e-News for Tax Professionals Issue 2019-37

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Issue Number:  2019-37

Inside This Issue

1. IRS Issues Guidance on Virtual Currency, Second Draft of Form 1040 Schedule 1
2. Two Million ITINs to Expire at End of 2019
3. October Is National Work and Family Month
4. Encourage Clients to Choose Direct Deposit for Tax Refund; Electronic Pay Options on IRS.gov
5. Tax Relief for Texas Victims of Tropical Storm Imelda
6. News from the Justice Department’s Tax Division
7. Technical Guidance

Earlier this week, as part of a wider effort to assist taxpayers and to enforce the tax laws in a rapidly changing area, the Internal Revenue Service issued two new pieces of guidance for taxpayers who engage in transactions involving virtual currency. The new guidance includes Revenue Ruling 2019-24 and frequently asked questions (FAQs). It supplements the guidance the IRS issued on virtual currency in Notice 2014-21 that describes how virtual currency is treated for federal tax purposes.

In addition, the IRS has now issued the second early release draft of the 2019 Form 1040, Schedule1, Additional Income and Adjustments to Income, which includes the following checkbox question:

At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?   ◊ Yes            ◊ No

Taxpayers who file Schedule 1 to report income or adjustments to income that can’t be entered directly on Form 1040 should check the appropriate box to answer the virtual currency question. Taxpayers do not need to file Schedule 1 if their answer to this question is NO and they do not have to file Schedule 1 for any other purpose.

The related draft Form 1040 instructions, also now available on IRS.gov, include instructions to help taxpayers determine how they should answer this new question.

The IRS will accept Schedule 1 comments at WI.1040.Comments@IRS.gov for a 30-day comment period beginning Oct. 11.

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The IRS urges all taxpayers with expiring Individual Taxpayer Identification Numbers (ITINs) to obtain a new ITIN and avoid refund delays next year by submitting a renewal application soon. Any ITIN with middle digits 83, 84, 85, 86 or 87 and any ITIN not used in the past three years will expire at the end of 2019. ITINs with middle digits 70 through 82 that expired in 2016, 2017 or 2018 can also be renewed.

For more information on the ITIN renewal process, visit the ITIN information page on IRS.gov.

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The IRS is participating in National Work and Family Month with a series of news releases, fact sheets and tax tips on work-life throughout the month of October. Topics covered include family-owned businesses, family tax credits, military tax benefits and scams and security issues.

Find information on the IRS’s National Work and Family page, including the following tips and fact sheet:

• FS-2019-12, Employers may claim tax credit for providing paid family and medical leave to employees
• IRS Tax Tip 2019-138, Here’s how the credit for other dependents can benefit taxpayers
• IRS Tax Tip 2019-139, The Earned Income Tax Credit can put money in taxpayers’ pockets
• IRS Tax Tip 2019-141, The Child Tax Credit benefits eligible parents

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Please continue to promote Direct Deposit to your clients as the ideal way to receive their tax refunds. Direct Deposit is safe and secure while saving millions on printing and mailing paper refund checks. Remind your clients that direct deposit is fast, safe and more cost-effective than receiving a check in the mail, both for them and the government.

If your clients owe federal taxes, encourage them to pay electronically. They can pay online, by phone or with their mobile devices using the IRS2Go app. For more information, visit the IRS.gov/payments page. Additionally, Publication 5034, Need to Make a Payment?, available in English and Spanish, is a great product to download and share with your clients.

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Victims of Tropical Storm Imelda that took place from Sept. 17 – 23 in the Texas counties of Chambers, Harris, Jefferson, Liberty, Montgomery, and Orange may qualify for tax relief from the IRS.

For more information, visit the disaster relief page on IRS.gov.

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The U.S. Department of Justice Tax Division this week reported:

The United States has filed a civil suit in the Middle District of Georgia seeking to bar Stacy Lee and Heather Lee from owning or operating a tax return preparation business, and preparing tax returns for others. The complaint alleges that Stacy Lee has operated her tax return preparation stores under the names of Fast Track Tax Service in Talbotton and TimeLee Tax Service in Columbus. The complaint further alleges that the defendants fabricate deductions, businesses and related profit or losses, and claim various false credits, including education, energy and childcare credits. By repeatedly underreporting tax liabilities and claiming bogus refunds on behalf of their customers, the defendants have caused the United States to lose substantial tax revenue, according to the complaint.

A Waco, Texas, tax return preparer was sentenced to 60 months in prison for her role in a scheme to defraud the United States and for filing a false federal tax return. According to the indictment, Stacey Anderson owned a tax return preparation business, Anderson Professional Tax Services, and operated the business out of her residence in Waco. With the assistance of co-defendant Janell Lightner, Anderson prepared 2013 and 2014 tax returns claiming false business items and/or education tax credits to fraudulently increase their clients’ IRS tax refunds. These returns were prepared for clients in Texas, Maryland, and the District of Columbia. Anderson also filed a 2014 tax return for herself, falsely claiming an education credit and reporting a fraudulent income amount. The total tax loss generated from this scheme exceeded $10 million. In addition to the term of imprisonment, the judge ordered Anderson to serve a term of three years of supervised release and to pay restitution to the United States for $8,100,492.64. On Aug. 6, 2019, co-defendant Janell Lightner pleaded guilty to conspiring to defraud the United States and is scheduled to be sentenced on Dec. 5, 2019.

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Notice 2019-58 announces that, following the expiration of the temporary regulations under section 385, taxpayers may rely on the notice of proposed rulemaking cross-referencing the temporary regulations.

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