The IRS is a fragmented bureaucracy enforcing confusing tax laws. Most taxpayers lack knowledge and experience required to resolve IRS issues. Kugelman Law leverages its experience and understanding to navigate the administrative process. Kugelman Law has a successful track record of helping clients throughout California, including clients in San Francisco and Irvine.
Our team of IRS and U. Tax Court attorneys can guide a taxpayer through an audit, appeals representation, tax litigation, or any other kind of tax help. We understand how difficult and stressful it can be to deal with tax problems. That is why it is our goal to provide you with premium quality tax counseling and assistance to simplify and streamline the entire process. Kugelman Law can help with a range of tax issues from tax return preparation to IRS collections defense to foreign compliance.
Most so-called tax resolution firms and tax lawyers will exploit fear of IRS enforcement actions to try and extract large fees. Some will be able to obtain self-help, while for others it might be wise to hire a professional tax attorney. First, the vast majority of IRS enforcement is civil, not criminal. The IRS reserves criminal prosecution for the most egregious violations. While criminal liability should be evaluated, it is improbable for most taxpayers.
Rather the IRS and other tax agencies have two primary collection mechanisms. The first is a levy. A levy is when the IRS takes assets to pay a tax balance. This may come in the form of wage garnishment or a bank levy. In rare cases, the IRS will administratively or judicially seize property like valuable jewelry or real estate. The second enforcement mechanism is a lien. A tax lien is the government's legal claim against your property.
It is typically recorded in the county you reside and attaches to the title of any real estate you own. A lien will come into play if you attempt to sell or refinance the property. Generally most taxpayers can take action to prevent levies. Please contact us today if you would like us to advocate on your behalf. Cryptocurrency and blockchain technology presents a unique challenge for U.
Cryptocurrency records are often incomplete and most trade on a variety of platforms that have their own unique documentation standards. Complicating matters, the IRS guidance is limited. This makes accounting for and reporting cryptocurrency gains and losses extremely difficult.
Now imagine the IRS is auditing your tax return to verify its accuracy. It is a recipe for disaster. Our team can guide you through this. We then assess the issues presented by the audit. This begins with identifying its scope and analyzing the information reported on your tax return. We then help compile and organize the supporting documentation.
For missing records or accounting, our CPAs use proprietary, cutting edge software to recreate your activity. The improved documentation helps resolve current questions, prepare for future ones, and has helped make Kugelman Law a standout firm in cryptocurrency cases.
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Coinbase, a digital asset exchange company headquartered in San Francisco, operates exchanges of bitcoin, Ethereum, and other digital assets with currencies in 32 countries and bitcoin transactions and storage in countries worldwide. The summonses asked Coinbase to identify all United States customers who transferred convertible virtual currency from to At that point, Coinbase dealt only with bitcoin.
Coinbase is not the only medium for trading cryptocurrencies. Largely, cryptocurrency has gone unregulated, so these warrants are issued to level the playing field for the government. The author believes that Coinbase is just the first of many IRS targets.
I was the tax consultant for the largest fund of cryptocurrency a few years ago before it disbanded. The way this fund made money was by converting U. Then the bitcoin was converted to another cryptocurrency, and then another, and so it went. All of these transactions were tracked and made public using blockchain, which is a digital ledger in which transactions made in bitcoin or other cryptocurrencies are recorded chronologically and publicly.
Each conversion is a taxable transaction. It is easiest to think of cryptocurrency as a commodity, such as gold and platinum. Let's say an investor buys an ounce of gold and then converts the gold to platinum. That would be a taxable event. Gold has a dollar value and platinum has a dollar value, with the difference being taxable.
Just like any currency or commodity, the cost of one unit of any cryptocurrency changes by the second. That number of bitcoin can either be converted into other cryptocurrencies or be used to pay for goods and services.
In , only a few large retailers would take bitcoin for payment. That number has since exploded to several thousand. Miners, traders, or investors access their virtual currencies through a wallet, which is the bitcoin equivalent of a bank account. The wallet enables virtual currency owners to receive the virtual currency, provides storage for them, and enables the owner to send them to other wallets. There are two main types of wallet.
The first is a software wallet, which virtual currency owners install on their computer or electronic device. This type of wallet gives the owner total control, yet it can be challenging to download and maintain. The second type, the web wallet or hosted wallet , is hosted by a third party, and while it is easier to use, a certain trust must be placed in the provider to ensure the coins are protected.
After the wallet's owner chooses a password, by the way, there is no way to change it, which makes it imperative that the owner write down the password and secure it in a safe location. A wallet's owner has no way to access the wallet without the string of letters and numbers and the password.
In response to concern over virtual currencies and their perceived potential for evading taxes, the IRS issued Notice in March This notice gave guidance on everything from paying employees with cryptocurrency to how the various trades between different currencies are treated. The recommendations from this report included developing a coordinated virtual currency strategy, providing updated guidance for requirements and tax treatments, and revising third-party reporting requirements and documents.
Another problem that the IRS has had with virtual currencies is that the transactions by miners, traders, or other investors are not currently reported on any tax forms. From the point of view of an individual, selling or exchanging cryptocurrencies triggers capital gains taxation. If they are held as stock, any gain is deemed as income from business operations. Mining is taxed either as employment income, or income from business operations.
The UK interprets cryptocurrencies from the perspective of both income and capital gains. For instance, employees paid in virtual currency not only need to pay the personal income tax, but also the social security associated therein. If used for trading, they are treated as capital gains. Even though the country is still on the way to embracing cryptocurrencies, it has defined that cryptocurrencies can be taxed in both ways, as capital gains and income.
Once again a tribute to Eastern Europe. The complexity of the national progressive systems of taxation, coupled with the time-consuming procedure of recording and calculating all gains and losses across the history of transactions, can be a real nightmare, unless automated. However, as soon as the sequence of actions and tax calculating formulas are set in place, everything can be automated with the application of Artificial Intelligence, and thus become a 1-click procedure.
One of the examples of the early adoption of this system is the Statement widget of ORS CryptoHound , which records the historic values of the held crypto assets, and generates bank-like statements, which can be referred to for filling in tax returns. Some further inter-application integrations could even fully automate the calculations and filing of all needed reporting info by the due date.
Cryptocurrency taxation is far from being universally agreed upon, however this is similar to normal taxation, which varies greatly from country to country. While approaches differ and in most cases refer to already existing taxation systems, time will tell which approach proves to be the most efficient. It is only after this that a global role model will be set. As of now, global leaders in crypto regulation e. USA, Canada, Australia have a rather complicated system of tax treatment, while some Eastern Europe states Romania, Hungary, Lithuania, Belarus are definite winners depending on who you are in terms of simplicity and attractive tax rates.
At least for the time being…. Disclaimer: the information above was gathered from open sources at the time of writing and does not constitute any form of professional or other advice. If you find any inaccuracy or want to share an update, please post a comment or reach us via e-mail at [email protected]. Any feedback is appreciated. Signup or Login to Join the Discussion. Enter the Decentralized Internet Writing Contest! Interview Decentralized Interview.
There is still no unified approach to defining what cryptocurrencies are and how countries can develop a common policy for taxing them. The differing taxation approaches can be divided into three main categories: income tax, capital gains, income tax and mixed tax approaches.
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