TAXLITIGATOR – Tax Controversy (Civil & Criminal) Report

We are pleased to announce that Sandra R. Brown will be receiving the prestigious Richard Carpenter Excellence in Tax Award from the USD School of Law – RJS LAW Tax Controversy Institute. The Award is being presented at the 9th Annual USD School of Law – RJS LAW Tax Institute taking place July 19th in San Diego, California.

This award is given to an individual who exemplifies honesty, integrity, ethics, and compassion throughout their careers in the field of tax controversy and has demonstrated outstanding dedication and expertise while representing taxpayers before the federal and state governments.

Sandra is a principal of the law firm Hochman Salkin Toscher Perez P.C., where she specializes in criminal tax investigations, grand jury matters, litigation and appeals, as well as representing and advising taxpayers involved in complex and sophisticated civil tax controversies, including sensitive-issue audits and administrative appeals, as well as civil litigation in federal, state and tax court.

Prior to entering private practice, Ms. Brown served as the Acting United States Attorney, First Assistant United States Attorney, and Chief of the Tax Division in the Office of the U.S. Attorney, Central District of California. During her 27 years as a trial lawyer, she personally handled over 2,000 tax cases on behalf of the United States before the United States District Court, the Ninth Circuit Court of Appeals, the United States Bankruptcy Court, the United States Bankruptcy Appellate Panel, and the California Superior Court. Included in those cases are two U.S. Supreme Court decisions and a multitude of published 9th Circuit decisions.

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We are pleased to announce that Michel R. Stein and Philipp Behrendt will be speaking at the upcoming CSTC San Francisco Chapter webinar on “Cryptocurrency Tax Compliance: Tax Filing Requirements, Managing IRS Examinations & Tax Treatment of Digital Currency,” on Wednesday, June 5, 2024 from 6:00 p.m. – 8:00 p.m. (PST).

Cryptocurrency has exploded over the last few years causing significant concerns regarding the taxation of these transactions for sellers, purchasers, and investors. Tax counsel and accountants representing clients holding and selling cryptocurrency, including those engaging in mining, exchanges, staking and lending, must understand applicable tax rules and reporting requirements for these transactions. During the webinar we will discuss: The various types of cryptocurrency and exchanges, valuation issues, tax reporting requirements for cryptocurrency exchanges, disclosure requirements for cryptocurrency ownership, tax treatment of hard forks, staking and lending transactions and the likelihood of criminal investigations and prosecutions for failing to properly report cryptocurrency transactions, and the use of the IRS Voluntary Disclosure policy to get into compliance including “qualified amended returns” to avoid penalties.

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We are pleased to announce that Steven Toscher, Michel R. Stein and Thomas M. Giordano-Lascari (Greenberg Glusker) will be speaking at the upcoming Strafford webinar “IRS Audits of Expatriates: Section 965 Transition Tax, Exit Tax, Non-Filers, and the Examination Process“ Tuesday, May 28, 2024, 10:00 a.m. – 11:30 a.m. (PST).

The IRS has and continues to audit a higher proportion of ex-pat tax returns. The rules for these nonresidents are often the reverse of those for residents. The filing status Married Filing Jointly can require a special election. Self-employed taxpayers usually are not entitled to deduct expenses. A simple presence in the U.S. for 183 days can trigger capital gains. Remarkably, two-thirds of expats file these complicated returns on paper.

The IRS continues its compliance campaign focusing on Section 965 transition tax payments. The Service required these payments by U.S. shareholders of certain foreign corporations on unrepatriated (untaxed) earnings as part of the 2017 Tax Act. The IRS stated that these audits could be expanded to other issues, particularly those relative to the 2017 Tax Act.

Tax professionals and advisers working with individuals who have relocated abroad must understand the issues triggering these IRS audits, prepare clients for these audits, and know how to handle these demanding examinations.

Listen as our panel of foreign tax experts discusses reporting requirements of expatriates’ issues for non-filers, guides tax practitioners through the examination process, and explains best practices to withstand the ongoing scrutiny of these taxpayers’ returns.

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Sandra R. Brown was quoted in a May 6, 2024 Tax Notes Article on What the IRS’s 2024 ‘Dirty Dozen’ List Tells Us About Tax Administration, authored by Kathy A. Enstrom, Moore Tax Law Group, LLC. 

The IRS annually releases its “Dirty Dozen” list to warn taxpayers and tax practitioner alike of various tax scams as well abusive transactions that the Service will be focused on in the coming year. While many topics on the annual list are “repeat offenders”, there is always something new to be aware of. One might say that, akin to the anticipation of learning who will be drafted in the first round of the annual draft for your favorite professional sport, tax professionals as well as non-tax professionals look forward each year to the IRS’s release of its “Dirty Dozen” list. As noted by Sandra ….

“. . .The value of what can fairly be described as an IRS ‘tradition’ in releasing the ‘Dirty Dozen’ couldn’t be any clearer than a simple internet search,”

“You’ll get almost a million hits in less than .34 seconds showing that beyond the expected accounting firms and tax professionals, there are banks, credit unions, insurance advisers, universities, software companies, state taxing authorities, news publications, and the list goes on, of those posting the IRS’s Dirty Dozen list.”

For an in-depth review of what the Dirty Dozen list tells us about tax administration, what types of scams the IRS is advising taxpayers to be on the alert and diligent in protecting themselves and their personal financial information as well as tax avoidance strategies that the IRS has been challenging and will continue to scrutinize, please check out Kathy’s article, visit https://www.irs.gov/newsroom/dirty-dozen, or contact an experience tax professional.

In a recent interview with CNBC at the Chainalysis Links event in New York, Guy Ficco, a Chief of the IRS Criminal Investigation Division (IRS-CI), issued a stark warning: the IRS is gearing up to tackle a significant increase in cases of tax fraud and evasion related to cryptocurrency transactions.

Ficco’s words carry weight, especially in the ever-evolving landscape of cryptocurrency tax regulation and enforcement. He emphasized that the IRS has observed a noticeable surge in what he termed “pure crypto tax crimes” (so-called Title 26 cases) and is no longer only part of  non-tax scams such as fraud and embezzling. Ficco anticipates this trend to continue in the foreseeable future. These Title 26 crimes encompass a range of activities, from failing to report income generated from crypto sales to deliberately concealing the true basis of cryptocurrency holdings.

“This could be purely not reporting income generated from crypto sales, it could be hiding the true basis of crypto, or shielding the true basis in crypto. So, that is an area where we’ve seen an uptick and I anticipate we’re going to see more of and there is going to be more charged title 26 crypto cases here, in this year and going forward.” Guy Ficco (Chief of IRS CI)

The implications are clear: the IRS is not only focused on the growing prevalence of crypto-related tax offenses but is also taking proactive measures to address them head-on. Ficco also underlines that the agency has forged public private partnerships with leading blockchain analysis firms like Chainalysis, along with other law enforcement agencies. These collaborations aim to enhance the IRS’s capabilities in tracing and identifying illicit financial activities within the cryptocurrency ecosystem.

Ficco highlighted the expertise of IRS special agents in tracking financial transactions while at the same time acknowledging the unique challenges posed by the decentralized and pseudonymous nature of cryptocurrencies. To bridge this gap, the IRS is leveraging the specialized tools and knowledge offered by firms like Chainalysis, which are instrumental in the IRS’s unraveling complex crypto transactions and uncovering illicit activities.

What does this mean for crypto investors and enthusiasts? Firstly, it underscores the importance of complying with tax obligations related to cryptocurrency transactions. The IRS is ramping up its efforts to detect and prosecute individuals who flout tax laws, whether through ignorance or deliberate evasion. Ignoring these obligations could lead to severe penalties, including fines, penalties, and even criminal charges.

Moreover, the IRS’s heightened scrutiny serves as a reminder of the evolving regulatory landscape surrounding cryptocurrencies. As governments around the world grapple with how to regulate this burgeoning asset class, individuals and businesses operating in the crypto space must stay informed and adapt to changing compliance requirements. This includes maintaining accurate records of crypto transactions, reporting income from crypto-related activities, and seeking professional guidance when necessary.

For those who may have previously neglected their tax obligations related to cryptocurrency, Ficco’s statements serve as an important wake-up call. The IRS is not only actively pursuing current violations but also casting a retrospective eye on past non-compliance. Individuals who have failed to report crypto income or provided inaccurate information on their tax returns may find themselves facing increased scrutiny and potential legal consequences.

In conclusion, Ficco’s remarks paint a clear picture: the IRS is bracing for a surge in crypto tax crimes and is prepared to take decisive action to enforce tax compliance within the cryptocurrency ecosystem. As the regulatory landscape continues to evolve, it’s imperative for crypto investors and enthusiasts to stay informed, comply with tax obligations, and seek professional guidance to navigate this complex terrain. Failure to do so could result in serious repercussions, both financial and legal.

This is a fierce warning to taxpayer that the time of leniency is over and erroneous tax reporting will be criminally charged. We recently blogged on the first purely tax related crypto charges in the case against a Texas man.

Our firm specializes in advising clients on proactive measures to mitigate criminal exposure while also providing expert representation in criminal cases.

Employing many of the same tools as the IRS, such as Chainalysis, blockchain explorer and others, to assist in not only staying abreast but ahead of the information available to the IRS, so that we can effectively advocate for our clients’ interests and address any challenges that may arise in the process.

We are pleased to announce that Steven Toscher, Michel R. Stein and Cory Stigile will be speaking at the upcoming Strafford webinar “IRS High-Wealth Examinations: IRS Wealth Squad, Targeted Issues, Preparation, IDRs, Appeals, and Litigation” Wednesday, May 15, 2024, 10:00 a.m. – 11:50 a.m. (PST).

The IRS Large Business and International Division is auditing high net worth individuals and their related entities, including partnerships, S corporations, trusts, and private foundations. The Wealth Squad, a highly-trained division of the IRS, is conducting these audits.

These examinations will target recently enacted and complex areas of taxation, including:

• Section 199A Qualified Business Income Deduction
• Section 163(j) Business Interest Deduction Limitation
• Section 965 Repatriation of Previously Untaxed Foreign Earnings
• Section 172 Net Operating Loss Deduction Refund Claims
• Required foreign reporting of trusts, bank accounts, assets, etc.

Although targeting specific areas, these are comprehensive audits covering most aspects of a taxpayer’s tax return. Tax professionals working with high-wealth clients need to prepare for potential examinations and understand how to represent these taxpayers.

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We are pleased to announce that on May 17, 2024, Sandra R. Brown, along with Gwen Moore (Moore Tax Law Group), Jennifer Breen (Morgan Lewis), and Pamela Grewal (Andersen Tax), will join a webinar with the Loretta Collins Argrett fellows and leadership to discuss navigating their career transitions and what it means to be a tax lawyer. In 1993, Loretta Collins Argrett became the first African American in Justice Department history to hold a position that required Senate confirmation and was confirmed by the US Senate as the Assistant Attorney General of the US Justice Department’s Tax Division. The Loretta Collins Argrett Fellowship Committee of the ABA Tax Section seeks to create a more accessible and equitable pipeline into the Section of Taxation and the tax bar. To learn more about the Honorable Loretta Collins Argrett or the Argrett Fellowship, please visit here.

My co-chair, Kathy Keneally and I are very pleased to ask you to save the date for the ABA 2024 Criminal Tax Fraud/Tax Controversy conference, to be held this year at the Wynn Encore on December 12-14, 2024. 

The program is still in the planning stage, but we can assure you that we continue to build on the success of last year’s program and we anticipate having the top tax controversy practitioners in the country presenting on the most important topics. 

We are pleased to announce that Steven Toscher, Michel R. Stein and Evan Davis will be speaking at the upcoming Strafford webinar “Cryptocurrency Tax Compliance: Tax Filing Requirements, Managing IRS Examinations” Thursday, May 9, 2024, 10:00 a.m. – 11:30 a.m. (PST).

The IRS continues to press its concern over “massive under-reporting” of income from cryptocurrency transactions, including recently charging the first “pure tax” cryptocurrency criminal case in February 2024. This is the first of many criminal cases against cryptocurrency holders promised by IRS Criminal Investigations. Tax advisers for clients with cryptocurrency holdings must understand the reporting requirements for exchange transactions and the IRS scrutiny cryptocurrency investors are likely to face in the future.

Cryptocurrency is a digital currency using encryption techniques–rather than a central bank–to generate, exchange, and transfer currency units. Uniquely, no bank or government authority verifies the transfer of funds.

The value of Bitcoin has prompted a massive compliance initiative aimed at taxpayers holding and trading cryptocurrency. The IRS treats all virtual currency as property rather than currency for U.S. tax purposes. The IRS requires reporting any transaction involving cryptocurrency as a sale or exchange of property, with the taxpayer bearing responsibility for calculating and maintaining basis in their virtual currency holdings.

Listen as our expert panel discusses recent IRS enforcement actions focused on cryptocurrency and provides practical guidance on the U.S. tax reporting and payment duties arising from cryptocurrency transactions.

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Steven Toscher, the managing principal for Hochman Salkin Toscher Perez P.C., has received the Jules Ritholz Memorial Merit Award from The American Bar Association’s (ABA) Tax Section Civil and Criminal Tax Penalties Committee. The award was presented during ABA’s 2024 May Tax Meeting, held in Washington, DC. on May 3, 2024. 

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Steven Toscher specializes in civil and criminal tax controversy and litigation. He is a Certified Tax Specialist in Taxation, the State Bar of California Board of Legal Specialization, a Fellow of the American College of Tax Counsel and has received an “AV” rating from Martindale Hubbell. Mr. Toscher was the 2018 recipient of the Joanne M. Garvey Award. The award is given annually to recognize lifetime achievement and outstanding contributions to the field of tax law by a senior member of the California tax bar.