People who trade cryptocurrency had a surprise in 2019.
Some cryptocurrency companies sent out (incorrectly in my view) 1099-K forms for cryptocurrency transactions. This led to the IRS looking for Schedule C income for taxpayers and assessing taxes for unreported income.
Some have said will start issuing 1099-MISC in 2020 which likewise may be incorrect. A 1099-MISC is not meant for:
At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
At least $600 in:
Rents.
Prizes and awards.
Other income payments.
Medical and health care payments.
Crop insurance proceeds.
Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.
Payments to an attorney.
Any fishing boat proceeds.
In addition, use Form 1099-MISC to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
If you received a 1099-K in 2019 and didn’t report that income on your return what should you do. Amend your return with a schedule C showing the income and then backing out 100% of the income with a negative number (stating that the 1099 was issued erroneously). If you had trading profits or losses, you (and didn’t report them) you should amend schedule D to reflect those using the 1099-K number as gross proceeds.
If you receive a 1099-MISC in 2020, again, you may have to file a schedule C back out the number and then report the transactions on Schedule D.
In some respects, Cryptocurrency companies are stuck in the middle. Some people accept cryptocurrency in their businesses for payment, others trade the currency and these companies can not differentiate who is who.
The main lesson is don’t ignore the form, and be sure to include that income clearly on your return where the IRS will be looking which will be Schedule C.
Category Archives: Uncategorized
More Tax Planning Pre-Biden
If you make more than $400,000 (apparently in compensation) then there will be a 12.4% social security tax on top of your income tax which will go up to 39.5% Federal and who knows what will happen in high tax states who are losing payers by the day. So, if in fact the trigger is compensation, it might be time to look at those LLC’s and turn them into S Corporations starting 1/1/2021. That way you can limit compensation to reasonable compensation and the rest would be S Corp dividends. Given this was the method used by none other than Joe Biden to save medicare taxes on his $15 Million of book royalties, I don’t feel as bad about mentioning it. We’ll keep looking at this subject in days going forward.
What if your home was vandalized by a group of peaceful protestors
Under the 2017 Tax Act, no deduction for you. Hope you’re insured because until 2023 such a loss is not deductible. I suspect those living in some of these riot zones are going to have a big surprise.
What if you car was destroyed, same result. Personal property is also not subject to a casualty loss for vandalism.
The only casualty losses allowed are for casualty losses from a natural disaster in a federally declared natural disaster. Luckily the Administration has been quite generous in declaring FEMA natural disasters.
Adkins v. U.S. II, United State Court of Appeals for the Federal Circuit
One usually doesn’t get to celebrate in tax practice, but we were fortunate enough to win our appeal and in the process the Federal Circuit departed from a 5th Circuit finding. as to the year of a loss in a theft loss case. The opinion will be posted later on May 29, 2020 on the Court’s website. http://www.cafc.uscourts.gov/opinions-orders
Virginia’s Other New Taxes – hold on to your seats!
While we have been watching COVID numbers, the Virginia legislature has been implementing its version of the green new deal and healthy living deal.
Most taxes go into effect July 1, 2020 unless otherwise noted.
Gasoline Taxes:
This gets complicated. Statewide increase of 5ยข/gallon. For those outside of Northern Virginia and Hampton Roads, you will join them in paying an additional 7.6 cents/gallon (7.7 for diesel). So the statewide gas tax is now 28.8 cents/gallon. On July 1, 2021 they go up another 5 cents per gallon. On the same date Diesel goes up another 6.8 cents/gallon. Starting on July 1, 2022, state gasoline and diesel tax increases will be index to the consumer price index.
Cigarettes/Tobacco:
The State really wants you to quit smoking. They are doubling the cigarette tax from $3/carton to $6/carton.
And it gets worse. Other tobacco alternatives such as pipe tobacco, snuff and chewing tobacco goes up to 20%. And Vaping products now have a 6.6 cents per milliliter tax.
Starting July 1, 2021, localities without a local cigarette tax may impose one and they can’t exceed $2/carton.
Meals:
Those with meals taxes (except if they had a referendum which failed in the last six years) can raise them from 4% to 6%.
Entertainment Taxes:
Counties may impose taxes on entertainment admissions (as if after COVID anyone goes to the movies).
Game of Skill machine has a license fee of $1,200 per machine to pay for COVID expenses (don’t bet on it ever going away).
Local Sales and Use Taxes:
The following localities are authorized to call referendums on increasing their sales and use taxes an additional 1% to pay for school projects. They are Henry, Charlotte, Halifax, Mecklenburg, Pittsylvania, Gloucester and Northampton counties, and the City of Danville.
Peer to Peer Vehicle Sharing:
Starting October 1, 2020, there will be a new tax for this. Sort of like renting out your own car to others.
Plastic Bags:
Beginning January 1, 2021 the dreaded plastic bag will incur a 5 cent tax for localities.
Electricity:
Electricity Generators will pay a carbon tax starting January 1, 2021, the amount will be set by auction. This will be passed along to consumers along with another tax from the state a usage tax to be set by the State Corporation Commission.
Transient Occupancy Taxes:
For those counties not charging them, will be authorized to do so starting May 1, 2021.