A Californian pleaded guilty this week before the U.S. District Court, Central District of California, to willfully failing to disclose over $1 million held in offshore bank accounts. He and the bank also took other steps to hide and secretly access his funds. The man now faces up to five years in prison, supervised release, restitution, and other monetary penalties.
Virtual currency transactions, such as the purchase or sale of Bitcoin, are reportable transactions on your federal income tax returns, as a recent Internal Revenue Service (IRS) press release states. Failure to report digital currency transactions can lead to audit and possible penalty or interest assessments. The IRS has issued Notice 2014-21 (here) to provide guidance for taxpayers and tax return preparers regarding such transactions. To read the full IRS press release on this topic, click here.
The California Franchise Tax Board (FTB) issued Legal Ruling 2017-02 on October 16, 2017, concerning the state filing requirements of certain nonresident aliens with respect to foreign financial assets.
The Treasury Inspector General for Tax Administration (TIGTA) has released its semi-annual report to Congress for the period October 1, 2016 through March 31, 2017. The reports summarizes data about the agency's notable audits, investigations, inspections, and evaluations to provide oversight to the IRS.
The temporary statewide sales and use tax increase approved through California's Proposition 30 expires on December 31, 2016. Effective January 1, 2017, the state sales and use tax rate in California will decrease by 0.25% to the new rate of 7.25%. The California State Board of Equalization notes, however, that in many cities and counties the total tax rate will be higher due to local voter-approved district taxes.
The Treasury Inspector General for Tax Administration (TIGTA) recently issued a report on the IRS' strategy for addressing income produced through virtual currencies, such as bitcoin, litecoin, and dogecoin. Use of virtual currency has grown in recent years, due in part to service benefits such as faster turnaround and lower transaction fees, and in part due to the relative anonymity of the parties involved in such transactions.
The IRS' federal advisory committee, known as the Information Reporting Program Advisory Committee (IRPAC), has issued its 2015 report identifying several areas in need of improvement including a revision of certain forms, improvements to the IRS use of FAQs and improvements in the penalty abatement process for first time abatement requests and reasonable cause abatement requests. IRPAC noted that despite evidence that requests were submitted showing events beyond the taxpayer's control which resulted in taxpayer errors, the denial of penalty relief is commonly denied initially causing the taxpayer to spend additional time and money appealing the determination.