Today’s news media is full of stories about supposed malicious allegations, unfounded criminal investigations and indictments based on perjury.

Regardless of our political leanings, all of us should hope that such things are actually exceedingly rare. However, a case decided recently by the Sixth Circuit Court of Appeals shows that such things really do happen.  Mynatt v. United States, — F.4th —-, 2022 WL 3335690 (August 12, 2022). Continue Reading Politically-Motivated Criminal Cases Based on Perjured Testimony Really DO Happen! Even if You Work for the IRS

UPDATE:  On August 15, 2022, Judge Otis D. Write II in the Central District of California entered an order approving service of the summons by the IRS on sFOX for account and transaction records.  The Department  of Justice entered a press release the following day with Commissioner Chuck Rettig quoted as saying “the John Doe Summons remains a highly valuable enforcement tool that the U.S. government will use again and again to catch tax cheats and this is yet one more example of that.”  Deputy Assistant Attorney General David A. Hubbert of the Department of Justice Tax Division was also quoted as well saying “taxpayers who transact with cryptocurrency should understand that income and gains from cryptocurrency transactions are taxable.”


The IRS knows it has a problem, in that it knows there are far more cryptocurrency transactions than are being reported on tax returns. The IRS may also get an $80 billion increase in funding for enforcement that will help solve that problem.  What can taxpayers and cryptocurrency service providers expect?  More John Doe Summonses.  If there was any doubt, the IRS filed two new John Doe Summons requests (here and here) this week on cryptocurrency service provider sFOX. sFOX is the full-service crypto prime dealer for institutional investors, providing brokerage services for digital assets. It’s also now a target for information by the IRS and the Department of Justice Tax Division. Continue Reading IRS Continues to Hunt for Cryptocurrency Investors with John Doe Summonses

Cryptocurrency is no longer a new asset — it’s been around since 2009 — and the number of individuals and businesses who own or use cryptocurrency and NFTs, and the underlying blockchain technology, continues to increase with each passing year. Remarkably, the U.S. and most other countries are still only beginning to regulate the taxation of this “new” asset class.

Gray Reed attorney Joshua Smeltzer recently published an article in Law360 Tax Authority reviewing the current and proposed reporting and enforcement rules, and what worldwide regulation of digital assets might look like in the future. A reprint of the article is available here.

Many people, myself included, can sometimes be accused of poor penmanship. As our paperwork becomes more and more electronic, we write less and less down with pen and paper. However, a recent decision from the tax court may be sending more supervisors at the IRS to penmanship classes.  The taxpayers, Gregory and Simone Colbert, were assessed income tax deficiencies and associated accuracy related penalties. The Colberts admitted the deficiencies but disputed the interest and penalties. Continue Reading IRS Penalty Denied Because of Poor Penmanship

It is well-established that attorneys and their clients are entitled to private and protected communications.  But what level of protections are available when an accountant is used in an engagement to provide an area of expertise not possessed by the attorney?

This is a significant question because accountants are frequently relied upon as indispensable members of legal teams because they have the ability to properly interpret complex technical accounting concepts and explain them to lawyers, judges and juries.  When utilizing accountants in legal matters, the level of protections afforded will often depend on the agreement entered into between the parties.

As an initial matter, parties involved in legal disputes should understand that the accountant-client privilege generally does not provide the same level of protections as the attorney-client privilege.  Relying solely on the accountant-client privilege presents substantial risks for the client.  Rather, the parties should recognize and consider the benefits of entering into a Kovel Agreement to protect their communications. Continue Reading Protecting Client Information When Using Accountants in Legal Matters

On June 21, 2022, the United States Supreme Court agreed to hear a dispute involving split decisions among the circuit courts on non-willful penalties. The Fifth Circuit parted ways with the taxpayer friendly decision of the Ninth Circuit that non-willful penalties are capped at $10,000 per FBAR filing instead of the $10,000 per unreported bank account argued by the government. District courts in New Jersey, Connecticut, California, and Texas had all ruled in the taxpayer’s favor that non-willful penalties were capped at $10,000 per form as well.  The case headed to the Supreme Court is United States v. Bittner, where a taxpayer friendly decision from the District Court reduced the $2.7 million penalty to $50,000 based on a $10,000 per form cap on non-willful FBAR penalties.  The Fifth Circuit reversed the favorable district court decision and held that the “$10,000 penalty cap therefore applies on a per-account, not a per-form basis.” Continue Reading Supreme Court Will Hear Non-Willful FBAR Penalty Dispute

In some federal tax disputes, if at first you don’t succeed you may not get to try again. A recent Fifth Circuit decision confirms issue preclusion when the parties and the issue are truly the same. See ETC Sunoco Holdings, LLC v. United States, No. 21-10937 (5th Cir. June 8, 2022). Sunoco sought a refund in the Court of Federal Claims for tax years 2005 through 2008, arguing that they should be permitted a deduction of their costs of goods sold as an excise tax expense even though it did not technically reduce the company’s excise-tax liability. The Court of Federal Claims disagreed. See Sunoco, Inc. v. United States, 908 F.3d 710, 715 (Fed. Cir. 2018). Sunoco then sued again, five years later, for alleged overpayments from tax years 2010 and 2011 but filed suit in the Northern District of Texas instead. Jurisdiction in tax disputes can often be brought in the Federal District Court with local jurisdiction or the Court of Federal Claims that has national jurisdiction. Therefore, jurisdictionally, this was proper.  However, District Courts can choose not to hear the case if they conclude that the doctrine of issue preclusion applies. Continue Reading Fifth Circuit Says No Do-Overs in Oil and Gas Tax Dispute

Crypto currency tax, government make crypto investor to pay tax for capital gain or profit concept, businessman investor holding bitcoin surprised by government hand issue tax bill.Cryptocurrency holders often want to put their assets into an entity for a host of reasons, such as asset protection, arranging negotiated management rights and exit planning.  This post discusses basic federal income tax issues related to holding cryptocurrency inside a partnership (meaning any entity taxed under Subchapter K* of the Internal Revenue Code; the “Code’). Continue Reading Thoughts on Cryptocurrency and Tax Partnerships

Cryptocurrencies might, simplistically, be defined as virtual currencies that use cryptography to secure transactions which are digitally recorded on a widely distributed ledger.  The ledger technology uses independent digital systems to timestamp and harmonize transactions. The cryptocurrencies associated with a ledger are often called “coins” or “tokens”.

Cryptocurrency can be acquired in multiple ways.  This post covers only common methods, such as purchase, gift, or airdrop following a hard fork.  A hard fork occurs when a ledger is subject to modifications that “break” compatibility with an earlier protocol; in other words, each leg of the fork follows different “rules” so the blockchain ledger is split into an original chain and new chain. Hard forks sometimes result in the creation of a new cryptocurrency.  An airdrop is a method of distributing cryptocurrency units to the ledger addresses of individual taxpayers. Airdrops sometimes, but not always, follow hard forks. While blockchain technology is interesting, and an elementary understanding of its technological mechanics is useful, it is the tax consequences of the receipt and disposition of cryptocurrency which is the subject of this post. Continue Reading Cryptocurrency: The Basics of Tax Treatment and Recognition

Properly navigating the IRS labyrinth of rules and regulations is difficult and sometimes taxpayers fail to dot every “i” and cross every “t”. The results can sometimes be devastating for both individuals and small businesses. Especially if the IRS chooses to assess penalties for the unknown failures and then pay those penalties from other funds the taxpayer submits through its offset power. The recent case of Special Touch Home Care Services v. United States, provides an example of how this can sometimes occur. Continue Reading Taxpayer’s Informal Claim for Refund of Taxes Paid and Offset by the IRS Denied on a Technicality