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IRS scores victory over cryptocurrency trading platform

After a year-long battle in court, the Internal Revenue Service (IRS) has notched a victory over Coinbase, a leading cryptocurrency exchange headquartered in San Francisco. The Nov. 28 federal court ruling ordered that the company turn over the identities of more than 14,000 of its users.

The decision was a triumph for the IRS, who had claimed that only a small portion of digital currency owners acknowledged their holdings in their tax filings.

Will changes in IRS examinations affect you?

A famous New York rapper once said that he had “more money, more problems.” Is this notion actually true? When it comes to your tax returns as a high-income earner, it just might be. As the 2017 fiscal year came to a close, the IRS announced that it is changing the way it examines tax returns and wealthy taxpayers are expected to be most affected. Let’s look at the reason for the change and how you can potentially avoid trouble.

Why did the IRS change examinations?

Large holiday gifts can be subject to taxation

The holidays are a time of goodwill and generosity in gift giving for many families. This year could be a time in which you're ready to surprise a loved one with that big, memorable gift they have always wanted. Maybe you're a grandparent who wants to pay off your grandchild's school tuition bill or maybe you want to buy a car for your parents and present it with a bow on top, just like in the commercials.

Whatever the occasion, it is sure to be memorable. However, with the memories comes a reminder that even large holiday gifts may come with a tax bill. Making plans to accommodate or avoid a tax bill can help keep the focus on giving.

Responding to an IRS audit

According to the Tax Foundation, 1.2 million Americans had their taxes audited by the Internal Revenue Service in 2015. Predicting who will be audited and why is difficult because tax law changes every year. Additionally, the IRS could change their focus from one group to another annually as new issues emerge.

Although audits are a routine part of enforcement for the IRS and usually aren’t anything to fear, your recognition and response is an important part of the process. Additionally, because of the potential for an unforeseen tax bill, it is not recommended that you respond to the audit without seeking help from a tax attorney first.

Is that charity organization really tax exempt?

The holidays are a time in which you might feel the need to give to those who are less fortunate. As the season of good tidings approaches, you realize that you’ve had a blessed year for your family and business, and now you want to contribute money, food or toys to a charity organization. Donating in-kind is an easy way to give back to your community and, in turn, earn a tax deduction as the year ends. But, how do you ensure that the organization asking for your resources is really tax-exempt and supporting the cause they claim?

Are my workers employees or contractors?

As a business owner, making hiring decisions is one of the most important duties of your job. Talented employees contribute to the success of your business in immeasurable ways, but you know that you don’t always have to rely on employees to get the job done. Labor practices in business are changing, giving rise to a growing number of companies and workers who rely on contract work to make ends meet.

What you need to know about the Panama & Paradise Papers

Yet another leak has caught the media’s attention. This one primarily focuses on clients of a firm that specialized in aiding the wealthy with asset management. The leak has earned the moniker “The Paradise Papers” due to its connection with offshore accounts in the Caribbean.  

This most recent leak is composed of over 13.4 million documents. Of these, almost 7 million are from corporate registries involving over 19 tax jurisdictions. Those implicated by this leak include a large span, ranging from wealthy citizens of the United States to politicians and celebrities. 

Is there a difference between tax avoidance and evasion?

Significant social conversation centers on the notion that business owners are obligated to pay their fair share in taxes. As a business owner, you do your diligence in complying by hiring tax professionals who have more specialized knowledge of the state and federal codes.

While you rely on them in compliance, you may also ask their advice on how to reduce your tax burden. This is where the difference between avoidance and evasion comes into the conversation.

Business or hobby: Here's how the IRS decides

From arts and crafts to sailing, woodcarving or horse breeding, we all have hobbies in which we enjoy. Some of these hobbies you can use to make a little extra money on the side, in addition to finding pleasure in the activity itself. Sometimes these hobbies can blossom into a business, but the IRS has specific rules in determining whether or not what you do is ultimately for profit or just for fun.

When a hobby makes you money

Like a business, you can write off some expenses from a money-making hobby, but the amount differs when there's no profit motive. For example, say you have a woodworking hobby and like to attend craft fairs where you view the work of others and occasionally sell your own. In one year, you spend $3,000 in supplies, equipment and gas in getting to and from shows. In that same year, you made $1,000 back in selling your work. How much can you write off? 

The link between taxes and nexus

In business, we are surrounded with buzzwords that might mean a lot to us, but outside of your industry, it could seem like you're speaking a foreign language. One word for you to consider today is "nexus." This term does not apply to one industry, but rather to any company that does business in a state where it does not have a physical presence.

Another way to think of nexus is a connection or a link. If an entity, in this case, a state government, has a link to your business, then you have created a nexus. When it comes to taxes, each state has its own threshold for economic nexus. In New York, any corporation that does more than $1 million in business in the state is subject to taxation even if the company has no physical presence.

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