John P. Fahey, CPA

The IRS has released a revenue ruling providing additional guidance concerning receipt of cryptocurrency. If a cash-method taxpayer stakes cryptocurrency native to a proof-of-stake blockchain and receives additional units of cryptocurrency as rewards when validation occurs, the fair market value of the validation rewards received is included in the taxpayer's gross income in the tax year in which the taxpayer gains dominion and control over the validation rewards. The same is true if a taxpayer stakes cryptocurrency native to a proof-of-stake blockchain through a cryptocurrency exchange and receives additional units of cryptocurrency as rewards as a result of the validation

NATIONAL HARBOR, Md.—National Taxpayer Advocate Erin Collins is hoping that collections notices from the Internal Revenue Service will resume in the coming months. The agency suspended automated collections notices in response to the backlog of unprocessed mail correspondence that resulted from the shutdowns due to the COVID-19 pandemic and have yet to resume sending notices out. Collis said that the agency is developing a plan on how those collections notices will resume and she said it is an important piece of information that taxpayers with balances due need.

The Financial Crimes Enforcement Network is seeing a "concerning" increase in state and federal payroll tax evasion and workers' compensation fraud in the U.S. residential and commercial real estate construction industries. "FinCEN is committed to combating fraud by shedding light on how illicit actors within the construction industry are using shell corporations and other tactics to commit workers' compensation fraud and avoid payroll taxes," FinCEN Acting Director Himamauli Das said in a statement.

The Internal Revenue Service detailed plans on some of the high-income taxpayers that will be targeted for more compliance efforts in the coming fiscal year.
IRS Commissioner Daniel Werfel, during a September 7, 2023, teleconference with reporters, said that the new compliance push "makes good on the promise of the Inflation Reduction Act to ensure the IRS holds our wealthiest filers accountable to pay the full amount of what they owe,"adding that the agency will simply be enforcing already-existing laws.

Amid a growing number of scams and fraudulent activity surrounding the Employee Retention Credit, the Internal Revenue Service will stop processing new claims, effective immediately, at least through the end of the year.Werfel said the agency has received about 3.6 million claims by taxpayers taking advantage of the program and there are more than 600,000 that have yet to be processed, "virtually all of which were received within the last 90 days. That means about 15 percent of all ERCclaims received since the start of the program three and half years ago have been received in the last 90 days. That's an incredibly large number to have so far beyond the pandemic and nearly two years after the time periods covered by the program."

The Treasury Inspector General for Tax Administration is calling on the Internal Revenue Service to improve its training of revenue agents that will be focused on auditing high-income taxpayers. In an August 31, 2023, report, the Treasury Department watchdog noted that despite receiving supplemental funding from the Inflation Reduction Act that has been earmarked, in part, to increase examination of high-income taxpayers, the "IRS's efforts to train new hires do not appear to be fully leveraging" the expertise it has within the Large Business and International Division.

The Department of the Treasury is reaching out to Congress to get the appropriate tools to combat the wave of Employee Retention Credit fraud and other future issues. In a September 14, 2023, letter to Senate Finance Committee Chairman Ron Wyden, the agency made two specific requests. First, the IRS asked for authority to regulate paid preparers, which it stated "could help protect taxpayers from penalties, interest, or avoidable costs of litigation that result from the poor-quality advice they receive."

Problems with the Internal Revenue Service's handling of the Employee Retention Tax Credit took center stage before a House committee hearing, with tax professionals airing issues they have experienced and ongoing concerns they have. Testifying at a July 28, 2023, hearing of the House Ways and Means Subcommittee on Oversight, Larry Gray, partner at AGC CPA, said that as the pandemic started and he started to make educational YouTube videos to help other practitioners navigate the tax law, he found issues with the ERTC, including the growing industry of ERTC mills and the potential for fraud that comes with them. He noted that many of these mills are simply taking their fee for providing essentially clerical assistance. However, Gray noted that in these ERTC mills, the agreements stated that"they don't do audit," but they might be able to help find someone of a business does get audited because of the ERTC filing. And unfortunately, as was discussed throughout the hearing, people are falling for these ERTC mills and putting their businesses at risk.

The Internal Revenue Service will end, except in very limited circumstances, the practice of making unannounced visits to taxpayers' homes and businesses."This change is effective immediately,"IRS Commissioner Daniel Werfel said during a July 24, 2023, teleconference with reporters. Werfel said the change is being made in reaction to an increase in scam activity as well as for IRS employee safety."With a growth in scam artists, taxpayers are increasingly uncertain who was knocking on their doors," Werfel said. "For IRS employees, there were fears about their own personal safety on these visits. I also learned that these concerns were shared by our partners as the National Treasury Employees Union."