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Friday, April 20, 2018

Tracking Cryptocurrency Transactions for Tax Compliance

I was surprised to see today a survey result that 46% of cryptocurrency traders don't plan to report the transactions for income tax purposes (TeamBlind survey - see 4/17/18 article in The Wealth Advisor). There is, of course, no reason for not reporting income. The IRS is well aware that people have virtual currency transactions. It is also an agenda item for the Criminal Investigation Division of the IRS per their 2017 annual report.

To help track crypto transactions, there are a few software tools readily available.  A recent entry to this market is CryptoTrader.Tax.  Here is information from their recent press release (with permission of the company):

"CryptoTrader.Tax released a web-based tool developed with the intention of helping users calculate the capital gains and losses associated with their cryptocurrency investment endeavors. The tool is currently in the ‘beta’ phase of development, and can be accessed from their website at, www.CryptoTrader.Tax. CryptoTrader.Tax aims to provide its users with an easy and accurate tool to use when it comes time to do their taxes. It properly considers the user’s set time zone, trades across all exchanges, and the sale of their uploaded cryptocurrency income.

CryptoTrader.Tax uses a safe, streamlined workflow to gather the data needed to accurately calculate gains and losses. Users upload trade data via exported .csv files from supported exchanges or manually using the provided template. They can also upload several types of cryptocurrency income, such as mining, gifts, etc. The tool then generates detailed reports using the uploaded information. User’s can view an IRS 8949-esque form showing gains and losses for each sell of a coin or view a detailed breakdown of each sell with even more information. There are also views for income items and coins still being held at the end of the year. Future updates planned for the tool include: population of IRS forms, automatic trade importing from a wide variety of exchanges, and more."

You can find a few others out there as well. What is important is to check these out and use one. 

What do you think?

Monday, April 16, 2018

April 17 - Doubly A Big Tax Day!

April 17 is the due date for 2017 individual returns as well as for calendar year corporations. It's not April 15 for 2018 because that was a Sunday so even with e-filing, a weekend date moves the due date to the next weekday.  But, if that is a holiday in the District of Columbia, then it is the next day. April 16 is Emancipation Day in DC making April 17 tax day.  But, isn't everyday really tax day since we pay taxes every day?

But April 17, 2018 is also a big day because the U.S. Supreme Court will hear oral argument in South Dakota v Wayfair, et al. The issue is whether the physical presence standard for sales tax nexus, dating back to 1992 from the Court's decision in Quill, should be changed. The relevance is that per Quill, if a seller does not have physical presence in a state, it doesn't have to collect sales tax from its customers in that state. The customers must instead self-assess and pay the use tax (same amount as the sales tax). States don't like this because many consumers don't know about use tax and it is much easier to have vendors charge it and remit it.

I have more on the background and relevance (and links) at this blog for the Southwestern Federal Tax textbooks that I help write and edit - here.  I hope you'll take a look.

What do you think? Is the physical presence standard outdated or still necessary to allow e-commerce to continue to grow?

Wednesday, April 11, 2018

Sales Tax Discounts - Still Warranted?

I've got a blog post on the sales tax discounts that several states offer to vendors to help address the costs they incur in getting sales tax remitted. See the post at Two things caught my attention recently that led to me to this topic.

1. Governor Greitens of Missouri has proposed repealing that states 2% unlimited discount. Certainly, it would raise revenue, but he also states that with improve compliance technology, the discount is no longer needed.

2. I reviewed many parts of Texas' tax law in preparing for testimony I presented to the Texas Commission on Public School Finance on April 5. I first noticed that they gave a discount for paying hotel taxes on time. They also have penalties for filing and paying late. The discount along with the penalty seemed to me worth addressing. After all, who gets a bonus for doing what they are supposed to do? I have not heard of employees getting bonuses for showing up for work on time. I also noted they had both a discount and a prepayment bonus in their sales tax system. A prepayment bonus is intriguing and one that technology can certain eliminate the need for.  If states want their tax dollars earlier, such as to pay bills rather than have to borrow to pay bills, why not use technology to get the payment to the government real time rather than have the sales tax first go to the vendor and then to the government (see my 6/23/08 (!) post for this topic).

For more on discounts, what states use them, which have limits and which do not and the tax policy considerations of them, please take a look at the post.

What do you think?

Friday, April 6, 2018

Cryptocurrency tax lessons

In March 2014, the IRS issued Notice 2014-21 to let us know that virtual currency should be treated as property (rather than as a currency). That helped answer a lot of questions, but not all.

I've got a short article in CoinDesk's Crypto and Taxes 2018 Series on lessons for the "taxman" based on virtual currency guidance and needs.

Please check it out - What the Taxman Can Learn From Crypto.

What do you think? What cryptocurrency tax issues are you dealing with?

Sunday, April 1, 2018

Drug Ad Deductions and Tax Policy - S. 2478

S. 2478 (115th Congress), End Taxpayer Subsidies for Drug Ads Act, caught my attention for a few reasons. First, I'm always surprised at the number of television and multi-page magazine articles on various drugs. I don't think the drug companies are solely trying to reach doctors who could actually prescribe these drugs as there are less expensive and more direct ways to reach that audience. So, apparently, they are trying to convince viewers that they might need one of these drugs and they should ask their doctor.  It seems very puzzling to me.

S. 2478 would add IRC Section 280I, to provide that "no deduction shall be allowed for expenses relating to direct-to-consumer advertising of prescription drugs." It also defines this term.

Senator McGaskill (D-MO), sponsor of S. 2478, says that in 2015, drug companies deducted $6 billion for these ads. She is concerned that consumers suffer via increased cost of the drugs and the public's subsidy of the advertising. Per McGaskill, the drug companies "are surfing off taxpayer dollars to push prescription drugs." She also suggests that some drug companies spend more on marketing than on R&D. In addition, she notes that this bill does not prohibit the ads, it just removes the taxpayer subsidy for them via the tax deduction.  [3/1/18 press release]

Is this good tax policy? Consider the following:

Equity - Are similarly situated taxpayers treated similarly? Well, drug companies are treated similarly. But other companies can still get a deduction for their ads despite the public's subsidy for them.

Simplicity - Generally, special rules add complexity to the law because it isn't usually easy to define the exception. For example, what about an ad that is primarily informing us about an illness or disease and with less magazine space or television time, telling us about the drug?

Neutrality - Tax systems are for raising revenue for government operations, not for affecting our decisions. S. 2478 seems aimed at encouraging drug companies to decide to devote less dollars on advertising. That won't mean they spend it on R&D though. They could use it for larger dividends.

Appropriate design of an income tax - The design of an income tax is that businesses report revenues and deduct the costs of generating those revenues. Denial of a deduction goes against the design of an income tax. Expenses contrary to public policy can justify denial of a deduction, such as denial of a deduction for fines and penalties. Are drug ads contrary to public policy? Shouldn't the company and its board of directors decide what is appropriate to generate revenues and profits?  Customers (doctors and patients) can also vote by boycotting products where the company spends more than the customers think is appropriate, or voicing their concern with letters to the company or via social media.

Senator McGaskill's bill brings attention to the issue. Additional data to share with the public might also help encourage companies to move advertising dollars to R&D or lower prices.

What do you think?