The Department of the Treasury and the Internal Revenue Service today issued proposed regulations that would require brokers to report sales and exchanges of digital assets by customers.

The proposed regulations cover a range of digital asset issues where there have been questions, including defining brokers and requiring proceeds to be reported to the IRS on new Form 1099-DA.

“These proposed regulations are designed to help end confusion involving digital assets and provide clear information and reporting certainty for taxpayers, tax professionals and others,” said IRS Commissioner Danny Werfel. “A key part of this effort fits in with the larger IRS compliance focus on wealthy taxpayers. We need to make sure digital assets are not used to hide taxable income, and the proposed regulations are designed to provide a clearer line of sight into activities by high-income people as well as others using them. We want to make sure everyone pays what they owe under the tax laws, and our research and experience demonstrate that third-party reporting improves compliance. We welcome comments on these proposed regulations as we work to finalize the rules in this complex and evolving area.”

For sales or exchanges of digital assets that take place on or after Jan. 1, 2025, the proposed regulations would require brokers, including digital asset trading platforms, digital asset payment processors and certain digital asset hosted wallet providers, to report gross proceeds on a newly developed Form 1099-DA and to provide payee statements to customers. Brokers, in certain circumstances, would also be required to include gain or loss and basis information for sales that take place on or after Jan. 1, 2026, on these information returns and statements, so that customers have the information they need to prepare their tax returns.

The proposed regulations would also require real estate reporting persons, such as title companies, closing attorneys, mortgage lenders and real estate brokers, who are treated as brokers for dispositions of digital assets, to report the disposition of digital assets paid as consideration by real estate purchasers to acquire real estate in real estate transactions that close on or after Jan. 1, 2025. These real estate reporting persons would also be required to include on Form 1099-S the fair market value of digital assets paid to sellers of real estate in real estate transactions that close on or after Jan. 1, 2025.

Finally, the proposed regulations set forth gain (or loss) computation rules, basis determination rules and backup withholding rules applicable to digital asset sale and exchange transactions and propose many useful definitions.

Written comments regarding the proposed regulations must be submitted by Oct. 30, 2023. A public hearing has been scheduled for Nov. 7, 2023, with a second public hearing date for Nov. 8, 2023, if the number of requests to speak at the hearing exceed the number that can be accommodated in one day.

Source: IRS-2023-153, Aug. 25, 2023

WASHINGTON – As the new school year begins, the Internal Revenue Service reminds teachers and other educators that they’ll be able to deduct up to $300 of out-of-pocket classroom expenses for 2023 when they file their federal income tax return next year.

This is the same limit that applied in 2022, the first year this provision became subject to inflation adjustment. Before that, the limit was $250. The limit will rise in $50 increments in future years based on inflation adjustments.

This means that an eligible educator can deduct up to $300 of qualifying expenses paid during the year. If they’re married and file a joint return with another eligible educator, the limit rises to $600. But in this situation, not more than $300 for each spouse.

Who qualifies?

Educators can claim this deduction, even if they take the standard deduction. Eligible educators include anyone who is a kindergarten through grade 12 teacher, instructor, counselor, principal or aide who worked in a school for at least 900 hours during the school year. Both public and private school educators qualify.

What’s deductible?

Educators can deduct the unreimbursed cost of:

• Books, supplies and other materials used in the classroom.
• Equipment, including computer equipment, software and services.
• COVID-19 protective items to stop the spread of the disease in the classroom. This includes face masks, disinfectant for use against COVID-19, hand soap, hand sanitizer, disposable gloves, tape, paint or chalk to guide social distancing, physical barriers, such as clear plexiglass, air purifiers and other items recommended by the Centers for Disease Control and Prevention.
• Professional development courses related to the curriculum they teach or the students they teach. But the IRS cautions that, for these expenses, it may be more beneficial to claim another educational tax benefit, especially the lifetime learning credit. For details, see Publication 970, Tax Benefits for Education, particularly Chapter 3.

Qualified expenses don’t include the cost of home schooling or for nonathletic supplies for courses in health or physical education. As with all deductions and credits, the IRS reminds educators to keep good records, including receipts, cancelled checks and other documentation.

For 2022 tax returns being filed now: Don’t forget to claim educator expenses

For those who received a tax filing extension, qualify for a disaster extension, or for any other reason are still working on their 2022 return, the IRS reminds educators that the rules for claiming the deduction are the same as they are for 2023. For those who obtained an extension, the filing deadline is Oct. 16, 2023. But taxpayers can avoid processing delays by filing before that date.

File electronically when ready. Tax-filing software uses a question-and-answer format that makes doing taxes easier. Whether a return is self-prepared or prepared with the assistance of a tax professional or trained community volunteer, the IRS urges everyone to file electronically and choose direct deposit for refunds. For details, visit IRS.gov/efile.

In addition, the IRS urges anyone who owes taxes to choose the speed and convenience of paying electronically, such as with IRS Direct Pay, a free service available only on IRS.gov. For information about this and other payment options, visit IRS.gov/payments.

Source: IRS-2023-150, Aug. 17, 2023

The Internal Revenue Service warned taxpayers today to be on the lookout for a summer surge of tax scams as identity thieves continue pounding out a barrage of email and text messages promising tax refunds or offers to help ‘fix’ tax problems.

The latest email schemes touch on a variety of topics, but many center around promises about a third round of Economic Impact Payments. The IRS is seeing hundreds of complaints daily pouring into phishing@irs.gov about this scam, which has an embedded URL link that takes people to phishing website to steal sensitive taxpayer information.

The IRS is also receiving reports of emails urging people to “Claim your tax refund online,” and text messages that the person’s tax return was “banned” by the IRS. These scams are riddled with spelling errors and awkward phrasing, but they consistently try to entice people to click on a link.

“The IRS is seeing a wave of these summer scams relentlessly pounding taxpayers,” said IRS Commissioner Danny Werfel. “People are being flooded with these email and text messages, but we want them to avoid getting swept up in these terrible scams. Taxpayers should be wary; remember, don’t click on links from questionable sources.”

As part of the Security Summit effort, the IRS has been working in partnership with state tax administrators, tax professionals and the nation’s tax industry to warn people about identity theft risks, including the ongoing push by scammers to trick people into sharing personal information through email, texts and phone calls. The Security Summit is currently in the middle of a special summer news release series aimed increasing awareness among tax professionals on ways to protect themselves – and their clients – against identity theft.

At the same time, the IRS and Security Summit continue to warn taxpayers against the most recent wave of activity involving tax scammers. Here are some highlights:

The Economic Impact Payment scheme

This is currently the highest volume email scheme the IRS is seeing. Emails messages are hitting inboxes with titles like: “Third Round of Economic Impact Payments Status Available.” The IRS routinely sees hundreds of taxpayers forwarding these messages each day; the IRS has seen thousands of these emails reported since the July 4 holiday period.

The third round of Economic Impact Payments occurred in 2021, more than two years ago. And this particular scheme, which plays off this real-world tax event, has been around since then. But while the stimulus payments ended long ago, the related scheme has evolved and changed as scam artists look for new ways to adjust their message to trick people.

Taxpayers shouldn’t be fooled by this message for many reasons. For example, these emails are routinely riddled with spelling errors and factual inaccuracies, like this example:

“Dear Tax Payer, We hope this message finds you well. We are writing to inform you abount an important matter regarding your recent tax return filing. Our record indicate that we have received your tax return for the fiscal inconsistencies or missing information that require your attention and clarification. You will receive a tax refund of $976.00 , We will process this amount once you have submitted the document we need for the steps to claim your tax refund.

Sender : INTERNAL REVENUE SERVICE”

Like many scams, this email urges people to click on a link so they can complete their “application.” Instead, it takes the taxpayer to a website where identity thieves will try to harvest valuable personal information.

The misleading “You may be eligible for the ERC” claim

The IRS has observed a significant increase in false Employee Retention Credit (ERC) claims. The ERC, sometimes also called the Employee Retention Tax Credit or ERTC, is a pandemic-related credit for which only select employers qualify.

Scam promoters are luring people to improperly claim the ERC with “offers” online, in social media, on the radio, or through unsolicited phone calls, emails and even mailings that look like official government letters but have fake agency names and usually urge immediate action. These unscrupulous promoters make false claims about their company’s legitimacy and often don’t discuss some key eligibility factors, limitations and income tax implications that affect an employer’s tax return. It’s important to watch for warning signs such as promoters who say they can quickly determine someone’s eligibility without details, and those who charge up-front fees or a fee based on a percentage of the ERC claimed.

Anyone who improperly claims the ERC must pay it back, possibly with penalties and interest.

Eligible employers who need help claiming the ERC should work with a trusted tax professional. False ERC claims were so widespread this year that the IRS added them to its annual Dirty Dozen list of tax scams. Details about eligibility, how to properly claim the credit, and how to report promoters are available at Employee Retention Credit.

The “Claim your tax refund online” scheme

Identity thieves know that the concept of free or overlooked money is tempting for people. So the IRS routinely sees email and text schemes playing off tax refunds and suggesting people have somehow missed getting their tax refund.

A variation hitting inboxes in recent weeks has a blue headline proclaiming people should “Claim your tax refund online.”

Again, there are telltale warning signs, including misspellings and urging people to click a link for help to “claim tax refund.” Here’s one example:

“We cheked an error in the calculation of your tax from the last payment, amounting to $ 927,22. In order for us to return the excess payment, you need to create a E-Refund after which the funds will be credited to your specified bank. Please click below to claim your tax refund. If we are unable to complete within 3 days, all pending will be cancelled.”

The “Help You Fix-It” text scheme

In another text scam seen in recent weeks, identity thieves come up with a name on a text message that tries to sound official, like “govirs-accnnt2023.” They then send a variety of messages that say there’s a problem with a person’s tax return but, not to worry, the anonymous sender of the text message can help resolve the problem if they click on a link.

Like others, there are many red flags on these text messages, including misspellings and factual inaccuracies:

“MSG … IRS: You federal return was ban-by the IRS. Don’t worry, we’ll help you fix it. Click this link.”

The “Delivery Service” scam at your door

Earlier this month, the IRS warned taxpayers to be on the lookout for a new scam mailing that tries to mislead people into believing they are owed a refund. The new scheme involves a mailing that arrives in a cardboard envelope from a delivery service. The enclosed letter includes the IRS masthead and wording that the notice is “in relation to your unclaimed refund.”

Receive a scam message?

People that receive these scams by email should send the email to phishing@irs.gov. People can forward the message, but IRS cybersecurity experts prefer to see the full email header to help them identify the scheme.

If people are victims after clicking and entering their information, they should report the email to phishing@irs.gov – but they should also file a complaint with Treasury Inspector General for Tax Administration and visit IdentityTheft.gov and Identity Theft Central.

More important reminders about scams

The IRS and Security Summit partners regularly warn people about common scams, including the annual IRS Dirty Dozen list.

Taxpayers and tax professionals should be alert to fake communications from scammers posing as legitimate organizations in the tax and financial community, including the IRS and the states. These messages can arrive in the form of an unsolicited text or email to lure unsuspecting victims to provide valuable personal and financial information that can lead to identity theft, including phishing and smishing.

The IRS never initiates contact with taxpayers by email, text or social media regarding a bill or tax refund.

As a reminder: Never click on any unsolicited communication claiming to be the IRS as it may surreptitiously load malware. It may also be a way for malicious hackers to load ransomware that keeps the legitimate user from accessing their system and files.

Individuals should never respond to tax-related phishing or smishing or click on the URL link. Instead, the scams should be reported by sending the email or a copy of the text/SMS as an attachment to phishing@irs.gov.

Source: IRS-2023-131, July 21, 2023

The Internal Revenue Service will hold a free webinar designed to help employers, tax professionals and other interested taxpayers understand how the Employee Retention Credit (ERC) works and how to avoid tax scams and aggressive marketing related to the credit.

The IRS continues to warn businesses to not fall for aggressive marketing or scams related to the ERC. There are important details that applicants should be aware of before they take steps to claim this credit. The IRS continues to urge those considering claiming the ERC to be wary of aggressive marketers and unsolicited offers about the ERC. Businesses should first check with their trusted tax professional before submitting an ERC claim.

The two-hour webinar will take place on Tuesday, July 25, at 2 p.m. ET. Closed captioning will be available. Topics to be covered include:

• Overview of the credit;
• Key areas of ERC compliance;
• Characteristics of potential ERC fraud;
• Ways to report ERC fraud;
• Live question-and-answer session.

Tax professionals can earn two continuing education credits for attending this webinar. To register or for more information, visit the Webinars for Tax Practitioners page or the Webinars for Small Businesses page on IRS.gov.

The IRS sponsors an ongoing series of free webinars. Though primarily designed for tax professionals and small businesses, anyone is welcome to attend.

This year, scams tied to the Employee Retention Credit made the tax agency’s Dirty Dozen list of the most egregious tax-related scams. In May, the IRS issued an updated warning on ERC scams.

When properly claimed, the ERC is a refundable tax credit designed for businesses that continued paying employees while shut down due to the COVID-19 pandemic or that had a significant decline in gross receipts during the eligibility periods. The credit is not available to individual employees.

Unscrupulous promoters make false claims about their company’s legitimacy and often don’t discuss some key eligibility factors, limitations and income tax implications that affect an employer’s tax return. It’s important to watch for warning signs such as promoters who say they can quickly determine someone’s eligibility without details, and those who charge up-front fees or a fee based on a percentage of the ERC claimed.

Are you in search of career changes? Jooble is a great place to explore international accounting jobs and much more.

Source: IRS-2023-132, July 21, 2023

WASHINGTON —The Internal Revenue Service today warned tax professionals and businesses that they remain a top target for identity thieves and face threats from common scams on this year’s Dirty Dozen list.

As part of the annual Dirty Dozen tax scams effort, the IRS and the Security Summit partners urged tax professionals and businesses to be on the lookout for a variety of suspicious email requests. Through these spearphishing emails, scammers try to steal client data, tax software preparation credentials and tax preparer identities with the goal of getting fraudulent tax refunds. These requests can range from an email that looks like it’s from a potential new client to a request targeting payroll and human resource departments asking for sensitive Form W-2 information.

“It’s vitally important for tax professionals and businesses to maintain a strong defense against cyberattacks like spearphishing,” said IRS Commissioner Danny Werfel. “The information these businesses have on their systems is extremely valuable to an identity thief looking to steal identities and file fraudulent tax returns. There are simple steps that tax pros and businesses can take to avoid being fooled by these common schemes, including extra caution when opening emails, clicking on links or sharing sensitive client data. Extra care can go a long way to protect tax professionals and businesses as well as their clients.”

Working together as the Security Summit, the IRS, state tax agencies and the nation’s tax industry have taken numerous steps since 2015 to strengthen internal systems and controls to protects against tax-related identity theft. As part of this effort, the IRS and Summit partners continue to warn people about common scams and schemes during tax season and beyond that can threaten a taxpayer’s personal and financial information. The Security Summit initiative is committed to protecting taxpayers, businesses and the tax system from scammers and identity thieves, and the Dirty Dozen is part of the larger effort.

The IRS’ annual Dirty Dozen campaign is a list of 12 scams and schemes that put taxpayers and the tax professional community at risk of losing money, personal information, data and more. Some items on the Dirty Dozen are new and some make a return visit. While the Dirty Dozen is not a legal document or a formal listing of agency enforcement priorities, it is intended to alert taxpayers and the tax professional community about various scams and schemes.

Side-step spearphishing: Cyber security tips for tax pros and businesses

Phishing is a term given to emails or text messages designed to get users to provide personal information, either directly or by clicking on a link or attachment. Spearphishing is a tailored phishing attempt to a specific organization or business.

The IRS is warning tax professionals about spearphishing because there is greater potential for harm if the tax preparer has a data breach. A successful spearphishing attack can ultimately steal client data and the tax preparer’s identity, allowing the thief to file fraudulent returns.

A taxpayer becoming a victim of tax-related identity theft is certainly an issue with spearphishing, but criminals seeking tax preparer credentials or access to their client’s tax-related information increases the potential number of victims.

Spearphishing begins with a suspicious email – one that may appear as a tax preparation application or another e-service or platform. Some scammers will even use the IRS logo and claim something like “Action Required: Your account has now been put on hold.” Often these emails stress urgency and will ask tax pros or businesses to click on links to input or verify information.

How to side-step spearphishing:

• Never click suspicious links.
• Double check the requests with the original sender.
• Be vigilant year-round, not just during filing season.

Client impersonation: Spearphishing aimed at tax pros

The IRS and its Security Summit partners continue to see spearphishing attempts that impersonate a new potential client, known as the “New Client” scam. If the tax preparer responds, the scammer sends a malicious attachment or URL that ultimately enables them to gain access to sensitive client information on the tax preparer’s computer systems.

Bogus requests for W-2s: Spearphishing aimed at businesses

The IRS wants to warn businesses about another specific spearphishing scam that targets employees in payroll or accounting departments. These employees might get an email that looks like it comes from an official source requesting W-2s for all employees. The payroll department might accidentally reply with these important documents, which would provide scammers with W-2 data on employees that can be used to commit fraud.

The IRS recommends using a two-person review process when receiving these types of requests for W-2s. The IRS also recommends any requests for payroll be submitted through an official process, like the employer’s Human Resources portal.

Make a difference: Report fraud, scams and schemes

Individuals should never respond to tax-related phishing or spearfishing or click on the URL link. Instead, the scams should be reported by sending the email or a copy of the text/SMS as an attachment to phishing@irs.gov. The report should include the caller ID (email or phone number), date, time and time zone, and the number that received the message.

Taxpayers can also report scams to the Treasury Inspector General for Tax Administration or the Internet Crime Complaint Center. The Report Phishing and Online Scams page at IRS.gov provides complete details. The Federal Communications Commission’s Smartphone Security Checker is a useful tool against mobile security threats.

As part of the Dirty Dozen awareness effort, the IRS encourages people to report individuals who promote improper and abusive tax schemes as well as tax return preparers who deliberately prepare improper returns.

To report an abusive tax scheme or a tax return preparer, people should mail or fax a completed Form 14242, Report Suspected Abusive Tax Promotions or PreparersPDF and any supporting materials to the IRS Lead Development Center in the Office of Promoter Investigations.

Mail:

Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, CA 92677-3405
Fax: 877-477-9135

Alternatively, taxpayers and tax practitioners may send the information to the IRS Whistleblower Office for possible monetary reward.

Source: IRS-2023-62, March 29, 2023

To wrap up National Tax Security Awareness Week, the Internal Revenue Service and the Security Summitpartners today urged businesses to remain vigilant against cyberattacks aimed at stealing their customer’s personal information and other business data.

The IRS continues to see instances where small businesses and others face a variety of identity-theft related schemes that try to obtain information that can be used to file fake business tax returns. For example, phishing schemes continue to target businesses as well as tax professionals and individual taxpayers.

“Just like individuals and tax professionals, businesses of all types need to be on the lookout for attempts to steal information and data,” said IRS Acting Commissioner Doug O’Donnell. “Businesses are especially attractive to cyberthieves because there is a potential to steal a lot of data. They may use the information to file a business tax return or use customer data for identity theft.”

The IRS, state tax agencies and the nation’s tax software and tax professional industries operate cooperatively as the Security Summit to highlight data security and fight identity theft. Today marks the final day of the seventh annual week dedicated to information security and helpful tips for individuals, businesses and tax professionals.

Cyber criminals target businesses of all sizes; knowing some cybersecurity basics and putting them in practice will help business owners protect their business and reduce the risk of a cyber-attack. Criminals can target a business’s credit card or payment information, business identity information or employee identity information.

Businesses are encouraged to follow best practices from the Federal Trade Commission, including:

• Use multi-factor authentication.
• Set security software to update automatically.
• Back up important files.
• Require strong passwords for all devices.
• Encrypt devices.

More information is available at FTC’s Cybersecurity for Small Businesses.

Businesses should especially be alert to phishing email scams that attempt to trick employees into opening embedded links or attachments. IRS related scams may be sent to phishing@irs.gov so the IRS can try to track, stop or disrupt scams.

To improve security, the IRS now masks sensitive information from business tax transcripts, which summarizes tax return information, to help prevent thieves from obtaining identifiable information that would allow them to file fake business tax returns. Only financial entries are fully visible. Other information has varying masking rules. For example, only the first four letters of each first and last name will display for individuals and businesses. Also, only the last four digits of the Employer Identification Number will be visible.

The IRS also has the Form 14039-B, Business Identity Theft AffidavitPDF, that will allow companies to proactively report possible identity theft to the IRS when, for example, an e-filed tax return is rejected.

Businesses should file the Form 14039-B if it receives a:

• Rejection notice for an electronically filed return because a return is already on file for that same period.
• Notice about a tax return that the entity didn’t file.
• Notice about Forms W-2 filed with the Social Security Administration that the entity didn’t file.
• Notice of a balance due that is not owed.

This form will enable the IRS to respond to the business and work to resolve issues created by a fraudulent tax return. Businesses should not use the form if they experience a data breach but see no tax-related impact. For more information, see Identity Theft Central’s business section.

In addition to phishing and other scams, all employers should remain alert to Form W-2 theft schemes. For example, a thief may pose as a company executive who emails payroll employees and asks for a list of employees and their W-2s. Businesses often don’t know they’ve been scammed until an employee reports that a fraudulent tax return has been filed.

There’s a special reporting procedure for employers who experience the W-2 scam. It’s available in the Identity Theft Central’s business section.

Finally, Security Summit partners urge businesses to keep their EIN application information current. Changes of address or responsible party information may be reported using Form 8822-B. Changes in the responsible party must be reported to the IRS within 60 days. Current information can help the IRS find a point of contact to resolve identity theft and other issues.

For more details and to learn more about this year’s National Tax Security Awareness Week’s efforts, visit IRS.gov/securitysummit.

Source: IRS-2022-211, December 2, 2022