The IRS recently announced a letter campaign, issuing one of three letters to taxpayers regarding virtual currency. Two of the letters are informational, sent to taxpayers who may have had a requirement to report virtual currency transactions but did not do so (Letter 6174), or taxpayers who reported transactions with virtual currency but may have made a mistake (Letter 6174-A). Neither of these letters require a response to the IRS. It is the third letter that gives tax professionals pause for concern.
If you dealt in virtual currency in recent years, you may soon receive a letter from the IRS regarding a potential failure to report income and pay related taxes, according to a recent IRS announcement. The federal tax agency is beginning to reach out to taxpayers as part of the virtual currency compliance campaign it announced last year.
The National Taxpayer Advocate Service (TAS) recently published an illustrated "taxpayer roadmap" showing the many stages of federal tax administration in the U.S., from tax preparation to audits, appeals, collection, and litigation. To view the map in detail, click here.
For months, many out-of-state retailers have been working to determine the extent to which they may owe tax to California for sales made in prior years, even though they had no physical nexus in California. Following the U.S. Supreme Court's decision in Wayfair v. South Dakota, California took the position that out-of-state retailers who utilize Amazon to hold inventory and make sales to customers in California have sufficient nexus to meet the requirements to collect and pay sales/use tax to California. This was true even if the business sent inventory to Amazon outside of California and Amazon made the determination to store inventory in California.
The California Franchise Tax Board (FTB) recently issued a news blast that many payments sent by mail to the state tax agency in June were delayed significantly due to post office issues. When the mail finally caught up on June 9th, the FTB received some 115,000 payments for estimated taxes and other purposes. The agency is working to process all the backlogged payments now and will post them with a timely date of June 15, 2019. However, this should serve as a reminder to try to issue online payments to tax agencies whenever possible!
The California Department of Tax and Fee Administration (CDTFA) recently announced it is offering relief to certain out-of-state retailers (referred to as "marketplace sellers") who are considered to be engaged in business in the state of California based solely on their use of in-state fulfillment centers to store inventory. Qualifying retailers may be entitled to reduced tax liabilities, penalties, and interest, effective June 27, 2019.
The U.S. Supreme Court recently issued a unanimous decision in North Carolina Dept. of Revenue v. The Kimberley Rice Kaestner 1992 Family Trust, ruling that residence in a state is not a sufficient reason to tax an out-of-state trust's undistributed income. Justice Sonia Sotomayer delivered the opinion, explaining the Court's two-step analysis of the case in regards to the 14th Amendment on due process. The judges considered that there must be "some definite link, some minimum connection, between a state and the person, property or transaction it seeks to tax" and that the "income attributed to the State for tax purposes must be rationally related to 'values connected with the taxing State.'" In this instance, "the presence of in-state beneficiaries alone does not empower a State to tax trust income that has not been distributed to the beneficiaries where the beneficiaries have no right to demand that income and are uncertain ever to receive it."
The California Franchise Tax Board (FTB) recently released some initial data on the 2019 tax filing season. As of June 1st, the FTB had processed 17.4 million personal income tax returns, a vast majority (88%) of which were e-filed. A total of $11.7 billion in personal income tax refunds were issued to 12 million individual taxpayers, 98% of whom received their refunds within 30 days of filing. The FTB also received 1.1 million business entity returns and issued 92,000 refunds to business taxpayers, totaling $553 million. To read the full update, click here.
The Taxpayer First Act signed into law by President Trump requires the IRS to make important changes that will benefit taxpayers and improve tax administration.