Today's Tax Talk with Attorney Steven Leahy

Thursday April 6, 2023 - The Internal Revenue Service released its Inflation Reduction Act Strategic Operating Plan today. The plan is more of a "Wish List" or fantasy in my view.

All that was wrong with the IRS will now be made right.

According to the IRS Plan:

The Plan is structured to achieve five objectives, which will be accomplished through a series of initiatives

and projects aligned to each.

1. Dramatically improve services to help taxpayers meet their obligations and receive the tax incentives

for which they are eligible

2. Quickly resolve taxpayer issues when they arise

3. Focus expanded enforcement on taxpayers with complex tax filings and high-dollar noncompliance to

address the tax gap

4. Deliver cutting-edge technology, data, and analytics to operate more effectively

5. Attract, retain, and empower a highly skilled, diverse workforce and develop a culture that is better

equipped to deliver results for taxpayers

The new Commissioner, Danny Werfel, calls it "a vision for the future of Federal tax administration."

The purpose of the plan was to lay out how the IRS was going to spend the $80 Billion from the Inflation Reduction Act. But the plan doesn't include any numbers until page 131. And then only in a high level, general, and abstract way.

Let's not forget the IRS scandals of the 2010's. Not only the targeting of conservative organizations, but the capricious waste of taxpayer money for lavish conferences that included 10s of thousands of dollars for video parodies of Star Trek and Gilligan’s Island.

Attorney Steven A. Leahy critiques the new IRS report on Today's Tax Talk.

https://www.irs.gov/about-irs/irs-inflation-reduction-act-strategic-operating-plan

https://thehill.com/homenews/ap/ap-business/irs-pledges-better-customer-service-no-new-agents-with-guns/

https://www.cnn.com/2013/06/06/politics/congress-irs-waste/index.html

Wednesday April 5, 2023 - Danny Werfel was sworn in as the 50th Commissioner of the Internal Revenue Service on Tuesday April 4, 2023. While Commissioner Werfel was sitting through his Senate confirmation hearing, the Treasury Department missed its self-appointed deadline to present a plan to the American people on just how they planned to spend the nearly $80 Billion in new funding for the IRS provided by the Inflation Reduction Act. Remember the Inflation Reduction Act? The Act that was passed without a single Republican vote.

Danny is not new to the IRS. He was appointed as the Acting Commissioner of the Internal Revenue Service (IRS) on May 22, 2013, by then-President Barack Obama. Right after the IRS was caught targeting conservative groups seeking tax-exempt status and the previous Commissioner, Steven Miller resigned under a cloud. Think Lois Learner.

Commissioner Werfel has promised the IRS workforce they will receive the credit they deserve. The IRS workforce “has risen to the occasion and delivered for taxpayers with limited resources.” The additional $80 Billion will allow the IRS to treat every taxpayer fairly.

Don’t worry, everything you ever thought bad about the IRS, will be just great. This filing season has been better than the previous filing seasons. You know the filing seasons when the IRS employees stayed home and no one was there to process returns or answer the phone.

Attorney Leahy welcomes IRS Commissioner Danny Werfel on Today’s Tax Talk.

https://www.govexec.com/management/2023/04/new-irs-chief-growing-workforce-will-transform-agency-armed-only-their-calculators/384806/

https://www.irs.gov/about-irs/commissioner-danny-werfel

https://federalnewsnetwork.com/reorganization/2023/04/irs-commissioner-danny-werfel-outlines-plan-to-transform-agency-with-historic-investment/

Crypto-Tuesday April 4, 2023 - In December 2020, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Labs Inc. (Ripple), the company behind the XRP cryptocurrency, claiming that XRP was an unregistered security. Ripple has denied the allegations and the case has been closely watched by the cryptocurrency industry. The outcome of the case could have far-reaching consequences for the regulation of cryptocurrencies in the United States and around the world.

The SEC's complaint alleges that Ripple conducted an unregistered securities offering when it sold XRP to investors. According to the complaint, XRP was sold as an investment contract, and therefore, XRP is a security under U.S. law. The SEC is seeking to recover all profits obtained by Ripple and its founders as a result of the alleged sale of unregistered securities, as well as civil penalties.

Ripple has vigorously denied the allegations, arguing that XRP is not a security and that the SEC's case is misguided. Ripple contends that XRP is a digital asset that serves as a medium of exchange and a store of value, and therefore, is not subject to the same regulations as securities.

The case has generated a great deal of interest and concern. Many observers believe that the outcome of this case will have far-reaching consequences for the regulation of cryptocurrencies. If the SEC prevails, it will set a precedent for other cryptocurrencies to be classified as securities, which would subject them to stricter regulation and potentially stifle innovation within the industry. If Ripple prevails, the SEC’s position that all cryptocurrencies, other than Bitcoin, are securities will suffer a major setback. Either way, a decision in this case will lead to greater regulatory clarity and certainty.

The case has also raised questions about the SEC's approach to regulating cryptocurrencies. Some within the industry have criticized the SEC for its lack of clarity regarding the regulatory status of cryptocurrencies, arguing that the agency has been slow to provide guidance and has not kept pace with the rapid growth and evolution of the industry. Others have criticized the SEC for its perceived inconsistency in its approach to regulating cryptocurrencies, with some arguing that the agency has been overly aggressive in its enforcement actions against certain projects while ignoring others.

Regardless of the outcome of the case, it is clear that the regulatory landscape for cryptocurrencies is still evolving and uncertain. While some countries have taken a more progressive approach to regulating cryptocurrencies, the United States has been slower to provide clear guidance and establish a regulatory framework for the industry. The Ripple vs. SEC case is just one example of the challenges and uncertainties that the cryptocurrency industry faces as it seeks to mature and gain wider acceptance.

https://finbold.com/ripple-v-sec-court-case-update-as-of-april-3-2023/

https://forkast.news/headlines/sec-charges-beaxy-cryptocurrency-platform-for-violating-securities-laws/

https://bitcoinist.com/ripple-sec-xrp-foia-request-jp-morgan-delayed/

https://www.jdsupra.com/legalnews/cryptocurrency-companies-should-expect-2656781/

Thursday March 23, 2023 – On this show, I have spoken openly about the new 1099-k information reporting rules for Third party settlement organizations – I think they stink. Recently, the IRS updated their “frequently asked questions about Form 1099-K. We all remember the empty promises made by supporters of this expansion. “This really doesn’t change anything, as these transactions are already taxable.” And “Only payments for goods and services will be effected.”

Now we know, and the IRS has acknowledged, that almost all transactions involving third-party settlement organizations will come under scrutiny and require “Accounting” to explain close to every transaction.

For example, The FAQ page provides guidance on how to report the sale of personal items on Form 1099-K, as well as how to report multiple Forms 1099-K and Forms 1099-K received in error. Taxpayers can report offsetting entries on Schedule 1 for each Form 1099-K they receive separately, or they can combine the Forms 1099-K they've received.

The FAQ also address the question “During the year, I sold my personal guitar for $800 on a social media platform's marketplace and I received Form 1099-K. I purchased the guitar several years ago for $3,000. How do I prove how much I paid if requested by the IRS?” This is what I have been saying from the beginning, and why I thought the explanations given by the IRS, Congress, and their media mouthpieces were, shall we say, disingenuous.

In 2021 the IRS processed 4.7 Billion (with a B) information returns. In 2020 the IRS destroyed 30 million without processing them, because they did not have the resources. With this HUGE increase, look for more delays. Although the delays generally come from paper returns, and the IRS is doing all they can to BAN paper returns.

Attorney Steven A. Leahy looks over the new 1099-K FAQ sheet on Today’s Tax Talk.

https://www.accountingtoday.com/news/irs-issues-new-guidance-on-form-1099-k

https://www.irs.gov/pub/taxpros/fs-2023-06.pdf

Wednesday March 22, 2023 - The Inflation Reduction Act provided the IRS with a boat load of money. The Act also put aside $15 million for the IRS to conduct a study to find out how to create a program that allows Americans to file their taxes for free.

As we all know. There is nothing more expensive than when the government gives something away. This free tax filing plan was the brain child of Senator Elizabeth Warren. She insisted this provision be included in the Act before she would support it.

What most of the public does not know is - there is already a free file program at the IRS. If you make less than $73,000.00 you can file your 2022 federal tax returns for free.

However, the Free File progrqam is not used by many taxpayers. According to the IRS, More than 100 million people, almost 70% of all taxpayers, qualify for Free File. Since the program launched the Free File program in 2003, according to the IRS, less than 2% of eligible Americans have taken advantage of it.

Attorney Steven A. Leahy talks about the IRS Proposal to prepare tax returns for all Americans.

https://thehill.com/business/3912232-conservative-coalition-takes-aim-at-bidens-irs-run-tax-preparation-service/

https://www.clickondetroit.com/news/national/2022/09/07/irs-gets-15m-to-find-out-if-it-can-create-online-tax-return-system-so-americans-can-file-for-free/

https://www.irs.gov/newsroom/irs-free-file-launch-aims-to-save-taxpayers-hard-earned-dollars

https://www.cnet.com/personal-finance/taxes/irs-free-file-lets-most-americans-file-their-taxes-for-free/

Crypto-Tuesday March 21, 2023 - The Supreme Court is set to hear arguments in its first case involving cryptocurrencies. The case involves Coinbase, one of the leading crypto exchanges, attempting to compel arbitration for a pair of class action lawsuits against it.

Abraham Bielski is suing Coinbase for $31,000 he lost after providing a scammer access to his account. Suski v. Coinbase concerns a million-dollar sweepstakes event hosted by Coinbase in 2021. In that case, plaintiffs allege they were misled.

The outcome of the case could have major implications for how Crypto companies can resolve disputes. As more class action lawsuits are filed against crypto ledgers, the Supreme Court's decision in this case could have major ramifications.

Ripple vs SEC is also an important case reaching the end of litigation. We have covered this case in this space. The question before the court is whether XRP is a security, as the SEC alleges. If it is, Ripple violated the registration provisions of the Securities Act of 1933 and many other cryptocurrencies are also securities and subject to SEC regulation.

Attorney Steven A. Leahy reviews these cases on Today’s Tax Talk.

https://coinflip.tech/markets

https://www.washingtonexaminer.com/policy/courts/supreme-court-takes-up-first-cryptocurrency-case

https://www.irs.gov/newsroom/irs-issues-guidance-seeks-comments-on-nonfungible-tokens

https://fortune.com/crypto/2023/03/21/ripple-xrp-sec-landmark-court-case-digital-assets/

Monday March 20, 2023 – The Biden Administration’s proposed budget for 2023 is out. The budget proposes increasing spending from $5.8 Trillion to $6.7 Tillion. It’s clear from the administration’s proposals, they are not serious about engaging in any rational discussions on the budget and the debt ceiling.

In addition, the budget drastically increasing the tax rate for those with incomes higher than $500,000 a year and a minimum tax for those with more than $100 million in wealth. The budget also increases corporate rates from 21% to 28%, as well as increase taxes on stock buybacks, investment income and certain federal agencies.

But the BIGGEST surprise in the budget is the boost to the IRS budget. Remember, the Inflation Reduction Act has already provided the IRS with $80 billion for hiring 87,000 additional employees over the next decade, transforming it into one of the largest government agencies. This new budget would add an additional $43 BILLION. The baseline increases by 15% to $14.1 Billion PLUS another $29.1 billion in “mandatory funding for enforcement and operations.”

I have to repeat Rep. Jason Smith’s, chairman of the House Ways and Means Committee, question. “Is this a joke?

Attorney Steven A. Leahy goes over the Biden Administration’s new budget on Today’s Tax Talk.

https://elamerican.com/biden-wants-more-money-for-the-irs-43-billion-this-time/

https://waysandmeans.house.gov/never-enough-biden-budget-seeks-absurd-43-2-billion-for-irs-despite-receiving-unprecedented-80-billion-windfall-just-last-year/

Thursday March 16, 2023 - The Inflation Reduction Act was passed in August 2022.  The Act provided $80 Billion over 10 years.  The vast majority of those funds are directed to enforcement almost 60%.  Only $3.2 billion – under 4% - is going to taxpayer services – like answering the phone.  

Today the Taxpayer Advocate, Erin Collins, wrote “The IRA allocated the funds in a manner that does not address the needs of U.S. taxpayers, including individuals, families, and businesses,” Collins continued, “The additional funding provided by the IRA, while appreciated and welcomed, is disproportionately allocated for enforcement activities and should be reallocated to achieve a better balance with taxpayer service needs and IT modernization. We need to put taxpayers first.” 

This space recently reported the IRS missed the 6 month deadline, imposed by Treasury Secretary Janet Yellen, to provide a plan on how the IRS intends to spend the IRA money.  The IRS reported that it “expects to deliver the plan to the Secretary in [the] coming weeks.”  That doesn’t mean they aren’t already spending 

Attorney Steven A. Leahy looks at the IRS’ progress on this episode of Today’s Tax Talk.

https://www.pgpf.org/blog/2023/03/would-increased-funding-for-the-irs-narrow-the-tax-gap

https://thehill.com/business/3903701-taxpayer-advocate-urges-congress-to-reconsider-80-billion-irs-funding-boost/

https://www.irs.gov/pub/image/21dbmainchart.png

https://www.boropark24.com/news/irs-hires-5-000-customer-service-agents

Crypto-Tuesday March 14, 2023 – Pi Day – Now that the Government has effectively guaranteed every deposit in every bank in America, Cryptocurrency prices have seen a sharp increase., Coinbase (COIN 5.88%) rose 11.9% on Tuesday and other cryptos such as Cardano, Ethereum and Bitcoin also saw double-digit gains. 

The Consumer Price Index report released Tuesday morning showed that inflation cooled down mildly in February.  There are expectations that the banking crisis will also have an effect on the Fed’s interest rate targets. This could prove a benefit for both the crypto market and digital currencies themselves.

The recent surge has brought some digital tokens back to levels last seen at various points throughout 2021, while others have seen double-digit gains over the past two days. 

I think it is unrealistic to expect the economy to have a quick rebound.  Did you notice the banks are failing??  That is never a sign of a strong economy.  

There is lots of bullish talk out there.  Again, did you notice the banks are failing?

Attorney Steven A. Leahy takes a look at the Crypto market on Today’s Tax Talk.

https://coinflip.tech/markets

https://www.fool.com/investing/2023/03/14/why-bitcoin-ethereum-cardano-coinbase-are-soaring/

https://blocklr.com/cryptocurrency/state-of-cryptocurrency-today/

https://www.cnbc.com/amp/2023/03/14/moodys-cuts-outlook-on-us-banking-system-to-negative-citing-rapidly-deteriorating-operating-environment.html

https://www.msn.com/en-us/money/companies/barney-franks-bank-tanks-government-is-just-the-word-for-the-businesses-we-shut-down-together/ar-AA18CNTz

Monday March 13, 2023 – The Administration has been clear (??) the Inflation Reduction Act funding to the IRS, almost $80 billion, will not be used to Audit those making less than $400,000 per year.  Or will it.

Last week the new Commissioner of the IRS said, I think unequivocally, that the Inflation Reduction Act money will not be used to audit those taxpayers.  But, on Friday March 10th, Treasury Secretary Yellen appeared before the House Ways and Means Committee and admitted that more than 90% of any new audits supported by that money will be used to audit small businesses and individuals making less than $400,000 per year. 

If you listened closely over these past months, you knew this was the case.  There was always some “wiggle room,” as Senator Crapo put it.  And trying to get a straight answer was always met with obfuscation.

Now, I think the truth is out.  Will it make a difference?

Attorney Steven A. Leahy goes over this new information on Today’s Tax Talk.

https://www.cnn.com/2022/08/10/politics/yellen-new-irs-funding-audits/index.html

https://finance.yahoo.com/video/yellen-appears-admit-90-irs-201955117.html