Business lawyer and CPA, Austin Carlson, deals with tax planning and controversy daily. We asked Austin to weigh in on IRS hot topics and to share some insights on timely tax issues that many of our international clients’ face.

Q: Based on the recent DOJ case against the Florida CPA who prepared a false “Streamlined Submission,” what is your advice for clients who need a “non-willful” determination and/or statement for a pending Streamlined Submission?

Taxpayers who need to correct their past tax issues may qualify to use the Streamlined Filing Compliance Procedures, which allow for reduced penalties. To use this program, however, a taxpayer’s noncompliance must be “non-willful.”

This case highlights the need to use an attorney as part of a team to prepare and submit submissions under the Streamlined Procedures. A determination of non-willful conduct is a legal determination that looks to the facts and circumstances surrounding a taxpayer’s conduct. It is vital to fully explore the facts and make sure that the taxpayer meets this standard. If the taxpayer does not meet the non-willful standard but still goes through the Streamlined Procedures, there can be significant consequences to both the tax preparer and the taxpayer.

For taxpayers who do not meet the non-willful standard, there are options other than the Streamlined Procedures. Although the OVDP has closed, the IRS has released a guidance memorandum on how to come into compliance for taxpayers who do not qualify for the Streamlined Procedures.

Q: What is your advice for individual US taxpayers living overseas who have a controlled foreign corporation and did not know they had to report the Transition Tax on their 2017 Individual Income Tax Returns?

We regularly come across taxpayers who did not know about the significant international tax changes that were implemented by The Tax Cuts and Jobs Act of 2017. In addition to the Transition Tax reportable on 2017 tax returns, their 2018 and future tax years have several new tax planning traps to consider, such as Global Intangible Low-Taxed Income (GILTI). Taxpayers should connect with a qualified CPA as soon as possible to amend the 2017 tax return and work on tax planning for 2018 and going forward.

Q: What is your advice for individuals who recently received a notice or letter from the IRS for failure to report income from cryptocurrency assets?

In late August, the Internal Revenue Service sent another round of letters to crypto traders called CP2000. These notices were sent to traders of some crypto exchanges due to inconsistencies found in their tax reports. Using the information provided by third-party systems—such as crypto exchanges and payment systems—the IRS has been able to determine the amounts traders owe and included the amounts in dollars in the notices. Individuals who have received these notices are required to pay within 30 days, starting on the delivery date indicated in the letter.

Cryptocurrency is a hot area for the IRS right now, and there is still uncertainty about both income tax treatment and information reporting of these assets. Like with any IRS notice, the worst thing you can do is not respond. Take all your information regarding the cryptocurrency and the notices from the IRS and work with a tax professional to come up with a strategy to respond. Many times, the information in the CP2000 overstates your tax liability. If you do not respond, the IRS will assess the tax and start seeking alternatives, including liens and seizures, to collect the assessment.

About the Author

Austin Carlson, CPA, is an associate with Gray Reed Attorneys & Counselors. His practice is focused on corporate transactions, tax planning and controversy, and trust and estate planning. He helps domestic and international companies, small businesses, and individuals structure corporations, LLCs, partnerships and nonprofit entities, achieve their planning goals and successfully resolve tax controversies with the IRS and state taxing authorities.

Austin also has substantial experience with the Offshore Voluntary Disclosure Program, including the Streamlined Filing Compliance Procedures and assisting clients with all types of foreign account disclosure issues. He frequently partners with the international tax professionals in our firm, preparing non-willful statements for streamlined filing, reasonable cause statements for alternative amnesty programs, and penalty issues that are considered tax controversy.