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Problems Facing Taxpayers with Foreign Information Return Penalties and Recommendations for Improving the System (Part 3 of 3)

By Megan L. Brackney
Procedurally Taxing
January 8, 2020

The Gifts That Keep on Giving

Two young people moved to the U.S. as students.  They met in graduate school and married.  After graduation, they were offered jobs and were sponsored by their employers so that they could stay in the U.S.  While they were students, their parents from their home country sent them money to help pay for their expenses in the U.S.  After they became U.S. taxpayers, they received a few more gifts, totaling more than $100,000.  They told their CPA about these gifts, and even showed him copies of their bank statements so that he could see the wire transfers from their parents’ non-U.S. accounts.  The CPA told them that because these were gifts and not subject to taxation, they did not need to be reported.  The CPA did not advise them of the Form 3520 filing requirement for gifts from foreign persons that exceed $100,000 in the aggregate during the tax year.  Neither of the taxpayers had any knowledge of the Form 3520, and genuinely believed that they were filing their returns correctly.

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Megan L. Brackney participated in the panel entitled “Empire State Update: Recent Developments in New York State Taxes,” New York State Bar Association, Section of Taxation, Annual Meeting on January 28, 2020

The panelists discussed recent developments, including an update on New York’s draft corporate income tax regulations, newly issued administrative guidance, as well as some important decisions issued by the New York State Division of Tax Appeals and New York State judicial courts.

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Usman Mohammad participated in the webinar entitled "U.S. Tax Reporting of Foreign Retirement Accounts and Other Foreign Trusts" hosted by Strafford on January 23, 2020

Usman Mohammad participated in the webinar entitled "U.S. Tax Reporting of Foreign Retirement Accounts and Other Foreign Trusts" hosted by Strafford on January 23, 2020.

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New IRS Cryptocurrency Enforcement Efforts and Opportunities to Become Compliant

By Michael Sardar
The CPA Journal
January 2020 Edition

Cryptocurrency is here to stay. As of November 17, 2019, the top five cryptocurrencies by market capitalization had a combined value of approximately $196 billion, and consumers can now use cryptocurrency in place of legal tender at numerous online and brick-and-mortar retailers. In 2014, the IRS issued Notice 2014-21, which generally provided that cryptocurrency would be treated as property for purposes of income tax and was, therefore, subject to the tax principles generally applicable to transactions involving the creation, sale, and acquisition of property.

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Michael Sardar presented "The Updated IRS Voluntary Disclosure Practice" at The Long Island University Tax Controversy Forum on January 16, 2020

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Problem Solving Day at LIU's 2020 Tax Controversy Forum was held on January 16, 2020

Representatives of the IRS Local Taxpayer Advocate and the New York State Department of Taxation and Finance were available to help tax professionals with unresolved tax problems.

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Caroline D. Ciraolo was interviewed for the "People in Tax" Podcast by ABA Tax Times on January 9, 2020

In S02E12, James Creech and Caroline Ciraolo discuss nationwide coordination of tax issues by the DOJ Tax Division, working in government, mentoring, and work-life balance.

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K&F Pro Bono Spotlight: Counsel Paul T. Butler’s Work with the Exonerees’ Tax Assistance Network

For years, wrongfully incarcerated individuals who received compensation for their time behind bars were required to pay income taxes on the settlements they received from government organizations responsible for their wrongful incarceration. Congress changed the law in 2015 to exempt exonerees from paying income taxes on civil damages, restitution or other monetary awards received as compensation for their wrongful incarceration. Despite the passage of the Wrongful Conviction Tax Relief Act of 2015, many exonerated individuals remain unaware of their right to a refund of tax paid on their compensation, much less the applicable filing deadlines.

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Christopher Ferguson presented the "Update on International Voluntary Disclosure Procedures" at the NYSSCPA’s International Tax Committee’s Annual Conference on January 30, 2020

An overview of the current options in place for those US taxpayers who have not complied with return filings and/or information disclosures, recent activities/focus by the IRS on enforcement, and traps for the unwary.

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Problems Facing Taxpayers with Foreign Information Return Penalties and Recommendations for Improving the System (Part 2 of 3)

By Megan L. Brackney
Procedurally Taxing
January 7, 2020

Reasonable Cause

For all of the foreign information return penalties, reasonable cause is a defense.  See I.R.C. §§ 6038, 6038A(d)(3), 6038D(g), 6039F(c)(2), 6677(d); Treas. Reg. § 1.6038-2(k)(3)(ii).   The IRS applies the same standards for reasonable cause for failure to file income tax returns under I.R.C. § 6651 to failure to file foreign information returns, i.e., the exercise of ordinary business care and prudence.   See e.g., Chief Counsel Advisory 200748006

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