Got Cryptocurrency? Here is What You Need to Know About Estate Planning,                                 Crypto Memorandums, and RUFADDA

Got Cryptocurrency? Here is What You Need to Know About Estate Planning, Crypto Memorandums, and RUFADDA

Tax Law
 By Anthony Diosdi Cryptocurrency and digital assets present complex challenges for purposes of estate planning. Many traditional estate planning methods are rendered obsolete in the realm of digital assets. This article will discuss both the challenges and importance of estate planning in the context of crypto assets. In particular, this article will talk about the three solid components of estate planning of cryptocurrency which includes custody, planning, and administration. What is Cryptocurrency?Cryptocurrency has grown in popularity and ubiquity in the past few years. Cryptocurrency is a type of digital or virtual currency that uses cryptography for security. Virtual currency is a digital representation of value that functions as:1) A medium of exchange;2) A unit of account; and3) A store of value other than a representation of the United States dollar…
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How to Survive a Cryptocurrency IRS Tax Audit

How to Survive a Cryptocurrency IRS Tax Audit

Tax Law
By Anthony Diosdi Cryptocurrency and blockchain technology have grown in popularity and ubiquity in the past few years. Bitcoin and other forms of cryptocurrency have experienced unprecedented growth in recent years, leaving many investors with unexpected large gains. The growth in the cryptocurrency has also caught the attention of the Internal Revenue Service (“IRS”). As a result, the number of IRS audits of cryptocurrency transactions has been on the increase. This article focuses on how cryptocurrency holders can survive an IRS audit. Introduction Cryptocurrency Technology and the Taxation of CryptocurrencyCryptocurrency relies on blockchain technology for record keeping. A blockchain organizes information added to ledgers known as blocks or groups of data. Each block can hold only a certain amount of information. As a result, new blocks are continuously added to…
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A Brief Overview of the Estate and Gift Tax Considerations Associated with the Transfer of                                                           Cryptocurrency

A Brief Overview of the Estate and Gift Tax Considerations Associated with the Transfer of Cryptocurrency

Tax Law
 By Anthony Diosdi Federal law imposes a transfer tax upon the privilege of transferring property by gift, bequest or inheritance. This transfer tax takes the form of a gift tax in the case of completed lifetime gifts and an estate tax in the case of property owned by the decedent at the time of death. Since the Internal Revenue Service (“IRS”) treats cryptocurrency as property for federal tax purposes, the federal estate and gift tax is imposed on any cryptocurrency transferred by gift or bequest. Gift and estate taxes are computed on the progressive unified rate schedule set forth in Section 2001 of the Internal Revenue Code with rates as high as 40 percent. As of 2022, the lifetime estate and gift tax exemption for U.S. domiciled single filers is…
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How to Survive a Cryptocurrency an IRS Tax Audit

How to Survive a Cryptocurrency an IRS Tax Audit

Tax Law
By Anthony Diosdi Cryptocurrency and blockchain technology have grown in popularity and ubiquity in the past few years. Bitcoin and other forms of cryptocurrency have experienced unprecedented growth in recent years, leaving many investors with unexpected large gains. The growth in the cryptocurrency has also caught the attention of the Internal Revenue Service (“IRS”). As a result, the number of IRS audits of cryptocurrency transactions has been on the increase. This article focuses on how cryptocurrency holders can survive an IRS. Introduction Cryptocurrency Technology and the Taxation of CryptocurrencyCryptocurrency relies on blockchain technology for record keeping. A blockchain organizes information added to ledgers known as blocks or groups of data. Each block can hold only a certain amount of information. As a result, new blocks are continuously added to the…
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Navigating the Maze of the Complex Money Transmitter Laws of Cryptocurrency

Navigating the Maze of the Complex Money Transmitter Laws of Cryptocurrency

Tax Law
By Anthony Diosdi On January 1, 2021, the Anti-Money Laundering Act of 2020 was enacted into law. Under the Anti-Money Laundering Act of 2020, the Department of Treasury has the power to declare that cryptocurrency is a monetary instrument. As a result, certain cryptocurrency transactions must be reported to the Financial Crimes Enforcement Network or FinCEN (The Financial Crimes Enforcement Network is a bureau of the Department of the Treasury) as part of a financial institution’s anti-money laundering (“AML”) program. This article will discuss cryptocurrency trader’s obligation under the Anti-Money Laundering Act of 2020. Money Transmitter Laws- What Cryptocurrency Traders Need to KnowIf you are in the business of trading cryptocurrency, it is imperative that you understand the money transmitter laws. There are federal and state money transmitting laws. We…
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Unraveling the Mystery of Reporting Foreign Retirement Plans to the IRS

Unraveling the Mystery of Reporting Foreign Retirement Plans to the IRS

Tax Law
By Anthony Diosdi In an increasingly global economy, U.S. workers are experiencing unprecedented mobility. As such, U.S. citizens or residents (hereinafter U.S. persons) living in a foreign country, even for a limited time, often participate in a pension or retirement plan; participation might even be mandatory. In most cases, pretax money is contributed into retirement accounts where it accumulates tax-free until retirement. U.S. beneficiaries of foreign pension plans will likely need to report these plans on one or more information reporting forms with their U.S. tax returns. Foreign retirement accounts may also trigger unusual income tax consequences on the beneficiary of such a plan. This article will discuss the special U.S. reporting and tax consequences of foreign retirement plans. FBAR - Duty to Report Foreign Financial AccountsIn 1970, Congress enacted…
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How to Utilize Section 6751 to Successfully Challenge IRS 5472 Penalties

How to Utilize Section 6751 to Successfully Challenge IRS 5472 Penalties

Tax Law
By Anthony Diosdi Under Internal Revenue Code 6038A requires any domestic corporation (including single member LLCs treated as disregarded entities) that is 25 percent foreign-owned to annually file a Form 5472 and a Form 1120 with the Internal Revenue Service (“IRS”). The penalty for failure to file Form 5472 is $25,000. If such failure continues for more than 90 days after notification by the Internal Revenue Service (“IRS”), there is an additional penalty of $25,000 for each 30-day period or fraction. The problem is a significant number of individuals that operate U.S. companies which are 25-percent owned do not know they have a Form 5472 of the reporting obligation. Many of these same individuals believed they could correct the noncompliance by late filing a Form 5472 and Form 1120 with…
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How to Utilize Section 6751 to Successfully Challenge IRS 3520 Penalties

How to Utilize Section 6751 to Successfully Challenge IRS 3520 Penalties

Tax Law
By Anthony Diosdi Under Internal Revenue Code Section 6677(a), if any United States Person beneficiary receives (directly or indirectly) a distribution from a foreign trust, that person is required to disclose the aggregate distribution received on an Internal Revenue Service (“IRS”) Form 3520. A foreign gift, bequest, or inheritance that exceeds $100,000 must also be disclosed on a Form 3520. The IRS may assess an annual penalty equal to 35 percent of the gross value of the foreign trust not disclosed. In the cases where foreign gifts are not timely disclosed on a Form 3520, the IRS may assess a penalty under Internal Revenue Code Section 6039F equal to 25 percent of the value of a foreign gift. The problem is a significant number of individuals who had a 3520…
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Be Careful with Loans to Controlled Foreign Corporations – a Loan to a Foreign Corporation Can Trigger a Form 5471 Filing Requirement

Be Careful with Loans to Controlled Foreign Corporations – a Loan to a Foreign Corporation Can Trigger a Form 5471 Filing Requirement

Tax Law
By Anthony Diosdi Once a foreign corporation is established, it must decide how to raise funds. Like domestic corporations, foreign corporations often raise capital through issuing stocks or through borrowing. The investor who acquires stock holds an equity interest in the corporation while the lender holds a debt or creditor interest in the foreign corporation. In either case, the investor or lender expects a return on the investment. Shareholders may receive that return from dividends paid on stock and from profit upon later sale of the share. On the other hand, lenders receive their return on their investment in the form of interest payments. Many U.S. investors do not wish to hold an equity investment in a foreign corporation because of the harsh GILTI or subpart F income tax consequences…
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Potential IRS Penalties for Tax Non-Payment

Potential IRS Penalties for Tax Non-Payment

Tax Law
Federal law and IRS regulations state that if you don’t file your tax returns or pay your taxes in a timely fashion, the IRS will charge you pretty significant penalties. A penalty will apply for each month of 0.5 percent for the first month and each additional month or partial month that the tax remains owing, subject to an aggregate maximum of 25 percent of the taxes owing. The IRS applies the penalty to the net amount due, so any amount paid will reduce the overall debt.  If you miss certain deadlines in making your payments, the IRS can increase the monthly penalty to 1 percent of the total owing.  The penalties in the case of a fraudulent failure to file triple the penalty payments and aggregate maximum. You can…
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