Author: Bob Yurglich Jr

The Treasury Department and IRS announced on March 21, 2020 that the federal income tax filing due date has been extended by Presidential signature of the Families First Coronavirus Response Act (H.R. 6201).

The due date of April 15, 2020 has been postponed to July 15, 2020.

The IRS has now made official the March 20 announcement by the Treasury Secretary, that postpones until July 15, 2020, the filing date for 2019 federal income tax returns and 2020 federal income tax estimates that would otherwise be due on April 15, 2020.

Any person with a Federal income tax payment or a Federal income tax return due April 15, 2020 is an “Affected Taxpayer.” The term “person” includes an individual, a trust, estate, partnership, association, company or corporation, as provided in  Code Sec. 7701(a)(1).

For an Affected Taxpayer, the due date for filing Federal income tax returns and making Federal income tax payments due April 15, 2020, is automatically postponed to July 15, 2020. Affected Taxpayers do not have to file Forms 4868 or 7004 to obtain this relief.

The relief provided is available solely with respect to Federal income tax payments (including payments of tax on self-employment income) and Federal income tax returns due on April 15, 2020, in respect of an Affected Taxpayer’s 2019 tax year, and Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an Affected Taxpayer’s 2020 tax year.

No extension is provided in the Notice for the payment or deposit of any other type of Federal tax or for the filing of any Federal information return. As a result of the postponement of the due date for filing Federal income tax returns and making Federal income tax payments from April 15, 2020, to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to file the Federal income tax returns or to pay the Federal income taxes postponed by this notice. Interest, penalties, and additions to tax with respect to such postponed Federal income tax filings and payments will begin to accrue on July 16, 2020.

No limit on amount of payment that can be postponed.  Notice 2020-17 put limits on the amount of tax payments that could be postponed from April 15 until July 15.

 

References.  For extension of tax-related deadlines for taxpayers affected by disasters, see FTC 2d/FIN ¶ S-8502; United States Tax Reporter ¶ 75,08A4.  Thomson Reuters

The Internal Revenue Service (IRS) has issued new guidance for taxpayers engaging in transactions involving cryptocurrency.  The recent IRS Revenue Ruling 2019-24 focuses on the tax treatment of a cryptocurrency hard fork.  In addition, the FAQs on Virtual Currency Transactions address several topics and how to determine the fair market value.

The guidance in the recent Revenue Ruling addresses two questions:

• Does a taxpayer have gross income under §61 of the Internal Revenue Code as a result of a hard fork of a cryptocurrency the taxpayer owns if the taxpayer does not receive units of a new cryptocurrency?
• Does a taxpayer have gross income under §61 as a result of an airdrop of a new cryptocurrency following a hard fork if the taxpayer receives units of new cryptocurrency?

A hard fork occurs when cryptocurrency on a distributed ledger undergoes a shift.  A hard fork may result in the creation of a new cryptocurrency.  Following a hard fork, transactions involving the new cryptocurrency are recorded on the new distributed ledger, and transactions involving the former cryptocurrency continue to be recorded in the prior distributed ledger.

The Revenue Ruling makes it clear that a taxpayer does not have gross income as a result of a hard fork if the taxpayer does not receive units of a new cryptocurrency. The Revenue Ruling also makes clear that a taxpayer does have gross income – characterized as ordinary income – if the taxpayer receives units of new cryptocurrency as the result of an airdrop following a hard fork.  In contrast, when a soft fork occurs (when a distributed ledger undergoes a shift that does not result in the creation of a new cryptocurrency), the soft fork will not result in income.

In the case of virtual currency, if the taxpayer doesn’t have control over the asset, meaning the currency is not immediately credited to the taxpayer’s account at the cryptocurrency exchange, a tax issue may arise. If the taxpayer later acquires the ability to transfer, sell, exchange, or otherwise dispose of the cryptocurrency, the taxpayer is treated as receiving the cryptocurrency at that time.

Finally, the FAQs make clear that taxpayers are required to maintain excellent records to establish positions taken on tax returns. This is always true, no matter whether you’re dealing with cryptocurrency, cash, or diamonds. You should maintain records documenting receipts, sales, exchanges, or other dispositions of virtual currency and the fair market value of the virtual currency.

The need for record-keeping is particularly acute since the IRS is targeting non-compliance through a variety of efforts, ranging from taxpayer education to audits to criminal investigations.  In July of this year, the IRS began mailing letters to taxpayers who may have failed to report or misreported transactions involving virtual currency. Those taxpayers may be liable for tax, penalties, and interest. In some cases, taxpayers could be subject to criminal prosecution.

Spicer Jeffries’ tax department is available if you have questions regarding cryptocurrency and related tax regulations.

Spicer Jeffries’ tax department prepares tax documents for individuals and entities across the United States, in the Cayman Islands, and around the globe.  Our client base spans numerous business segments and Spicer Jeffries understands that our client’s businesses and private financial decisions have a direct correlation to their tax liability.  Our in-depth understanding of your business allows us to offer ideas and implement the necessary planning that may result in significant tax savings.