Tag:IRS
IRS & Treasury to Crack Down on Basis Shifting Among Complex Partnerships
On June 17, 2024, the Biden Administration issued a press release detailing plans to push forward a new multi-stage regulatory initiative targeting tax evasion among large business partnerships. The Internal Revenue Service (IRS) and U.S. Treasury Department will lead the charge to end abuses of a practice known as “basis shifting,” often used by complex partnerships to maximize deductions and consequentially minimize tax liability.
The I.R.S. is using AI to Crack Down on Tax Evasion
The Internal Revenue Service (I.R.S.) issued a press release on September 8, 2023, detailing how the agency plans to use at least part of the $80 million dollar allocation it received from the Inflation Reduction Act last year. I.R.S. Commissioner Danny Werfel plans to use the funds to make compliance enforcement efforts and tax evasion identification more effective and efficient. How does he plan to do this? The overwhelmed and perhaps overworked agency will be using artificial intelligence (AI) programs and features to expedite and assist with redundant processes as well as to audit parties that are too complicated or large for the I.R.S.’s current capabilities.
The Tax Gap and What it Means for Taxpaying Entities
Every three years, the Internal Revenue Service (IRS) releases the estimated gross tax gap calculated for the three years prior. Recently, the estimated tax gap for the years 2014 to 2016 was revealed to be $496 billion. This startlingly high number represents a continuing trend of noncompliance by American taxpayers that feeds into the federal budget deficit.
Stablecoins: Tying Cryptocurrencies to Other Assets
Cryptocurrency has an air of mystery about it. It seemingly burst onto the scene a decade ago, and while some of the stories about it may seem outlandish, many of them are true. The first known Bitcoin purchase was for two pizzas and prices can fluctuate wildly based off of tweets. With the origins of such a thing being the subject of internet humor and its value being so volatile, what level of attention and care is due to it?
Regulating Crypto Markets through the Build Back Better Act: Crypto Investors’ Future Compliance with Wash Sale Rules
The Build Back Better Act, which passed through the House of Representatives in November 2021, has been stalled in the Senate for several months. Senate Majority Leader Chuck Schumer has insisted that Democrats will work until the bill is passed. Within the Build Back Better Act, cryptocurrencies are shifted from being treated like property to being treated more like traditional securities, subjecting all digital currencies to wash rules under Section 1091. With cryptocurrencies collectively evaluated at upwards of $3 Trillion in 2021, crypto investors under the Build Back Better Act would be subject to the regulatory anti-abuse rules that currently apply to both stocks and bonds. This move by Democrats is for taxing purposes, but ultimately will call into question the IRS’ ability to regulate certain crypto transactions and asset disclosures. Additionally, questions have been raised as to the future regulation of cryptocurrencies and what that will mean for one of the most volatile trading markets.
Reining in Tax Havens
Shortly after Bristol Myers Squibb filed to create an offshore subsidiary in Ireland, the IRS took notice. The large drug manufacturer’s actions would now allow them to attribute some of its patent rights and medications to the subsidiary, and therefore subject to a twelve and a half percent Irish corporate tax rate, which is far less than the current twenty one percent rate in the United States. Additionally, while Bristol Myers had maximized the write offs and deductions for their products in the United States, the Irish deductions would now offset the U.S. taxes.
A New Way to Tax Wealth
With Democratic control over the House, Senate, and Presidency for the first time since 2011, President Biden has been ambitious in his efforts to reinvigorate the economy, signing into law a $1.9 trillion economic aid package with plans to increase access to affordable housing and a $3 trillion investment in infrastructure. To finance their legislative agenda, Democrats have several initiatives which would mostly raise taxes for the wealthiest Americans such as Elizabeth Warren’s proposed wealth tax or increasing the maximum income tax rate back to 39.6%, as it was while President Bush was in office.
Pressing Pause: A Survey of Regulatory Recovery After the Government Shutdown
Although the nation’s longest-ever government shutdown has ended, agencies forced to furlough employees and shutter temporarily are still facing the effects of the funding gap. On January 25th, President Trump agreed to sign a continuing resolution that will reopen and fund the federal government through February 15th. The government reboot means that the roughly 800,000 federal employees furloughed or forced to work without pay should expect to receive their back pay soon, but the thirty-five-day suspension of government functions comes with significant aftershock. While various regulatory agencies scramble to address their backlog of work, life for Americans who interact with these agencies has been hindered indefinitely.
IRS Offshore Voluntary Disclosure Program to Shutdown: The End of Amnesty for International Tax Evaders?
The IRS has decided to shutdown its Offshore Voluntary Disclosure Program (OVDP) on September 28, 2018. The program offers amnesty from criminal prosecution and a set penalty structure for those who have previously failed to disclose foreign bank accounts and other foreign assets, including those held through undisclosed foreign entities. Failure to disclose could include failure to file the annual FinCEN Form 114,most commonly referred to as the foreign bank account report or “FBAR”, as well as the failure to report income from such accounts and assets on tax returns and the failure to provide various other foreign information forms and returns.
TAX TALK SERIES: IRS Clarifies Post-TCJA Confusion on Home Equity Interest
On December 20, 2017, Congress passed the Tax Cuts and Jobs Act (“TCJA”) designed to decrease the taxable rate for corporations and individuals, and significantly limited allowable deductions. Since this change to the Tax Code was one of the largest since the Reagan era, the Internal Revenue Service will need to publish many regulations and advisories in the coming months to better clarify provisions of the TCJA. This multi-part series will explore prominent IRS regulations and advisories as they relate to the TCJA, and what these regulations and advisories mean for both individual and corporate taxpayers.