One of the most powerful tools in the Internal Revenue Service arsenal is the John Doe summons. However, as we all learned from Spider-Man, with great power comes great responsibility.

Although it ultimately approved an IRS request to serve a summons for information on the popular cryptocurrency exchange Kraken Inc., the U.S. District Court for the Northern District of California recently reminded the IRS of this principle. Statements in the court’s recent order allowing the summons provide hope for cryptocurrency investors who are worried about their private information being included in the broad net the IRS is casting in an effort to encourage tax compliance.[1]

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Hand holding magnifier glass to searching red human icon on wooden cube block among black people icon. Human development concept.Clients come from many sources.  Most of our practices deal with clients who are having problems with the IRS.  These problems can range from a simple audit to serious criminal problems.  The first two things that come to mind are 1) who do we want for our clients and 2) how do we select clients who will follow our advice? Continue Reading Tax Practice Pointer: Selecting the Right Client

Hour glass on calendar concept for time slipping away for important appointment date, schedule and deadlineThe multiple rounds of stimulus checks as part of the COVID-19 relief legislation may have people believing that mail from the IRS is not always bad news. However, aside from isolated situations, most people still flinch at the sight of a letter from the IRS. If the IRS sends you a tax bill, the process and timing of the response is very important.  Here are some tips for how to handle an IRS notice or tax bill. Continue Reading How to Handle IRS Notices and Tax Bills

one hand pointing mean job demands or job pressure concept flat illustration Business about hard work and pressure for presentationCo-author: Tim Fandrey

A corporate client of the firm was recently sued for breach of contract and other violations. However, the company manager found himself facing a personal liability allegation for the company debts.  Why? The petition claimed that personal liability was warranted because the company failed to file a timely Texas franchise tax report.  This failure meant the company forfeited its corporate privileges from the day after the franchise tax report was due until the date when the report was filed and any associated tax liabilities were paid.  However, can this simple failure cause personal liability against the officers and directors for the debts of the corporation? Continue Reading Missing Annual Franchise Tax Reports Can Have Big Consequences

green palm trees covered with snow in unusually cold winterWhen Texas froze in February, I learned a couple of things: i) snow storms have names, and ii) people in my neighborhood aren’t great at covering plants. Those poor sago palms never had a chance.

Compared to the damages to homes and burst pipes throughout the state, clearing out the flower beds after Winter Storm Uri may be just a minor inconvenience, but there was a lot of dead foliage that needed to be replaced and removed all over Texas. Taxpayers should remember that those storm-induced landscaping expenses could qualify for a casualty loss deduction on their income tax returns. Because special tax rules apply to federally declared disaster area losses, potential deductions for property owners include the cost of removing the damaged plants, measures taken to preserve the shrubbery and any replanting costs necessary to restore the property to its approximate value before the casualty. Continue Reading Deduct the Dogwoods: Tax Deductions for Winter Storm Uri Landscaping Expenses

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!

Overview of the Appeals Process

The goal of the Appeals Office is to settle as many cases as possible within the broad guidelines of its Mission Statement:

The Appeals mission is to resolve tax controversies, without litigation, on a basis which is fair and impartial to both the Government and the taxpayer and in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service.

Even though much of the work of Appeals comes from examinations, its jurisdiction has expanded over the last few years.  In examination cases, the taxpayer receives the 30-day letter.  This letter is accompanied by the Revenue Agent Report and gives the taxpayer 30 days to request an Appeals conference.  In most cases, the taxpayer is required to file a protest describing the taxpayer’s position.  If the taxpayer does not request an Appeals conference, then the IRS will send the taxpayer a notice of deficiency.  If the taxpayer files a petition with the Tax Court, and has not had an Appeals conference, the IRS will send the case to Appeals to investigate a possible settlement.  In other types of cases, the IRS will send the taxpayer a letter advising the taxpayer of his right to an Appeals and giving the taxpayer a time limit in which to request an Appeals conference. You file the protest as stated in the letter from the IRS and within the 30-day period.

Continue Reading Going to Appeals – Preparing the Protest