Photo of Joshua Smeltzer

Joshua Smeltzer is a former litigator for the U.S. Department of Justice Tax Division. He uses this first-hand knowledge to advise and defend individuals and businesses in a variety of challenging tax controversies before the IRS and federal court.

Businessman throwing red arrow dart to virtual target dart board. Setup objectives and target for business investment concept.The IRS has several tools in its arsenal to encourage compliance and audit and enforce those it believes are failing to comply.  One of the most powerful tools is the John Doe summons. A regular IRS summons seeks information on a specific taxpayer.  However, a John Doe summons, as the name implies, involves a group of taxpayers that the IRS cannot identify by name – yet.  Judicial approval is required, but the approval is ex parte (i.e. opposing parties are not notified or can respond before the court rules).  The IRS has used this tool to find tax shelter participants by summonsing the promoters, and most famously foreign banks like UBS, for foreign bank account holders.  The next target, cryptocurrency investors.

The IRS already successfully received thousands of names of account holders from the Coinbase cryptocurrency exchange. Many taxpayers, who received letters from Coinbase about the disclosure, came forward and disclosed assets in their accounts.

The IRS has now secured permission to issue a John Doe summons for cryptocurrency records on payments using a technology company called Circle and another popular cryptocurrency exchange – Kraken. This is all part of what the IRS has called, in public speeches, a “treasure hunt” for unreported cryptocurrency. If you have unreported cryptocurrency transactions, here’s what you should know.
Continue Reading The IRS is Hunting for Cryptocurrency Investors with John Doe Summonses

USA patriotic American flag muscular arm flex adorned in red, white and blue stars and stripes, huge bicep, very cool symbol of fitness, pride, strength and motivation. Isolated vector illustration for easy editing.The battle outside ragin’

Will soon shake your windows

And rattle your walls

For the times they are a-changin’

-Bob Dylan

A change in presidential administrations brings with it the uncertainty of what the political, legal and tax landscape will look like in the future. Statements from the Commissioner of the Internal Revenue Service and the President of the United States are starting to provide clarity of what things will look like going forward.  Here’s what we know and what you, as a taxpayer, should be thinking about as you adjust your financial planning.
Continue Reading IRS Commissioner and President Biden Draw Battle Lines

Video archives concept.What do professional athletes, punk artwork and digital kittens have in common?  They are all part of the expansion of valuable collectible assets using cryptocurrency and blockchain technology.  You can collect digital items for your favorite baseball and basketball players and then sell them in online exchanges.  You can also collect and “breed” your own designer CryptoKitties or purchase a digitally created punk portrait using blockchain technology. Investing in valuable collectibles can be both fun and lucrative. There are now thousands of buyers of these new digital collectibles and transactions involve millions of dollars worth of cryptocurrency.   The current leader in digital collectibles is NBA Top Shots with an active marketplace where the highest asking prices are hundreds of thousands of dollars. What are the tax consequences of these new assets?  Here are some concepts to consider if you have collectible assets, digital or otherwise.
Continue Reading Taxation of Digital Collectibles: Sports, CryptoPunks and CryptoKitties, Oh My!

Old axe standing against a piled pieces of firewood in wood“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”

― Abraham Lincoln

The Bipartisan Budget Act (BBA) was signed into law by President Barack Obama in 2015 and fundamentally changed the way partnerships are audited. Under the BBA, the IRS generally assesses and collects any understatement of tax (called an imputed underpayment) at the partnership level. The new rules were applicable to all entities starting on January 1, 2018, unless they are eligible to elect out. A significant uptick in BBA audits hasn’t, for the most part, occurred because of other demands on the IRS. However, a ramp up in BBA audits in 2021 is expected given IRS plans to increase audits on small businesses, usually operating as partnerships, by 50 percent.  Preparation prior to any audit is a good idea, but it is imperative for partnerships navigating new audit rules under BBA.  Here are some ways to sharpen your axe before the audit notice arrives.
Continue Reading Is Your Partnership IRS Audit Ready?

Magnifying glass in front of an open newspaper with paper houses. Concept of rent, search, purchase real estate.Even if you are not a tax professional, many people have heard of a 1031 exchange or like-kind exchange. This tax deferral provision has been a permanent part of the Internal Revenue Code for a long time. Usually, if a taxpayer swaps an asset for another asset it is usually a taxable sale.  However, if the exchange comes within Section 1031, then it can generate no tax or limited tax due.  Essentially, a taxpayer can change their investment without, according to the IRS, cashing out or recognizing capital gain.
Continue Reading IRS Issues New Rules for Gain Deferral in Business Exchanges of Real Property

Texas statelineShortly after I moved to Texas from Washington, D.C., a federal judge called me about a potential conflict with a party in a lawsuit I just filed. Once the conflict was resolved, and recognizing I didn’t have a Texas accent, he asked if I was new to Texas and then welcomed me.  This was years ago and the numbers of those moving to Texas has only increased.  California, in particular, seems to generate many newly minted Texans.  The exodus from California is real and it involves high-profile moves like Elon Musk and hundreds of other Californians. The reasons for the exodus are usually cost of living and no state income taxes. However, the California Franchise Tax Board (FTB) is notoriously aggressive and may not let you go quietly.  If you are new to Texas here is what you need to consider when making the breakup with California official.
Continue Reading Leaving California for Texas May Cause State Income Tax Headaches

Cryptocurrency SavingsCryptocurrency is more accessible than ever before. Banks are continuing to both implement procedures for and, in some cases, develop their own cryptocurrencies. Paypal allows users in the U.S. to buy, sell and hold select cryptocurrencies directly through PayPal and it will enable cryptocurrency as a funding source for purchases in 2021. Volatility in the price of cryptocurrencies continues, and is likely to continue, but it is becoming a more recognized investment and method of payment. As more taxpayers integrate cryptocurrency into their finances, they should consider tax implications. Here are some things to remember about current or future cryptocurrency transactions and investment.
Continue Reading Taxpayer Guidelines for Cryptocurrency in 2021