You may have heard that the IRS is thinking of raising the reporting threshold for slot jackpots. But even if they don’t, the Handpay Reduction Act being could raise the reporting limit anyway. Representatives Dina Titus of Nevada and Guy Reschenthaler of Pennsylvania have brought forth a bill which would mandate a change if the IRS failed to act on the matter. Titus has been advocating for this regulatory change, introducing bills in 2020 and 2022, albeit without advancing past the committee stage.
Recent developments, however, seem to suggest that pushing the Handpay Reduction Act may be unnecessary. In November, the IRS Advisory Council recommended raising the threshold for automatic W2-G filings, potentially obviating the need for a new law. Titus and Reschenthaler have lobbied the IRS to increase the reporting threshold for slot jackpot winnings. Last year, they introduced the Shifting Limits on Thresholds, or SLOTAct, to pressure the issue, proposing to elevate the tax threshold for slot winnings from $1,200 to $5,000.
Titus emphasized the importance of updating antiquated gaming regulations, not only for her constituents in Las Vegas but also for fostering legal gaming growth in local and Tribal communities nationwide, as conveyed to Casinos.com. She highlighted how the outdated $1,200 standard imposes significant compliance burdens on taxpayers and operational costs on casinos nationwide due to inflationary pressures.
The IRS Advisory Council now endorses this proposal contained within the Handpay Reduction Act, suggesting a threshold of $5,800 to accommodate inflation properly. Furthermore, the Council advises the IRS to establish a mechanism for regularly adjusting this threshold to reflect inflation accurately. Time will tell how this plays out, but players should be optimistic about where this is moving.
The IRS says it is about to ramp up audits as it cracks down on tax cheats and seeks to deliver more revenue into the U.S. Treasury’s coffers. But not every group of taxpayers will face more scrutiny, according to IRS commissioner Danny Werfel.
The IRS has been bolstered by $80 billion in new funding directed by the Inflation Reduction Act (IRA), which was signed into law in 2022 by President Joe Biden. The idea behind the new funding was to help revive an agency whose ranks have been depleted over the years, leading to customer service snarls, processing delays and a falloff in audit rates.
On Thursday, the IRS outlined its plans for the funding, as well as its efforts so far to burnish the agency’s customer service operations after some taxpayers encountered months-long delays during the pandemic. The IRA money has helped the IRS answer more taxpayer calls during the tax season that just ended on April 15, as well as beef up its enforcement, which led to the collection of $520 million from wealthy taxpayers who hadn’t filed their taxes or still owed money, it said.
“The changes outlined in this report are a stark contrast to the years of underfunding” that led to a deterioration in the agency’s services, Werfel said on a conference call with reporters.
Werfel noted that the IRS’ strategic plan over the next three tax years include a sharp increase in audits, although the agency reiterated it won’t boost its enforcement for people who earn less than $400,000 annually — which covers the bulk of U.S. taxpayers.
Here’s who will face an increase in audits
At the same time, the IRS is increasing its audit efforts, with Werfel noting on Thursday that the agency will focus on wealthy individuals and large corporations:
The IRS plans to triple the audit rates on large corporations with assets of more than $250 million. Audit rates for these companies will rise to 22.6% in tax year 2026 from 8.8% in 2019.
Large partnerships with assets of more than $10 million will see their audit rates increase 10-fold, rising to 1% in tax year 2026 from 0.1% in 2019.
Wealthy individuals with total positive income of more than $10 million will see their audit rates rise 50% to 16.5% from 11% in 2019.
“There is no new wave of audits coming from middle- and low-income [individuals], coming from mom and pops. That’s not in our plans,” Werfel said.
But by focusing on big corporations, complicated partnerships and wealthy people who earn over $10 million year, the IRS wants to send a signal, he noted.
“It sets an important tone and message for complex filers, high-wealth filers, that this is our focus area,” he said.
The myth of 87,000 armed IRS agents
The agency also outlined its efforts to bolster hiring, thanks to the new IRA money. In the mid-1990s, the IRS employed more than 100,000 people, but its workforce had dwindled to about 73,000 workers in 2019 due to a wave of retirements and prior funding cuts.
Werfel said the agency has recently boosted its workforce to about 90,000 full-time equivalent employees, and that it plans to expand to about 102,500 workers over the next few years.
“That number won’t even be a record high for the IRS workforce; it’s well below the numbers from the 1980s and early 1990s,” Werfel noted.
He added that the hiring data should dissolve what he called “any lingering myths about a supersized IRS.” After the IRA passed, some Republican lawmakers warned in 2022 that the agency would use the money to hire “87,000 new IRS agents to audit Walmart shoppers.”
“This should put to rest any misconception about us bringing on 87,000 agents,” Werfel noted, adding that many of the new hires are replacing retiring employees.
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
WASHINGTON (AP) — The IRS says more than 140,000 taxpayers filed their taxes through its new direct file pilot program.
It says the program’s users claimed more than $90 million in refunds and saved roughly $5.6 million in fees they would have spent with commercial tax preparation companies.
But despite what IRS and Treasury Department officials said Friday is a successful rollout, they don’t guarantee the program will be available next year for more taxpayers.
They say they need to evaluate the data on whether building out the program is feasible.
The government pilot program rolled out this tax season allowed certain taxpayers in 12 states to submit their returns directly to the IRS for free.
IRS Audits help the agency collect money that tax cheats owe the federal government, but experts say they also serve another important purpose: They help deter fraud.
That can cause some serious agita, of course. The IRS says about 6 in 10 taxpayers cite the anxiety of getting audited as a motive for being honest on their taxes.
Meanwhile, the IRS has vowed to increase audits on taxpayers with annual income over $400,000 as a way to raise revenue and crack down on tax dodgers, funded by the Inflation Reduction Act. After the 2022 law was passed, roughly a quarter of voters expressed concern about getting hit with an audit, according to Morning Consult research.
So what are the odds of getting audited? Very low. Only 0.2% of all individual income tax returns filed for the 2020 tax year faced an audit, according to the most recent data available from the IRS. That means about 1 in 500 tax returns are audited each year.
To be sure, some people face higher audit risks than others, and one of them might surprise you. The taxpayers most likely to be audited are those with annual incomes exceeding $10 million — about 2.4% of those returns were audited in 2020. But the second most likely group to get audited are low- and moderate-income taxpayers who claim the Earned Income Tax Credit, or EITC.
Why can the EITC trigger an audit?
The higher audit rate for people who claim the EITC has sparked criticism from policy experts. The Bipartisan Policy Center notes that these examinations tend to disproportionately fall on people of color, partly because they are more likely to qualify for the tax credit.
People can claim different amounts through the EITC based on their income and their number of dependent children. For instance, a married couple filing jointly with three kids and less than $63,398 in income can claim the maximum EITC amount, at $7,430. But the most a single taxpayer with no kids can claim is $600.
EITC returns can get flagged if the IRS’ records show the taxpayer doesn’t qualify for all or some of the credit, such as claiming a child who isn’t actually eligible (which can happen if they’re over 19 and not a full-time student). About 8 in 10 audited returns that claimed the EITC had either incorrectly claimed a child or misreported income, the National Taxpayer Advocate noted in a 2022 report.
Still, these audits are slightly different than the kind a wealthier taxpayer would typically face. The IRS relies on so-called “correspondence audits” to handle EITC issues, which are handled via letters and phone calls, rather than in-person visits from an IRS agent, or how audits are handled with high-income taxpayers.
Are taxpayers more or less likely to get audited these days?
Quite the opposite. In fact, the audit rate has been declining for years, according to IRS data.
For instance, the agency in 2014 audited about 9.4% of all tax returns for people earning more than $10 million a year — that’s almost four times the present audit rate, IRS data shows.
Middle-class taxpayers are also much less likely to get audited today. IRS figures show that the audit rate for people with annual income of $50,000 to $75,000 was 0.4% in 2014 — also four times higher than the current audit rate.
The reason, the IRS says, is partly due to its shrinking workforce. In fiscal year 2022, the agency had about 79,000 full-time equivalent workers, a 9.1% decline from 2013. But the IRS is now beefing up its staff, thanks to Inflation Reduction Act funding, and it says that it is focusing on increasing audits for those earning above $400,000.
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
As the tax season progresses, the IRS reports having received over 71.5 million tax returns, already issuing more than 49 million refunds to Americans. With the average refund amounting to $3,109, CBS News business analyst Jill Schlesinger offers advice on how Americans can make the most of their tax refund.
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The deadline for filing tax returns is a little less than a month away. The IRS says it expects more than 128 million individual tax returns this year. Julie Weil, a tax reporter for The Washington Post, joined CBS News with some tips for couples on whether it’s better to file joint or separate returns.
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If you’re a California resident and haven’t done your federal tax return for 2023, you now have another, more user-friendly option online: the free Direct File service from the IRS.
It’s not for everyone, however. Instead, it’s aimed mainly at people with very simple annual tax returns, which the Treasury Department said amounts to about 1 of every 3 taxpayers.
The tax agency launched the Direct File service in January on an extremely limited basis to make sure its online systems were up to the task. That changed Monday, when the IRS announced that Direct File was available to all taxpayers in California, Arizona, Nevada and nine other states.
Think of Direct File as the IRS’ alternative to the free online tax-filing programs from TurboTax and H&R Block. It provides step-by-step guidance for filling out your tax forms, filing them and either paying any amount you might owe or collecting your refund.
The program’s question-and-answer approach means you won’t have to know which forms to fill out or where on the forms to enter your information. Instead, the program will handle those details for you.
The IRS already works with several tax-prep companies to offer lower-income taxpayers a free online tax return service called Free File. What makes Direct File different is that there’s no middleman and no income limit for participants — anyone can use it, provided that their tax returns use only the most basic forms.
Specifically, the program will work only for taxpayers whose income is limited to wages reported on a W-2, retirement benefits from Social Security or the Railroad Retirement Board, unemployment benefits or interest income of $1,500 or less. That means if you’re a self-employed person, a business owner, a contractor or a gig worker, or if you have income from a partnership or trust, Direct File isn’t for you.
The Treasury Department estimates that 19 million people in the 12 participating states are eligible to use Direct File this year and that several hundred thousand people will do so.
One other caution: The IRS says Direct File will be available only until April 15, when most Californians’ 2023 returns are due. The agency pushed the deadline for taxpayers in San Diego County back to June 17 in response to the federal disaster declaration in that county.
Direct File runs online only; you’ll need a smartphone, tablet or computer to access it. And to get started, you’ll need to prove to the IRS that you are who you say you are.
The only way to do that this year will be to use the identity verification service ID.me, which takes a scan of your government-issued picture ID, such as your driver’s license or passport, then uses facial-recognition software to match your image from a live chat session or a new selfie against the stored photo. ID.me has raised concerns among some critics, who say it poses too great a threat to privacy and security.
Once you’ve established your identity, the program will check your eligibility, then guide you as you enter information about your income, credits and deductions. You don’t need to download any software, the IRS said; instead, your entries will be saved online, and you’ll be able to pause and resume later without having to start over.
Direct File has a live chat feature to help taxpayers with questions, but it’s not a source of free tax advice.
“IRS customer service representatives can provide technical support and provide basic clarification of tax law related to the tax scope of Direct File,” the agency said in a release. “Questions related to issues other than Direct File will be routed to other IRS customer support, as appropriate.”
The Direct File service hasn’t been integrated into California’s tax filing system yet, so you won’t be able to transfer your federal information seamlessly to your state return. The state Franchise Tax Board offers a free online return filing system called CalFile whose restrictions are similar to those in Direct File, so if you’re eligible for the latter, you’re probably able to use the former.
If you’re entitled to a refund, tax experts say, you should file your return as soon as possible. Otherwise, you’re just making an interest-free loan to the federal government.
I’m pretty good at math, but I no longer prepare my own taxes. The form alone scares me.
I feel I have to hire an accountant, because Congress, endlessly sucking up to various interest groups, keeps adding to a tax code. Now even accountants and tax nerds barely understand it.
I can get a deduction for feeding feral cats but not for having a watchdog.
I can deduct clarinet lessons if I get an orthodontist to say it’ll cure my overbite, but not piano lessons if a psychotherapist prescribes them for relaxation.
Exotic dancers can depreciate breast implants.
Even though whaling is mostly banned, owning a whaling boat can get you $10,000 in deductions.
And so on.
Stop! I have a life! I don’t want to spend my time learning about such things.
No wonder most Americans pay for some form of assistance. We pay big—about $104 billion a year. We waste 2 billion hours filling out stupid forms.
That may not even be the worst part of the tax code.
We adjust our lives to satisfy the whims of politicians. They manipulate us with tax rules. Million-dollar mortgage deductions invite us to buy bigger homes. Solar tax credits got me to put panels on my roof.
“These incentives are a good thing,” say politicians. “Even high taxes alone encourage gifts to charity.
But “Americans don’t need to be bribed to give,” says Steve Forbes in one of my videos. “In the 1980s, when the top rate got cut from 70 percent down to 28 percent…charitable giving went up. When people have more, they give more.”
Right. When government lets us live our own lives, good things happen.
But politicians want more control.
American colonists started a revolution partly over taxes. They raided British ships and dumped their tea into the Boston Harbor to protest a tax of “three pennies per pound.” But once those “don’t tax me!” colonists became politicians, they, too, raised taxes. First, they taxed things they deemed bad, like snuff and whiskey.
Alexander Hamilton’s whiskey tax led to violent protests.
Now Americans meekly (mostly) accept new and much higher taxes.
All of us suffer because politicians have turned income tax into a manipulative maze.
We waste money and time and do things we wouldn’t normally do.
Since I criticize government, I assume some IRS agent would like to come after me.
So, cowering in fear, I hire an accountant and tell her, “Megan, don’t be aggressive. Just skip any challengeable deduction, even if it means I pay more.”
I like having an accountant, but I don’t like having to have one. I resent having to pay Megan.
I once calculated what I could buy with the money I pay her. I could get a brand-new motorcycle. I could take a cruise ship to Italy and back every year.
Better still, I could give my money to charity and maybe do some good in the world. For the same amount I spend on Megan, I could pay four kids’ tuition at a private school funded by SSPNYC.org.
Or I could invest. I might help grow a company that creates a fun product, cures cancer, or creates wealth in a hundred ways.
It’s back to regular IRS deadlines for California taxpayers this year, but with a new tool for many low- and moderate-income households: a service that will prepare and file their tax returns online for free.
Starting later this year, taxpayers in California, Arizona, Nevada and nine other states will have access to a new program from the IRS called Direct File. Unlike the free filing options the IRS provides through third parties or the free services from TurboTax and H&R Block, Direct File enables you to send sensitive financial information directly to the IRS — no middleman required.
It’s also the first service from the agency itself that guides you through the process of filling out your return. And its chat feature can provide answers to basic tax questions in real time from IRS customer service representatives.
There’s a catch, however. Although Direct File is available to California taxpayers regardless of how much they earn, it can be used only by people who earn income in limited types of ways. For example, Direct File is not for you if you have income from a business you own, subcontracting work or gig-economy jobs.
Regardless of how you do your taxes, you won’t have an automatic extension of the deadline for filing your 2023 return — at least not yet.
Because of the damage caused by winter storms last year, most taxpayers in California had until mid-November to complete their 2022 returns and pay what they owed. There have been no federal disaster declarations in California thus far, so the deadline for filing your federal and state returns for 2023 remains April 15.
If you’re entitled to a refund, tax experts say, you should file your return as soon as possible. Otherwise, you’re just lending interest-free money to the federal government.
Here’s what you need to know about Direct File.
Who will have access to Direct File?
The IRS is rolling out the program slowly to try to work out the kinks before releasing it to the general public. In addition to limiting access to taxpayers in 12 states — California, Arizona, Nevada, Washington, Florida, Massachusetts, New Hampshire, New York, South Dakota, Tennessee, Texas and Wyoming — it will make Direct File available at its Monday launch only to people who’ve been invited to test the system.
“Using a phased approach like this means that the pilot will not be available to all eligible taxpayers immediately when the IRS begins accepting federal tax returns” on Monday, the agency said on its website. According to the San Francisco Chronicle, the agency expects to open the program to more taxpayers by mid-March.
You’ll be able to sign up on the IRS’ Direct File site for an alert telling you when the program is available to you.
Who can use Direct File?
The program will work only for taxpayers whose income is limited to wages reported on a W-2, retirement benefits from Social Security or the Railroad Retirement Board, unemployment benefits or interest income of $1,500 or less. That means if you’re a self-employed person, a business owner or a contractor, or if you have income from a partnership or trust, Direct File isn’t for you.
The forms and chat help are available in English and Spanish.
How do you use Direct File?
The program runs online only; you’ll need a smartphone, tablet or computer to access it. And to get started, you’ll need to prove to the IRS that you are who you say you are.
The only way to do that this year will be to use the identify verification service ID.me. ID.me takes a scan of your government-issued picture ID, such as your driver’s license or passport, then uses facial-recognition software to match your image from a live chat session or a new selfie against the stored photo. ID.me has raised concerns among some critics, who say it poses too great a threat to privacy and security.
Once you’ve established your identity, the program will check your eligibility, then guide you as you enter information about your income, credits and deductions. You don’t need to download any software, the IRS said; instead, your entries will be saved online, and you’ll be able to pause and resume later without having to start over.
The program’s question-and-answer approach means you won’t have to know which forms to fill out or where on the forms to enter your information. Instead, the program will handle those details for you. That sort of virtual hand-holding is similar to what you’d get by using commercial tax preparation software.
Can you fill out your California tax return through Direct File?
No, the information you enter through Direct File will not flow automatically onto your state tax forms — California is not one of the handful of states that have enabled it. Instead, the state Franchise Tax Board offers CalFile, as a way for qualified taxpayers to file their returns for free online. The restrictions on participating in CalFile are similar to those in Direct File, so if you’re eligible for the latter, you’re probably able to use the former.
What are the alternatives for filing your tax return for free?
The IRS already offers its Free File service to taxpayers whose adjusted gross income — that is, income minus certain deductions, including retirement savings contributions and student loan interest payments — was $79,000 or less in 2023. Unlike Direct File, taxpayers with earnings from self-employment, their own businesses, investments or gig work are eligible, as long as they meet the income limits.
In addition, the AARP Foundation Tax-Aide and the IRS-sponsored Volunteer Income Tax Assistance program can connect you to a volunteer tax preparer who will do your tax return for you or help you do it yourself, at no charge to you. These services provide tax preparation or guidance only to low- and moderate-income taxpayers who meet the income limits, or who have disabilities or limited English proficiency.
Intuit’s TurboTax and H&R Block also make free versions of their tax preparation and filing software available online. There’s no income limit, but the services work only with basic returns that demand little more than a 1040 form. That would exclude anyone with income or losses from a small business, for example, or whose investments pay more than $1,500 in dividends.
Disclosure: The views and opinions expressed here belong solely to the author and do not represent the views and opinions of crypto.news’ editorial.
A bull market for digital assets is on the horizon for 2024. With abundant investment opportunities abound digital asset investors should be aware that the IRS announced that during 2024, it would focus on compliance initiatives associated with digital assets, FBAR, high-income and high-wealth taxpayers.
The veil on the identity of Satoshi Nakamoto, the author of Bitcoin’s White Paper that proposed the blockchain-based decentralized cryptocurrency, still has not been lifted. This “‘identity issue,’ namely whether Dr. Craig Wright is the pseudonymous ‘Satoshi Nakamoto,’ i.e., the person who created Bitcoin in 2009” or not, according to High Court Judge John Mellor, is still being litigated in the United Kingdom with the support of Bitcoin Legal Defense Fund set up by Block CEO Jack Dorsey. As Jack explained:
“The Bitcoin Legal Defense Fund is a nonprofit entity that aims to minimize legal headaches that discourage software developers from actively developing Bitcoin and related projects such as the Lightning Network, Bitcoin privacy protocols, and the like.”
Unfortunately, the self-proclaimed inventor of Bitcoin, Dr. Craig Wright, is only one of many to claim to be Satoshi Nakamoto, according to the article “The Faketoshi,” authored by Arthur van Pelt.
Adding layers to Satoshi’s identity mystery is a Binance wallet sending approximately $1.2 million worth of Bitcoin (BTC) to Satoshi’s Genesis wallet on January 5, 2024, which coincided with Judge Mellor’s order to Dr. Craig to pay over $1M to the court and was two days after BTC’s 15th birthday.
The mist around Dr. Craig’s ‘identity issue’ is expected to lift Judge Mellor said, “By 4 pm on January 18, 2024, [when] Dr. Wright and COPA [Crypto Open Patent Alliance] shall exchange and shall serve on the Developer Defendants expert reports on (a) forensic document analysis in respect of the Additional Documents,—[95 documents dating back to 2007]—stored on the Samsung Drive, and the BDO Drive; and (b) LaTeX software.”
Once the identity of Satoshi is known, if this person is a US person with an estimated BTC wealth of $40 billion, the US taxpayer is expected to file Form 8300 with the IRS by January 20, 2024, for the $1.2M in BTC received since effective January 1, 2024, any crypto transaction over $10,000 must be electronically (if they are required to file certain other information returns electronically) reported. Noncompliance with Form 8300 results in subjecting taxpayers to civil and criminal penalties.
While the “real” author of the Bitcoin White Paper continues to be debated in the United Kingdom’s court system, the digital asset industry went through a cleansing of bad actors in the US during 2023. The world’s largest crypto exchange, Binance, and its CEO pleaded guilty to federal charges. They agreed to pay over $4B to resolve the Justice Department’s investigation into the Bank Secrecy Act violations, failure to register as a money-transmitting business, and the International Emergency Economic Powers Act (IEEPA).
Binance, Coinbase, Terraform Labs, and others also faced action by the SEC for operating unregistered securities exchanges, which are still ongoing. As Sergiu Hamza, CEO of Coincub, a company that has prepared reports on the US money services business (MSB) and global Virtual or Digital Asset Service Providers (VASPs), explained to me in a private interview:
“In 2023, the US experienced significant regulatory shifts, particularly in response to the FTX collapse, which was followed by five crypto-friendly bank failures. The Biden administration’s ‘regulation by enforcement’ strategy shaped the federal landscape, spearheaded by Gary Gensler and the SEC. Amidst this, states like Colorado stood out as beacons for the crypto industry, accounting for 33% of all U.S. crypto businesses. This success is primarily attributed to forward-thinking measures such as Colorado’s ‘Digital Token Act’ and key initiatives like ETH Denver, all nurtured under Governor Jared Polis’ vision.”
Best states for crypto businesses | Source: Coincub
North American investors, money managers, and even CBOE Digital president John Palmer are confident that a new wave of institutional and pension fund investment will follow spot Bitcoin ETF approvals. Already, several spot BTC exchange-traded fund (ETF) applicants—such as Vaneck, Valkyrie, Grayscale Investments, Fidelity, BlackRock, and Bitwise—filed to register their funds as securities with the US Securities and Exchange Commission with an approval deadline of January 10, 2024. The first spot BTC ETF application was made by Cameron and Tyler Winklevoss, filed on July 1, 2013, with the SEC a decade ago. As Sergiu Hamza commented in a private interview:
“As we move into 2024, the launch of Bitcoin ETFs marks a significant milestone, particularly for Wall Street. This development enhances Bitcoin’s appeal and credibility, heralding a market ripe for expanded investment and engagement from political and financial sectors, potentially catalyzing the next chapter in Bitcoin’s growth.”
After a bear market in 2022, Bitcoin’s value surged 160% during 2023 and continues on an upward trend. William Quigley, co-founder of Tether and WAX Blockchain, said to me, “Unlike previous crypto bull market years, crypto-focused investment funds have large reserves of investable cash. This is a positive factor in driving a crypto bull market.” He continues:
“There are many more investment funds operating in 2024, with much more crypto investing experience. ETFs are a mixed bag for crypto enthusiasts. While they provide a new way for institutional investors to acquire Bitcoin, they also provide an easy way for those investors to short Bitcoin. This might cancel out any sustained buying support for bitcoin in 2024.”
In 2018, Russia took the lead in proposing a multinational stablecoin backed by commodities with the Eurasian Economic Union, or EAEU, and BRICS countries. At the beginning of 2024, five more countries joined BRICS, including Saudi Arabia, the United Arab Emirates (with a joint coin initiative, Aber), Iran, Egypt, and Ethiopia. At the beginning of the year, Russia was passed the baton of the BRICS chairmanship.
BRICS member countries plan to launch a common currency for their organization that could be a multinational digital currency backed by a basket of assets or gold. BricsTether has already launched a stablecoin backed by a basket of assets, providing greater stability and predictability than traditional cryptocurrencies.
However, China’s top legal watchdog recently clamped down on Tether’s use by declaring that exchanging local currency for foreign ones using Tether-USDT stablecoin or providing technical support for exchange services for such transactions is unlawful.
Furthermore, an order from Judge Jed Rakoff in the US District Court for the Southern District of New York, who granted summary judgment for the SEC, stated that stablecoinsLUNA, UST, and MIR are securities.
Accordingly, BricsThether or BRICS-issued multinational stablecoin could be subject to SEC oversight as a security. US BricsTether or BRICS stablecoin holders may be subject to FBAR and Form 8938 Foreign Account Tax Compliance Act (FATCA) reporting requirements.
With abundant investment opportunities abound digital asset investors should be aware that the IRS announced that in 2024, it would focus on compliance initiatives associated with digital assets, FBAR, high-income and high-wealth taxpayers. Noncompliance with FBAR FinCen Form 114 and Form 8938 subject taxpayers to severe civil and criminal penalties, potentially in excess of the unreported foreign assets. For institutions, noncompliance can result in exclusion from access to US markets.
The IRS is waiving penalty fees for people who failed to pay back taxes that total less than $100,000 per year for tax years 2020 and 2021. The relief measure will waive $1 billion in fees for tax returns filed for those years, the IRS said on Tuesday.
The tax agency said it is nixing the fees due to the disruption caused by the pandemic, which threw the IRS into operational turmoil and led to a massive backlog in unprocessed tax returns. The relief is aimed at resolving a quandary caused by the tax agency’s decision to suspend notices that taxpayers owed money. Although the IRS never sent the notices, penalties continued to mount for taxpayers in arrears.
While the IRS plans to resume sending out normal collection notices, the announcement is meant as one-time relief based on the unprecedented interruption caused by the pandemic, officials said.
“It was an extraordinary time and the IRS had to take extraordinary steps,” IRS Commissioner Daniel Werfel told reporters. He said the change will be automatic for many taxpayers and will not require additional action.
Starting next month, taxpayers will receive a special reminder letter from the agency alerting them of their liability, as normal collection processes resume. The IRS is urging those who are unable to pay their full balance due to visit IRS.gov/payments for payment plan options.
Here’s who qualifies
Taxpayers are eligible for automatic penalty relief if they filed a Form 1040, 1041, 1120 series or Form 990-T tax return for years 2020 or 2021; owe less than $100,000 per year in back taxes; and received an initial balance-due notice between Feb. 5, 2022, and Dec. 7, 2023.
If people paid the failure-to-pay penalty, they will get a refund, Werfel said on a call with reporters. “People need to know the IRS is on their side,” he said.
Most of the roughly 5 million people, businesses and tax-exempt organizations who will get the relief make under $400,000 per year, the IRS said.
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
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Once SBF stepped down, the new leadership of FTX scoured the bankrupt exchange’s databases, looking for misplaced and poorly labeled assets.
Months later, John J Ray III and his team have managed to map out about $7 billion in assets, nearly half of which are in cryptocurrencies.
The IRS Wants Its Share
However, the new team at FTX isn’t the only one taking a closer look at the notoriously mismanaged finances – the taxman has been on the case as well. Furthermore, the IRS – who have already submitted two revisions to the original claim – state that the tax audit is still in progress, and the full figure owed is subject to change.
Originally, the IRS claimed that FTX owed a whopping $44 billion. This amount was eventually amended all the way down to $24 billion spread across all entities in the FTX empire.
The lion’s share of the allegedly unpaid taxes pertains to unpaid partnership taxes – in quantum of $20.4 billion – with payroll and other income tax obligations making up the remaining amount.
Repeated Pushback
FTX originally attempted to have the entire claim dismissed late last month, arguing that the tax bill is a pie-in-the-sky figure that far surpasses its earnings. Furthermore, tax returns filed by Ernst & Young on behalf of the FTX Group were also dismissed by the IRS.
The original dismissal attempt was, understandably, rejected by the court.
FTX has now filed a second document, stating that not only are the figures incorrect, but that they would also effectively ensure its creditors would pretty much never see a red cent returned to them.
“This Alice in Wonderland argument has no support in the law. Just like any other claimant in a Chapter 11 bankruptcy, the IRS must provide a specific basis for its claims, with supporting documentation[…]. The Debtors are not expected to disprove that an office equipment vendor who says it provided an unspecified number of desk chairs is owed $24 billion, and the same is true for a supposedly massive tax liability that no one (including the IRS) can explain or support.”
The IRS and FTX will face off in court today, the 12th of December. It’s worth noting that FTX appears to no longer be gunning for a complete dismissal.
Instead, the exchange hopes for a more accurate – or at least better documented – figure filed by the U.S. tax regulator. The current figure, FTX lawyers argue, is “orders of magnitude greater” than the income the now-bankrupt crypto platform ever earned.
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According to a report from the Internal Revenue Service (IRS) criminal investigations division, tax evasion has emerged as a significant area of focus in crypto investigations. More than half of all probes conducted in the last fiscal year were related to tax matters.
This news coincides with the IRS actively seeking input from stakeholders on its upcoming framework centered around cryptocurrencies.
Crypto Tax Crimes Surged
The report indicates that three years ago, more than 90% of active cryptocurrency investigations primarily focused on money laundering. However, tax-related issues accounted for approximately half of the digital asset investigations in the previous fiscal year, which began October 1, 2022, and ended September 30, 2023.
Therefore, the IRS is intensifying its efforts to combat cryptocurrency tax fraud. The agency’s Criminal Investigation Unit reported an increase in the number of investigations into digital asset reporting in its annual report.
In the paper, the unit mentioned that they initiated at least 2,676 cases in the 2023 fiscal year. They identified over $37 billion in transactions associated with financial and tax crimes.
The investigations primarily centered around undisclosed holdings of cryptocurrencies, unreported capital gains from cryptocurrency transactions, income generated from mining activities, and even concealment of cryptocurrency holdings.
According to Jim Lee, the head of the Crime Investigation Unit at the IRS, the growing adoption of digital assets has led to a concurrent rise in tax-related investigations, which is anticipated to continue. Deliberate evasion of payment obligations is one of the main offenses under scrutiny, with taxpayers purposefully concealing ownership of cryptocurrencies to safeguard their assets.
IRS’s Crypto Mission
The Internal Revenue Service (IRS) initiated its mission to address crypto markets in 2015, commencing investigations into crypto-related crimes. According to reports, the IRS has successfully seized over $10 billion in crypto assets since its initial actions.
In 2019, the IRS introduced a new mandate for U.S. taxpayers, requiring them to report all digital asset transactions to mitigate instances of tax evasion.
The agency is diligently formulating new regulations, specifically targeting brokers and intermediaries involved in the crypto business. The IRS actively seeks input from various stakeholders regarding proposed cryptocurrency tax reporting measures until January 25, 2024.
These forthcoming regulations will be incorporated into the American Families Plan Act of 2023, necessitating crypto exchanges and brokers to report crypto transactions surpassing $10,000 to the IRS and taxpayers. Additionally, this framework mandates that crypto businesses maintain knowledge of their customers and retain thorough transaction records.
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The IRS is giving a break to People who received more than $600 via Venmo, PayPal or other payment apps this year.
The agency on Tuesday said it is again delaying the implementation of a 2021 law that requires payment platforms such as Venmo, Paypal or Cash App to send tax forms called 1099-Ks to anyone who received more than $600 in the current tax year.
It’s the second consecutive year the IRS has delayed enacting the new regulation, after the tax agency last year pushed off the new law until 2023. On Tuesday, the agency said it will push the regulation back another year “to reduce taxpayer confusion” after hearing from taxpayers, tax professionals and payment processors.
Without that delay, an estimated 44 million 1099-K forms would have been sent to millions of taxpayers for the current tax year, even though they may not have owed taxes on the payments and wouldn’t have been expecting such a form, the IRS said.
Instead, the IRS will rely on a preexisting threshold — more than 200 transactions that exceed $20,000 in income — for sending 1099-Ks in early 2024 for completing the current tax year’s returns.
The rule change is likely to impact “a significant portion of taxpayers” given that it would have affected anyone receiving more than $600 via a payment app this year, noted Eric Bronnenkant, a CPA and head of tax at Betterment, in an email.
Still, he noted that despite this change all taxable income must still be reported to the IRS. “[T]here need to be guideposts in place so taxpayers can navigate what should/shouldn’t be reported,” he said.
Reporting threshold raised to $5,000 next year
In a key revision to the law, the IRS said that starting in tax year 2024 it will transition toward the new rule by increasing the reporting threshold from $600 to $5,000. That means people who receive more than $5,000 in payments via PayPal and other apps in 2024 would receive the 1099-K tax form in early 2025 to complete their 2024 tax returns.
For the 2025 tax year, the threshold would step down to $600, unless the IRS makes additional changes.
“The IRS’s decision to delay implementation of the new Form 1099-K reporting requirements is good news for taxpayers, tax professionals and payment processors,” said Erin Collins, the National Taxpayer Advocate, an arm of the IRS focused on the interests of taxpayers.
She added, “Equally important is the IRS’s announcement today that it will adopt a phased-in approach and only require reporting of transactions totaling more than $5,000 next year. Taxpayers and tax professionals need certainty and clarity about what is expected of them.”
Some Republican lawmakers said the IRS’ second consecutive delay is a sign that the $600 rule has generated confusion and is “unworkable.”
“Given that even Democrats now admit that this law is unworkable and are trying to rewrite a key provision, it’s time to scrap it and start over,” said Rep. Jason Smith of Missouri, the chair of the House Ways and Means Committee.
A provision in 2021 American Rescue Plan requires users to report transactions through payment apps including Venmo, Cash App and others for goods and services meeting or exceeding $600 in a calendar year. Before the ARP provision — and now for this year — the reporting requirement applied only to the sale of goods and services to taxpayers who receive over $20,000 and have over 200 transactions.
Pushback from online sellers
The rule had sparked significant pushback from online selling platforms such as eBay and Etsy, with some of the companies arguing that the reporting requirement would create confusion and difficulties for sellers who rely on these platforms to make a living.
At the same time, Republican lawmakers had decried the plan as government overreach and argued that it could hurt people who rely on payment apps to reimburse friends and family members.
IRS officials said one reason for the delay is taxpayer confusion over what sorts of transaction are reportable under the new law. For instance, transactions between friends and families, like selling a couch or car or repaying a friend for pizza, would not be reportable. Likewise, selling used items such as clothing or furniture for a loss through a service like eBay could also generate a 1099-K, even though those sales would create no tax liability.
Yet other sales could be taxable, such as a small business that is selling goods or services for a profit.
“Taking this phased-in approach is the right thing to do for the purposes of tax administration, and it prevents unnecessary confusion,” IRS Commissioner Danny Werfel said in a statement. “It’s clear that an additional delay for tax year 2023 will avoid problems for taxpayers, tax professionals and others in this area.”
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
Shakira is avoiding the possibility of prison time in her tax fraud dispute involving the nation of Spain!
On Monday, the first day of the Colombian-born singer’s tax fraud trial began in Barcelona. But before things could really get going on the allegations that she supposedly skipped out on paying taxes to Spain while living there in the 2010s, everything came to a screeching halt! Because Shakira settled things up ASAP!
Per the BBC, the New York Times, and others, the 46-year-old singer cut a deal with Spanish prosecutors to end the mess and avoid any possible prison time if she were to have been found guilty. According to those outlets, the deal is pretty steep in terms of a payday for Spain: Shakira gets a three-year suspended sentence and a fine equivalent to $7.5 million USD. That’s a LOT of coin!!
Still, for Shakira, it was clearly worth it. The prosecution against her is over now, with no chance of being found guilty or going to prison for supposedly failing to pay those income taxes between 2012 and 2014. She had been facing up to eight years in prison on the charge — and as much as a $26 million fine — if found guilty. So, when compared to what might have happened in court, she definitely got off a little easier, we suppose.
The Hips Don’t Lie singer released a statement about the settlement on Monday, too. Obtained by People and others, the singer claimed in the statement that she chose to settle in the best interests of her children — sons Milan, 9, and Sasha, 7 — who she shares with soccer star exGerard Piqué. The sexy singer stated:
“While I was determined to defend my innocence in a trial that my lawyers were confident would have ruled in my favor, I have made the decision to finally resolve this matter with the best interest of my kids at heart who do not want to see their mom sacrifice her personal well-being in this fight.”
She went on:
“I need to move past the stress and emotional toll of the last several years and focus on the things I love — my kids and all the opportunities to come in my career, including my upcoming world tour and my new album, both of which I am extremely excited about. I admire tremendously those who have fought these injustices to the end, but for me, today, winning is getting my time back for my kids and my career.”
And she also strongly maintained her innocence on the tax fraud allegations:
“Throughout my career, I have always strived to do what’s right and set a positive example for others. … [Authorities in Spain] pursued a case against me as they have against many professional athletes and other high-profile individuals, draining those people’s energy, time, and tranquility for years at a time.”
Wow! Those are some strong words about what was supposedly going on behind the scenes! But regardless of whatever really happened a decade ago, it’s all over now. Shakira has settled up, and she’s ready to move on! Thoughts, Perezcious readers??
Washington — House Republicans want to pay for emergency aid to Israel by cutting funding to the IRS, teeing up a collision with the White House and Democratic-controlled Senate over how to support a key U.S. ally.
The House GOP released a $14.3 billion standalone measure on Monday that would pay for aid to Israel by cutting the same amount in funding that was allocated to the IRS under the Inflation Reduction Act, one of President Biden’s signature pieces of legislation.
“We’re going to have pays-for in [the bill],” House Speaker Mike Johnson told Fox News on Monday. “We’re not just going to print money and send it overseas.”
The Republican bill sets up a battle over support for Israel, with Mr. Biden and Democrats in the Senate wanting to pair aid for Israel with tens of billions of dollars in aid to Ukraine, which some House Republicans oppose. The White House asked Congress for a $105 billion aid package two weeks ago, which included $14 billion for Israel and $61 billion related to Ukraine.
Johnson, who supports separating the aid packages, acknowledged that the cuts to the IRS would be unpopular among Democrats, but said he planned to call Senate Majority Leader Chuck Schumer for a “direct” and “thoughtful conversation.”
“I understand their priority is to bulk up the IRS,” Johnson told Fox News. “But I think if you put this to the American people and they weigh the two needs, I think they’re going to say standing with Israel and protecting the innocent over there is in our national interest and is a more immediate need than IRS agents.”
The president signed the Inflation Reduction Act into law in 2022, and it included hundreds of billions of dollars for Democratic priorities related to climate change, health care costs and taxes. It also boosted the IRS’ funding by $80 billion, allowing the agency to hire thousands of agents and revamp decades-old technological systems. Experts said the upgrades and hiring boost were long overdue and would improve the agency’s ability to process tax returns, but the provision was highly unpopular among Republican lawmakers.
When it comes to aid for Ukraine, Johnson has said he wants more accountability for the billions of dollars the U.S. is spending to help repel Russia’s invasion, specifically asking the White House to detail where the money is going and what the end game in the conflict is.
Democratic Rep. Rosa DeLauro of Connecticut, the ranking member on the House Appropriations Committee, said Monday that offsetting emergency aid with cuts to the IRS sets a “dangerous precedent.”
“House Republicans are setting a dangerous precedent by suggesting that protecting national security or responding to natural disasters is contingent upon cuts to other programs,” the Connecticut Democrat said in a statement. “The partisan bill House Republicans introduced stalls our ability to help Israel defend itself and does not include a penny for humanitarian assistance.”
The House Rules Committee plans to take up the GOP’s Israel bill on Wednesday.
Some taxpayers may get a break next year on their taxes thanks to the annual inflation adjustment of tax brackets set by the IRS.
The tax agency hasn’t yet announced the new brackets for 2024, but that is likely to come within the next days or weeks, according to Steve Grodnitzky of Bloomberg Tax, which has issued its own forecast for the new tax brackets as well as other policies that are adjusted for higher prices.
The IRS relies on a formula based on the consumer price index — which tracks a basket of goods and services typically bought by consumers — to adjust many tax policies each year, Grodnitzky noted. Last year, for instance, tax brackets were boosted by a historically large 7% due to the highest inflation in 40 years. Because inflation has eased this year, the annual boost is likely to be more moderate, with brackets rising about 5.4%,
Setting higher thresholds can help avoid so-called “bracket creep,” or when workers are pushed into higher tax brackets due to the impact of cost-of-living adjustments to offset inflation, without a change in their standard of living. It can also help taxpayers shave some of what they owe to the IRS if more of their income falls into a lower bracket as a result of the higher thresholds.
“For the income tax brackets, the dollar amounts have now increased, so for 2023, the lowest bracket for single people is those making up to $22,000, but now it’s up to $23,200, so it basically changes how much you are going to be taxed,” Grodnitzky said.
New tax bracket limits
The tax brackets for the 2024 tax year, set by the 2017 Tax Cuts and Jobs Act, aren’t changing, but the cutoffs for each band of taxation will shift higher. The tax rates will remain 10%, 12%, 22%, 24%, 32%, 35% and 37%.
But it will take more income to reach each higher band of taxation. For instance, a single taxpayer who earns $100,000 in 2024 will have a top marginal tax rate of 24%, whereas in 2023, their top marginal tax rate is 32%.
Tax brackets indicate the percentage you’ll pay in taxes on each portion of your income. A common misconception is that the highest rate is what you’ll pay on all of your income, but that isn’t the case.
Take again the situation of a single taxpayer who earns $100,000. In 2023, she will take a standard deduction of $14,600, reducing her taxable income to $85,400. This year, she’ll pay:
10% tax on her first $11,600 of income, or $1,160 in taxes
12% tax on income from $11,600 to $47,150, or $4,266
22% tax on the portion of income from $44,735 up to her taxable income of $85,400, or $8,946.30
Together, she’ll pay the IRS $14,372.30 in taxes, which amounts to an effective tax rate of 16.8% on her taxable income, even though her top marginal rate is 22%.
Standard deduction
Another important change that could help lower taxes for some is the adjustment to the standard deduction, which is relied on by 86% of taxpayers. The standard deduction is used by people who don’t itemize their taxes, and it reduces the amount of income you must pay taxes on.
Here are the new 2024 standard deduction amounts, according to Bloomberg Tax’s forecast:
Single taxpayers will have a standard deduction of $14,600, up from $13,850 this year
Married couples filing jointly will see theirs rise to $29,200, up from $27,700
Heads of households will have a new standard deduction of $21,900, up from $20,800.
The IRS said Tuesday it will test a free, electronic tax-filing system early next year in 13 states, with the agency estimating that hundreds of thousands of taxpayers will participate in the limited rollout.
The tax agency earlier this year announced it was developing a free tax-filing tool as a way to save Americans money. Americans spend about $11 billion each year on tax-preparation services, accountants and others to help them fill out their returns.
Here are the first states that will roll out the IRS’ direct-filing platform, according to the agency:
Arizona
California
Massachusetts
New York
Additionally, residents in nine other states that don’t have an income tax may be able to participate in the pilot, the IRS said. These states are:
Alaska
Florida
New Hampshire
Nevada
South Dakota
Tennessee
Texas
Washington
Wyoming
The IRS program stems from last year’s Inflation Reduction Act, which directed $80 billion in funding to the agency and tasked the agency with assessing the feasibility of providing a free tax-filing system.
“The plan is to roll it out in increments that get larger and larger, consistent with how products like this are rolled out in the private sector,” IRS Commissioner Daniel Werfel said in a call with reporters on the status of the project.
“We want to make sure it is an easy to understand pilot,” he added.
The IRS plans to work with nonprofit groups, congressional offices, states and others to identify taxpayers who are eligible for the pilot program based on the types of income, tax credits and deductions they claim.
Werfel said the trial is meant to be “just another choice taxpayers have” to file their taxes. “Our work to evaluate the feasibility of direct file is just one of many examples of how we’re working to transform the IRS.”
—With reporting by the Associated Press.
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The IRS plans to invite select taxpayers across 13 states to try out the agency’s pilot electronic free file tax return system beginning in January.
The agency estimates that hundreds of thousands of taxpayers will participate in the limited rollout of the program for the 2024 filing season.
The IRS faces intense blowback from private tax preparation companies that have made billions from charging people to use their software. The introduction of a government-run option could upend the industry and fundamentally change the way taxpayers interact with IRS.
All eyes are on the agency to get it right — and avoid a roll-out reminiscent of the disastrous healthcare.gov website rollout a decade ago, when many users encountered challenges accessing and using the website.
“The plan is to roll it out in increments that get larger and larger, consistent with how products like this are rolled out in the private sector,” IRS Commissioner Daniel Werfel said on a call with reporters previewing the latest details of the program.
“We want to make sure it is an easy to understand pilot” Werfel said. He added that the data pulled from the pilot will be “imperative” in determining the usefulness of the program.
The agency plans to work with nonprofits, congressional offices, states and others to identify taxpayers who are eligible for the pilot program, based on the types of income, tax credits and deductions that they claim.
Werfel said the pilot is meant to be “just another choice taxpayers have” to file their taxes. “Our work to evaluate the feasibility of direct file is just one of many examples of how we’re working to transform the IRS.”
The IRS was tasked with looking into how to create a “direct file” system as part of the funding it received from the Inflation Reduction Act, which President Joe Biden signed into law last summer. It gave the IRS nine months and $15 million to report on how such a program would be implemented.
The IRS published a feasibility report in May laying out taxpayer interest in direct file, how the system could work, its potential cost, operational challenges and more.
One of the main criticisms of the program is that it the direct file pilot only covers individual federal tax returns and does not prepare state returns. However, IRS officials said they are working with Arizona, California, Massachusetts and New York for filing season 2024 to integrate state taxes into the pilot.
Organizations like Code for America are working with the states to create their own state filing programs to be integrated in to the direct file tool.
Gabriel Zucker, associate policy director for tax benefits at Code for America, said his firm is working with Arizona’s Department of Revenue and New York’s Department of Taxation and Finance to create a state filing tool.
The states are “really blazing the trail for this exciting project and finding a way for state filing to work within the context of this, ” Zucker said.
“This is a team that’s committed to doing government technology right,” he said.
Taxpayers in nine other states that don’t have an income tax – Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming — may also be eligible to participate in the pilot, according to the IRS.
Werfel said more details on who they choose to invite to the program will be released in January.
“In terms of that first set of taxpayers, we are still working the details — to find the right size and the best approach.”
