Today's Tax Talk with Attorney Steven Leahy

Crypto-Tuesday January 31, 2023 - If you're like most crypto enthusiasts, you're probably not too thrilled about the recent losses in the market. But did you know that there may be a silver lining? In some cases, your crypto losses can actually lead to tax gains! Here's how it works...  

When you sell cryptocurrency, the proceeds are considered a capital asset and could be subject to either short-term or long-term capital gains taxes. Short-term capital gains are taxed as ordinary income, meaning that they’re subject to your marginal tax rate. Long-term capital gains, on the other hand, receive preferential tax treatment and are taxed at a lower rate than ordinary income.

Fortunately, when it comes to crypto losses, the Internal Revenue Service (IRS) gives you the ability to deduct them from your other gains in the same tax year. This means that if you have a net loss of cryptocurrency during the year, you can use it to offset any other gains you may have made, reducing the amount of taxes you owe.

The good news is that these losses can also be carried forward to future tax years. This means that if your losses exceed your other gains during a given year, you can still deduct them from your taxable income in future years.

Ultimately, it pays to know the tax implications of your cryptocurrency losses and how they can be used to offset other gains. By doing so, you could be saving yourself some coin when Tax Day rolls around! 

Attorney Steven A. Leahy reveals the Crypto-Tax secrets on Today’s Tax Talk!

https://www.cnbc.com/2023/01/30/how-to-handle-cryptocurrency-losses-on-your-2022-tax-return.html

https://www.wpsdlocal6.com/news/concern-grows-for-cryptocurrency-industry-in-new-year/article_99be2f2e-a173-11ed-905d-933bae3bc6bf.html

Monday January 30, 2023 - The IRS recently announced a delay for implementation of $600 reporting threshold for third-party payment platforms’ Forms 1099-K.  Tax year 2022 will be a "Transition" year.

As one tax expert put it, "the new changes constituted one of the largest 'cash grabs' by the IRS in recent memory and were likely to hit taxpayers 'like a truck.' 

On March 11, 2021, President Joe Biden signed into law the American Rescue Plan Act of 2021. Let’s take a look at how this new law could potentially impact taxpayers. 

One area the reporting requirements will hit hard is fantasy sports players.  They must report any payments they make over $600 to both the IRS and those receiving payment. 

Previously, TPSOs had to report payments only if they were over $20,000 or more in value. A TPSO is defined as any business entity or person who processes credit card payments and/or engages in other activities related to money transfers and various other financial transactions. 

Therefore, anyone engaging in fantasy sports leagues where cash payouts are made and processed via a third-party would be subject to these reporting requirements.  These players will face increased chances of an audit or taxation. While the IRS has promised not to go after average taxpayers, this new law could target them, nonetheless. 

Changes brought about by the American Rescue Plan Act of 2021 have direct implications on ALL taxpayers. The lower reporting threshold means increased 1099s being filed with the IRS and higher chances of audit or taxation.  

Attorney Steven A. Leahy will evaluate the impact of the American Rescue Plan Act of 2021’s tax plan on the average American taxpayer on Today’s Tax Talk.

https://www.foxnews.com/media/irs-cash-grab-fantasy-sports-hit-americans-like-truck-tax-experts

Thursday January 26, 2023 - The United Supreme Court declined certiorari on the case Toth vs. United States.  Certiorari is the process by which an appellate court has the discretion to review decisions made by trial courts.

Becase the Supreme Court refused to hear this case the appellate court's decision stands.  And that decision stinks!  I think a clear violation of the Eighth Amendment to the Constituion.  The Eight Amendment simply says "Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted."

Justice Gorsuch dissented from the denial of certiorari. Monica Toth, an American citizen who failed to report a foreign bank account as required by law. The Internal Revenue Service assessed a civil penalty against Ms. Toth for her failure to report, which she argued violated her rights under the Excessive Fines Clause of the Eighth Amendment.

Justice Gorsuch noted that protection against excessive punitive economic sanctions is “fundamental” and “deeply rooted in this Nation’s history and tradition". He further argued that it would be wrong for governments to evade constitutional scrutiny by labeling fines as "civil" rather than "criminal".

In addition, he pointed out other reasons why taking up this case was worth consideration such as incentivizing governments to impose exorbitant civil penalties and clashing with original understanding of Eighth Amendment.

Some Judges write for other Judges to help them understand the legal basis for a certain ruling, or even provide their own interpretation of an existing law. This can help inform future decisions on similar cases, since the opinion can serve as precedent. 

Some judges write with lawyers in mind, crafting legal opinions that are complex and highly technical, so that attorneys can use them as powerful tools when advocating for their clients.

Some judges write for the public, with the intention of making legal opinions easier to understand and more accessible to a wider audience. 

Justice Gorsuch writes for the public.

Attorney Steven A. Leahy reviews Justice Gorsuch's opinion on Today's Tax Talk.

https://reason.com/2022/08/30/this-grandmother-didnt-submit-the-proper-banking-form-now-the-irs-wants-2-1-million-from-her/

https://reason.com/2023/01/23/supreme-court-declines-case-challenging-excessive-irs-penalties/

https://www.reuters.com/legal/government/us-supreme-courts-gorsuch-dissent-calls-217-mln-tax-penalty-excessive-2023-01-23/

https://news.bloomberglaw.com/us-law-week/supreme-court-punt-in-tax-fine-case-leaves-uncertainty-in-wake

Wednesday January 25, 2023 - American taxpayers may have reason to rejoice as Republican lawmakers introduced the Stop the Nosy Obsession with Online Payments (SNOOP) Act on Tuesday. The bill, if passed, would put an end to the Biden Administration’s new requirement passed in the American Rescue Plan of 2021, for Americans to report online transactions over $600. 

As reported here, The IRS recently announced a "delay for implementation of $600 reporting threshold for third-party payment platforms’ Forms 1099-K." California Rep. Michelle Steel and Tennessee Sen. Bill Hagerty are leading this effort in their respective chambers of Congress, looking to nix this intrusive policy forever, which is a weaponization of government against hardworking citizens.

Americans have long been wary of the government's ability to intrude on their personal lives and financial information.  But this new policy would have required all third-party platforms to report all online transactions over $600 the Internal Revenue Service (IRS). This policy would leave no room for privacy between a citizen and the government. 

The SNOOP Act would revert back to the old rules, where third parties reported amounts of $20,000.00 or more AND 200 transactions. 

Attorney Steven A. Leahy reports on these developments on Today’s Tax Talk.

https://www.foxnews.com/politics/snoop-scoop-new-gop-bill-would-put-stop-irss-600-online-reporting-requirement

https://www.yahoo.com/entertainment/irs-aims-cut-back-1099-211701325.html

https://www.msn.com/en-us/news/politics/bill-to-abolish-the-irs-likely-dead-in-the-house-gop-lawmaker-predicts/ar-AA16JnrZ

https://chicago.suntimes.com/columnists/2023/1/25/23571245/irs-policy-penalties-senior-citizen-monica-toth-supreme-court-jacob-sullum-column

Crypto-Tuesday January 24, 2023 - Money serves three purposes: medium of exchange, preserving labor value over time and measuring goods and services across an economy.  

The promise of Crypto was to provide all three purposes.  However, Cryptocurrency still needs acceptance from people in order to work as a medium of exchange like traditional currencies do.  That's why the El Salvador move looked so encouraging.  Using Crypto as a medium of exchange, rather than a store of value.  That experiment hasn’t worked…yet.

Governments around the world have ratcheted up  regulatory controls on Cryptocurrency.  Our own Department of Justice proposed three regulatory and legislative priorities for combating cryptocurrency crime, including amending the anti-tip-off law for financial institutions to include digital assets, strengthening penalties and broadening the application of criminal laws governing operation of an unlicensed money transmitting business, and increasing limitations period to 10 years for all crimes that involve transfer of digital assets.

The White House also committed additional priorities such as aggressive investigations by SEC Chair Gary Gensler, as the SEC battles with the Commodities Futures Trading Commission to be the regulatory king in the Crypto space.

Attorney Steven A. Leahy looks at the past, present and future of money on Today’s Tax Talk.

https://www.deseret.com/2023/1/22/23558962/cryptocurrency-blockchain-us-dollar

https://news.bloomberglaw.com/us-law-week/crypto-actors-face-increased-enforcement-spurred-by-doj-network

Monday January 23, 2023 - U.S. Treasury Secretary Janet Yellen told Reuters "I’m excited about legislation that’s passed and I want to make sure that it makes the difference it should make, and that includes the IRS," she said. "That agency needs to be completely redone, and it’s a big task."

She also shot down the idea of minting a $1 Trillion Dollar coin to avoid negotiating the debt limit with Congress as a "gimmick."

Yellen is looking to find ways to spend the $80 Billion Dollar boondoggle, and Congress is trying to find ways to eliminate it.  Let’s hope Congress finally does something right.

Attorney Steven A. Leahy looks at both sides on Today’s Tax Talk.

https://www.dailymail.co.uk/news/article-11666579/Treasury-Sec-Yellen-says-IRS-needs-completely-redone-rules-1T-coin-debt-limit.html

https://www.yahoo.com/news/janet-yellen-says-not-given-165317435.html

https://nypost.com/2023/01/23/u-s-treasury-secretary-janet-yellen-says-irs-needs-to-be-completely-redone/

https://www.reuters.com/world/us/us-treasurys-yellen-says-irs-needs-be-completely-redone-2023-01-22/

Thursday January 19, 2023 - The 2023 tax season officially begins on January 23, 2023. This is the date when the Internal Revenue Service (IRS) begins accepting and processing individual tax returns for the 2022 tax year. Taxpayers who file early in the tax season are more likely to receive their refund sooner than those who file later.

One important thing to note for the 2023 tax season is the availability of the Free File program. The Free File program is a partnership between the IRS and several tax software companies, which allows taxpayers with an adjusted gross income (AGI) of $73,000 or less to file their federal tax return for free.  http://www.tinyurl.com/t3freefile

This program is designed to help low- and moderate-income taxpayers prepare and file their taxes electronically, which can make the process faster and more accurate. Taxpayers can use the Free File program to file their federal tax return, schedule their payments, and check the status of their refund.

Taxpayers who are eligible for the Free File program can access it through the IRS website (see link below). They will be able to choose from a list of participating tax software companies, which offer various features and options depending on their needs.

It is important to note that the Free File program is only available for federal tax returns and does not cover state tax returns. Taxpayers who need to file a state tax return will need to use a separate service or software.

Attorney Steven A. Leahy reports on the Tax return 2023 tax season and the IRS Free File program.

https://en.as.com/latest_news/irs-tax-season-2023-when-to-expect-your-tax-refund-n/

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

https://www.tinyurl.com/t3freefile

Monday January 16, 2023 - The Biden Administration is pushing for 87,000 new Internal Revenue Service (IRS) agents in order to increase the amount of audits against families and small businesses. 

This proposal would cost taxpayers an additional $80 billion on top of their already existing $14 billion annual IRS budget. Thankfully, Republicans in Congress are fighting back with the passage of the “Family and Small Business Taxpayer Protection” Act. This act will rescind all new IRS funding and protect middle-class families and small businesses from IRS audit harassment.

Unfortunately, this Act has Zero chance of passing.  The Democrats still have control of the Senate, and President Biden would never sign such a bill.

In another story, the IRS has set a date of January 23, 2023 for tax season to open.

Attorney Steven A. Leahy looks at the effort to curb the power of the IRS.

https://thehill.com/opinion/3811279-irs-funding-dont-feed-the-mouth-that-bites-you/

https://www.nytimes.com/2023/01/11/business/irs-tax-returns-backlog.html

https://www.denver7.com/news/national/irs-sets-date-for-tax-season-but-taxpayers-can-begin-filing

Thursday January 12, 2023 - The Taxpayer Advocate Service (TAS) is an independent organization within the Internal Revenue Service (IRS) that helps taxpayers resolve problems with the agency. Each year, by law, the TAS releases a report to Congress highlighting the most serious problems encountered by taxpayers. The report, known as the National Taxpayer Advocate's (NTA) report, identifies systemic issues that impede taxpayers' ability to exercise their rights and recommends solutions to those problems.

The 2022 National Taxpayer Advocate report identified ranked the ten most serious problems encountered by taxpayers: 

1. Processing Delays

2. Complexity of the Tax Code

3. IRS Hiring & Training

4. Telephone & In-Person Service

5. Online Access for Taxpayers and Tax Professionals.

6. E-File & Free File

7. IRS Transparency

8. Return Preparer Oversight

9. Appeals

10. Overseas Taxpayers

The biggest issue identified in the report is Processing Delays.  That finding isn’t news to any taxpayer.  The processing delay has been reported since last year.  

The recently replaced IRS Commissioner, Charles Rettig told a Congressional hearing last March the backlog would be cleared by the end of 2022. 

In the just released report the National Taxpayer Advocate, Erin Collins, wrote to Congress, saying ““We have begun to see the light at the end of the tunnel, I am just not sure how much further we have to travel before we see sunlight.”

So, the IRS did not clear the backlog by the end of 2022, despite the additional funding to do so.  The additional funding BEFORE the additional $80 billon. 

Attorney Steven A. Leahy looks at the Number one problem according to this report – Processing Delays – on Today’s Tax Talk.

https://www.taxpayeradvocate.irs.gov/reports/2022-annual-report-to-congress/most-serious-problems/

https://www.washingtonpost.com/business/2023/01/11/irs-backlog-delays-refunds/

https://www.thinkadvisor.com/2023/01/11/taxpayer-service-expected-to-improve-in-2023-irs-says/

https://www.journalofaccountancy.com/news/2022/mar/commissioner-congress-irs-will-clear-backlog-years-end.html

Wednesday January 11, 2023 - With the new House Majority, Republicans are pledging to use their power to identify agencies at which to slash budgets. Their vote on Monday was the first step in this process, passing a repeal of $71 billion in IRS funding. 

The Inflation Reduction Act was passed by Democrats in the last Congress - without a single Republican vote. It was designed to provide funding over 10 years to boost enforcement at the IRS after massive hiring surges.

It's important that business owners stay informed about any changes related to taxes and filing procedures so they can comply with all requirements quickly and accurately. Keeping up-to-date on any news related to taxes is critical - especially as tax season approaches - so businesses can remain compliant while also taking advantage of any benefits they may be entitled to receive under current laws. Additionally, making sure you have accurate records and staying organized throughout the year can help reduce any potential issues down the line if you do get audited or need help with a specific issue related to your taxes or filing status.

Attorney Steven A. Leahy  explores the details of this act and how it will affect you.

https://news.yahoo.com/heres-why-the-house-gop-made-defunding-the-irs-its-first-priority-123223299.html

https://www.govexec.com/workforce/2023/01/house-republicans-say-clawing-back-irs-funding-just-beginning-agency-spending-reductions/381647/