encourage you to subscribe to our blog.
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All the Best,
Curious about the IRS and the Biden Administration Tax Compliance and Revenue Funding?
We, as tax attorneys, are seeing an increase in IRS civil and criminal investigations AND President Biden has proposed an 80 Billion Dollar budget increase for the IRS to combat tax evasion.
As we begin to emerge from COVID and return to a more normal environment, Moskowitz LLP is seeing an increase in tax disputes and tax controversies and a more aggressive landscape for taxpayers.
For context, the IRS has a new approach to examination, identifying issues to target that they think have potential for noncompliance, including but not limited to:
- High Income/Wealth Non-Filers and Audit Campaign
- Forms 3520/3520-A Non-Compliance
- Micro-Captive Insurance
- Offshore Bank Accounts
- Post-Offshore Voluntary Disclosure Program Compliance
- S-Corporation Losses Claimed in Excess of Basis
- S-Corporation Built in Gains Tax
- Syndicated Conservation Easement Transactions
- The Tax Cuts and Jobs Act (TCJA) campaign
- Virtual Currency/Cryptocurrency Enforcement – Operation Hidden Treasure
A couple of notes:
High Income/Wealth Compliance
IRS Commissioner Rettig recently testified before Congress regarding the tax gap and request for additional budget. His testimony included that effective tax enforcement at the top of US income distribution requires a comprehensive approach, including: Greater scrutiny of pass-through businesses, comprehensive audits, more thorough litigation of tax disputes, additional regulations clarifying certain activities are noncompliant, and additional programs to encourage whistleblowing. See National Bureau of Economic Research (NBER) – Tax Evasion at the Top of Income Distribution: Theory and Evidence.
The TCJA campaign is an unusual campaign because there is no single defined issue. The IRS has designed the campaign to create target campaigns related to the act which may include, partnership audits, Section 199A disputes, and more.
Steve Moskowitz reminds you that “as a general rule, a person who has engaged in tax wrongdoing is much better off going to the IRS before the IRS knocks on the door. And that, you should immediately seek the advice of a tax attorney to review your tax matters if you believe that you may have or may be suspected of tax wrongdoing.”
Hire Us for Tax Preparation Services Now
IRS Identity Verification Service
What to do if you receive an IRS Identity Verification Letter
To help fight identity theft, the IRS may send an identity verification letter to you. If you receive this letter, it does not mean that you did something wrong or that your identity has been stolen. Usually, the IRS will sent this identity verification letter before processing a refund. However, sometimes it is to verify the identity as a duplicate tax return that may have been filed using the same social security number.
Use this service only if:
You received a 5071C letter, 5747C letter, 6331C letter, or 5447C letter and your financial and phone information is U.S. based, or;
An IRS representative directed you to use it
What You Need to Verify Your Identity
To register and verify your identity, you need:
- Your personal account number from a:
- Credit card
- Student loan
- Home equity loan or home equity line of credit
- Car loan
- A mobile phone associated with your name
- Your 5071C letter, 5747C letter, 5447C letter, or 6331C letter
- The income tax return (form 1040,1040-PR, 1040-NR, 1040-SR, etc.) for the year shown on the letter
- Note: A Form W-2 or 1099 is not an income tax return
- You must also have your mailing address from your previous year’s tax return.
Please note that the IRS will NEVER call you or send you an email to seek your identity. Moskowitz LLP also encourages you to take an active role in the protection of your identity. Please see the tips in our March 2021 Newsletter here.
Everyone Needs a Financial Plan
At some point you will be responsible for your own money. If that is not currently the case for you, here are some ideas to help get your financial plan in order.
Saving for retirement is crucial. Even small amounts can go towards U.S. savings bonds or mutual funds with an automatic savings plan. If you have more money to work with, diversify your holdings among several types of investments. The younger you are, the more you should consider growth investments, which are likely to increase your nest egg in excess of the inflation rate. True, your strategy may change over time, depending on your age, total assets, tax bracket, and tolerance for risk. But you should never totally stop investing for growth.
Of course, picking winning investments isn’t the only goal of good financial planning. Adequate insurance is also essential. For example, disability is far more common among middle-aged people than death, yet disability insurance is often overlooked. Consider supplementing any employer’s coverage with your own policy. Most people aim to replace 60%-80% of pretax income, since disability payouts are generally tax-free. A disability policy should cover partial disability as well as total disability. You should be able to save money on premiums by opting for a longer waiting period before receiving benefits.
If you have dependents, you need enough life insurance to protect them. This is true even if you’re a married stay-at-home mom, or if your absence as a caregiver would create financial hardship for your family.
Finally, prepare an estate plan that meets your needs. Review it with your accountant and your attorney every few years to ensure that you stay current with the tax law and with changes in your personal circumstances.
Whether you find yourself as a single parent or a widower, you may need to step up your financial understanding. Why not start the process now? Please see our blog article Inspecting 15 key items of your business and personal tax matters for more information.
Cryptocurrency IRS Enforcement Priorities
You may have read that the IRS Office of Enforcement announced the kickoff of “Operation Hidden Treasure” a program dedicated to IRS investigation of cryptocurrency tracking and compliance. Here in the Northern District of California, the Court authorized the IRS to serve a John Doe summons on Payward Ventures Inc, (an exchange) seeking information about U.S. taxpayers who conducted at least the equivalent or $20,000 in transactions in cryptocurrency during the years 2016 through 2020. Acting Assistant Attorney General David A. Hubbert of the Justice Department Tax Division recently stated “Gathering the information in the summons approved today is an important step to ensure cryptocurrency owners are following the laws”.
Read our blog post for more information: Cryptocurrency IRS Enforcement Priorities.
Do you know Moskowitz LLP’s Cryptocurrency Services?
Moskowitz LLP has been at the forefront on Cryptocurrency taxation since 2014. Examples of some of the Cryptocurrency matters that we handle, include but are not limited to:
- Filing both new and amended tax returns that properly report capital gains from the sale or transfer of cryptocurrency (including virtual currency used to pay for goods and services)
- Money-saving strategies for crypto day traders
- Getting companies into compliance with employment tax rules, such as withholding payroll taxes on wages paid with cryptocurrency
- Tax Audits and Tax Litigation
- Regulatory compliance
- Government Criminal Investigations
Upcoming Webinar: Medical Practice Profit Optimization May 26, 2021 at 12pm
While this webinar is designed specifically for medical practices, you may want to take a look at the type of analysis and forecasting Moskowitz LLP can provide to you and your business
Listen: Steve’s Recent Podcasts
KGO Radio: Small Business Benefits in the American Rescue Plan
Little Known Tax Strategies That Could Save you a Fortune – Bacon Wrapped Business with Brad Constanzo Podcast
Hire Us for Tax Preparation Services Now