Today's Tax Talk with Attorney Steven Leahy

Crypto-Tuesday January 10, 2023 - Account abstraction (AA) is a powerful concept that can help business owners unlock the full potential of Ethereum transactions. AA combines user accounts and smart contracts into just one account type, giving users more flexibility in validating a transaction on the blockchain.

Account abstraction (AA) is a proposal that attempts to combine user accounts and smart contracts into just one Ethereum account type by making user accounts function like smart contracts. This means that transactions on the Ethereum blockchain will have more flexibility when it comes to being validated. For instance, instead of having rigid requirements such as a valid ECDSA signature or sufficient balance to cover the cost of computation, users will be able to design their own unique criteria for validating their transactions.

One of the biggest benefits of using account abstraction (AA) is that it enables multi-owner accounts, which can be used to facilitate auto payments between multiple parties without any manual intervention. This makes AA perfect for businesses looking to streamline their payment processes. Additionally, since AA allows you to customize your own criteria for validating a transaction, you can ensure that only legitimate transactions are processed on your blockchain network. This helps minimize fraud and other malicious activity on your blockchain network.

Another benefit of using account abstraction is that it allows for much faster transaction processing times than traditional Ethereum transactions. Since users are not required to wait for confirmations from miners before processing a transaction, you can dramatically reduce transaction processing times with AA and make sure your customers get their products or services delivered promptly.

Account abstraction (AA) offers numerous benefits for business owners looking to transition onto the blockchain platform and take advantage of its features in order to streamline their operations and reduce costs associated with managing payments between multiple parties. With AA, businesses can enjoy enhanced security measures due to customizable criteria for validating transactions as well as faster processing speeds due to reduced waiting times for confirmations from miners. Ultimately, if you want your business operations to run smoothly and efficiently while enjoying maximum security and trustworthiness from customers, then account abstraction may be exactly what you need!

Attorney Steven A. Leahy takes an in-depth look at what Account  Abstraction  is and how it can benefit your business.on Today's Tax Talk.

https://www.forbes.com/sites/michaeldelcastillo/2022/12/19/visa-proposal-would-bring-ethereum-users-one-step-closer-to-being-their-own-bank/?sh=7b43948521b5

https://usa.visa.com/solutions/crypto/auto-payments-for-self-custodial-wallets.html

Monday January 9, 2023 - The recently seated Republican majority recently proposed a bill that would cut the IRS budget by $70 billion. 

This proposal has been met with mixed reactions from both sides of the political aisle, as it would drastically reduce the proposed growth of IRS services and enforcement capabilities. 

Attorney Steven A. Leahy explores what this bill means for taxpayers and how it might affect IRS operations in the future.

https://theprint.in/world/our-very-first-bill-will-repeal-funding-for-87000-new-irs-agents-speaker-us-house-of-representatives-kevin-mccarthy/1304254/

https://www.foxnews.com/politics/irs-chopping-block-first-day-legislative-work-speaker-mccarthy

Thursday December 29, 2022 - There is much confusion about the 1099-K, no thanks to the IRS changing the reporting threshold rules – after the reporting threshold rules were changed by the American Rescue Plan in 2021. You may ask “what is 1099-K form used for?”

In short, 1099-Ks are sent to merchants, financial institutions, and other businesses that accept payments from customers through credit cards, debit cards, PayPal or other online payment systems to report gross transactions to the Internal Revenue Service (IRS).  

Information Returns

1099-K is a version of what the IRS calls an information return.  The IRS uses information returns to help ensure that individuals and businesses report all their income and pay the appropriate amount of taxes on that income. By requiring organizations to report certain types of payments made to individuals or businesses, the IRS can more easily track and verify the income that is being reported on tax returns.  Reporting helps to improve voluntary tax compliance

Reporting Thresholds

Since 2011 the reporting threshold was:

• Gross payments that exceed $20,000, AND

• More than 200 such transactions

The American Rescue Plan of 2021 changed the reporting threshold for third-party settlement organizations, including payment apps and online third-party settlement organizations. The new threshold required these organizations to report transactions in excess of $600 per year, without regard to the number of transactions.

On December 23, 2022, the IRS announced that calendar year 2022 will be treated as a transition year for the reduced reporting threshold of $600. For calendar year 2022, third-party settlement organizations who issue Forms 1099-K are only required to report transactions where gross payments exceed $20,000 and there are more than 200 transactions.  Back to the original threshold. 

Conclusion: 

I hope this helps clear up some of the confusion.  Remember, the Sixteenth Amendment to the Constitution makes all income, “from whatever source derived” taxable.  So, even if you do not receive a 1099 – all income must be reported on your tax return.

Attorney Steven A. Leahy reveals What a 1099-K is used for on Today’s Tax Talk.

https://www.irs.gov/businesses/understanding-your-form-1099-k

https://www.irs.gov/businesses/small-businesses-self-employed/a-guide-to-information-returns

https://www.marca.com/en/lifestyle/us-news/personal-finance/2022/12/29/63adb4cd22601d9b2c8b45f5.html

Wednesday December 28, 2022 - The Internal Revenue Service (IRS) recently announced that it is delaying the implementation of 1099-K reporting requirements until January 2023. This delay affects businesses and individuals who receive payments from financial organizations and other third parties through electronic payment channels such as PayPal, Venmo, Square, Apple Pay or Google Wallet. 

The delay provides financial organizations and their customers with a valuable reprieve from the compliance and administrative costs associated with the new requirements. More importantly, the IRS doesn’t have the capabilities to process the huge increase in information returns.  In 2020 the IRS processed 3.2 billion information returns – 30 million of which went unprocessed.  In 2021 the IRS processed 4.7 billion information returns.  It isn’t clear if the IRS left any unprocessed.

For both businesses and individuals receiving payments through these online platforms, this announcement offers interim relief from an onerous process for filing 1099-K forms for income earned through digital payment methods to report to the IRS. The original deadline was in 2021, but now has been extended for two years.  There have been Congress members, on both sides of the aisle, proposing legislation to change the parameters.  The current law triggers a 1099-K after just $600 of activity.  With that low trigger, it is clear the number of returns were set to explode.

The extension also provides additional time for employers to develop additional safeguards or systems that protect taxpayers from being charged taxes on amounts that should be exempt from taxation, as commercial activity tax laws vary between different states. It is important to bear in mind that while this delay may provide comfort to some businesses, they are still required to comply with all applicable federal tax laws when it comes to reporting any income received through digital payment channels starting January 2023. 

Attorney Steven A. Leahy looks at this new development on Today’s Tax Talk

https://www.irs.gov/newsroom/irs-announces-delay-for-implementation-of-600-reporting-threshold-for-third-party-payment-platforms-forms-1099-k

https://www.irs.gov/newsroom/irs-announces-delay-for-implementation-of-600-reporting-threshold-for-third-party-payment-platforms-forms-1099-k

https://www.jdsupra.com/legalnews/irs-delays-reporting-requirements-on-3732485/

https://nypost.com/2022/12/26/cheer-irss-delay-of-congress-ugly-rule-socking-the-gig-economy-but-it-should-die-entirely/

https://www.cpapracticeadvisor.com/2022/05/13/report-irs-destroyed-30-million-paper-tax-documents/49460/

CryptoTuesday December 27, 2022 - With a tnode o the New Year, this CryptoTuesday Today's Tax Talk takes a look at the "Top 5 Industries Blockchain Will Change FOREVER!"  Here is our list:

1. The banking industry is one of the most obvious beneficiaries of blockchain technology

2. International Payments - Blockchain will can help streamline the process.

3. The insurance industry can use blockchain to create a more secure and efficient system

4. Healthcare - Blockchain can help reduce fraudulent activities.

5. Real Eestate - Blockchain will secure property title registrations.

This is my list.  Attorney Steven A. Leahy reviews some other lists on Today's Tax Talk.

https://www.startupguys.net/industries-where-blockchain-tech-have-impact/

https://blog.pragtech.co.in/top-5-industries-to-benefit-most-from-blockchain-technology/

Wednesday December 21, 2022 – There has been much talk in recent weeks about Republicans’ efforts to cut funding to the Internal Revenue Service (IRS). While Republicans are hailing the 2 percent reduction in IRS funding, taxpayers must understand how insignificant this cut is.  Remember the Inflation Reduction Act added $80 Billion to the IRS budget over the next decade. This money will be used by the IRS to hire 87,000 new agents and expand its services. The aim of this legislation is to increase enforcement against taxpayers. 

Republicans opposed the Inflation Reduction Act because they felt that it would give too much power to an already powerful agency. They argued that giving additional resources to the IRS could lead to increased government intrusion into citizens’ lives and that any cuts should be offset by reducing other spending in order to help control government spending overall. 

Giving additional resources to the IRS will mean increased enforcement of tax rules and regulations. This translates into more audits and investigations as well as higher penalties for those who fail to comply with rules or pay their taxes on time. 

Attorney Steven A. Leahy keeps you informed about changes in taxation laws and policies so that you can remain compliant with all regulations and Fight Back Now! Against future IRS increases.  The Republican “cut” doesn’t affect the IRA funding whatsoever. All that on Today’s Tax Talk

https://thehill.com/homenews/3782281-republicans-hail-2-percent-cut-to-irs-appropriation-in-omnibus/

https://www.cnbc.com/2022/12/20/hagerty-manchin-propose-10000-threshold-for-venmo-paypal-tax-reporting-change-up-from-600.html

https://www.foxnews.com/politics/sen-rand-paul-mocks-massive-trillion-omnibus-bill-hazardous-debt

Tuesday December 20, 2022 - Should our government make rules for issues and areas they don’t understand?  The answer to that question isn’t really an issue.  Because, if government should or shouldn’t doesn’t matter.  Government does.

The latest example is cryptocurrency and blockchain.  Government has come late to the game – don’t really understand the issues but want to hurry through regulations to control it.  With the recent collapse if FTX, Sen. Sherrod Brown (D-Ohio) suggested banning the cryptocurrency market and then acknowledging banning crypto will not work.  

Attorney Steven A. Leahy looks at the latest moves to regulate crypto on Today’s Tax Talk. 

https://thehill.com/homenews/sunday-talk-shows/3779731-senate-banking-chairman-says-maybe-to-cryptocurrency-ban/

https://thehill.com/opinion/congress-blog/3780084-dont-let-ftxs-fall-discredit-blockchain/

Wednesday December 14, 2022 – Remember last year when Pro Publica revealed the confidential tax information of some of the wealthiest Americans?  Remember how the IRS pledged to “get to the bottom” of the crime and expose those who violated the law.  Well, that never happened.  Those criminals are still at large, and probably still working for the IRS.

One of those Wealthy Americans is Ken Griffin, CEO of Citadel.  Mr. Griffin has given up waiting for action from the IRS, he filed a federal lawsuit naming the Internal Revenue Service and the United States Treasury as defendants.

 The Complaint alleges the IRS violated its “legal obligations to safeguard and protect his information from unauthorized disclosure,” and willfully and intentionally failing to “establish appropriate administrative, technical or physical safeguards”

Further, the complaint states “IRS personnel exploited the IRS’s willful failure to establish adequate administrative, technical, and physical safeguards for the IRS’s data and records systems to misappropriate confidential tax return information for the highest earning U.S. taxpayers, including Mr. Griffin, and then unlawfully disclosed those materials to ProPublica for publication.”

Attorney Steven A. Leahy reviews this story on Today’s Tax Talk.

https://www.chicagotribune.com/news/breaking/ct-ken-griffin-irs-tax-lawsuit-20221214-grpig6lzonegtgxuzi6flw7cbe-story.html

https://www.usatoday.com/story/money/2022/12/14/ken-griffin-sues-irs-leak-propublica/10894958002/

https://www.cnbc.com/2022/12/13/billionaire-ken-griffin-sues-irs-over-tax-disclosure.html

CryptoTuesday December 13, 2022 - As we approach the end of 2022 Crypto News seems to be all negative.  Many are asking, "Is this the end of Crypto?"

What is the answer? In my opinion, there are two certainties.  One - Crypto is here to stay.  Two - There will be much more regulation in this sector.

Holders of crypto have taken huge losses: More than $2 trillion in market cap have disappeared.  While Bitcoin is down 75% off its peak, it is still up 4x from December 2018.  Ethereum, the second most popular coin, is up more than 1000% over that same time frame.  

Attorney Steven A. Leahy talks Crypto on Today’s Tax Talk.

https://www.kiplinger.com/investing/cryptocurrency/whats-next-for-cryptocurrency-after-the-collapse-of-ftx

Monday December 12, 2022 – The new tax season is closing in on us.  Many taxpayers want to file their tax returns as early as possible, to get their refund quickly.  The IRS is set to begin accepting and processing 2022 tax returns Monday January 24, 2023.

Usually, the IRS encourages taxpayers to file early.  But wait!  This year, because of the new 1099 K rules, the IRS advises taxpayers to slow down.  Wait for key documents.  Remember, the third-party payment networks, like Venmo and PayPal?  Remember, when the IRS told us it wasn’t a big deal?  Now, it is a Big Deal!!

Before the 2022 tax year, only taxpayers with 200 or more transactions AND worth more than $20,000 were received a 1099 k.  Now, under the new rules, the threshold is transactions worth more than $600, no matter how many transactions.  A BIG change.  Many more taxpayers are going to have to deal with these tax forms.  Like it or not.

Attorney Steven A. Leahy will discuss the IRS warning on Today’s Tax Talk.

https://www.cnbc.com/2022/12/12/irs-when-to-submit-your-tax-return-in-2023-to-avoid-missing-forms.html