Stay informed on the latest tax news and developments, including legislation and rule changes, for effective tax planning and compliance.
Look out for high-income filers' methods; monetized installment sales and charitable remainder annuities involve danger
The IRS cautions taxpayers to avoid questionable tax practitioners promoting schemes targeting wealthy taxpayers, as part of the annual "Dirty Dozen" campaign. Abusive arrangements may involve Charitable Remainder Annuity Trusts (CRAT) and monetized installment sales. Promoters may misapply rules, attracting clients and leaving filers vulnerable. Taxpayers should seek reputable tax advice and avoid aggressive advertising. The Dirty Dozen list alerts taxpayers and tax professionals about prevalent scams and schemes. Taxpayers are legally responsible for their tax returns, and the IRS may assert accuracy-related penalties, civil fraud penalties, or both, for underpayment of tax related to abusive transactions. The IRS encourages reporting of promoters of abusive tax schemes and tax return preparers filing improper returns.
The IRS intends to tax some NFTs as collectibles, with the wealthy subject to up to a 28% profit tax
The IRS plans to tax certain non-fungible tokens (NFTs) as collectibles, with a top tax rate of 28%, higher than the 20% rate applied to stocks, real estate, and cryptocurrencies. The agency intends to issue guidance on NFT treatment as collectibles and has requested public comments by June 19. NFTs are unique digital assets, including digital art, tweets, and GIFs, sometimes linked to non-digital assets or rights. The IRS will use a "look-through analysis" to classify NFTs as collectibles based on the associated right or asset. Until further guidance is issued, this approach will be used for tax filings. Collectibles are taxed at a maximum 28% rate, differing from the three-tier system for stocks. The IRS notice provides clarity but leaves some gray areas around the definition of collectibles. The agency is seeking input on questions related to NFT taxation, including whether digital files constitute "works of art."
If this W-2 scam is attempted, taxpayers risk penalties
A scam circulating on social media encourages people to falsify Form W-2, Wage and Tax Statement, to claim false credits and receive large refunds. There are two variations of this scheme: one misuses Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, claiming credits based on employee income; the other involves fabricating household employees and using Schedule H (Form 1040) to claim refunds based on false wages. The IRS, Security Summit partners, and payroll companies are actively monitoring for these scams. Perpetrators may face penalties, including a $5,000 frivolous return penalty and criminal prosecution. The IRS advises those involved to amend their tax returns or consult a tax professional.
