WASHINGTON — The Internal Revenue Service reminds taxpayers they’re generally required to report all earned income on their tax return, including income earned from digital asset transactions, the gig economy and service industry as well as income from foreign sources.

Reporting requirements for these sources of income and others are outlined in the Instructions for Form 1040 and Form 1040-SR. The information is also available on IRS.gov.

This release is the third in a four-part series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional guidance is available in Publication 17, Your Federal Income Tax (For Individuals).

Digital assets, including cryptocurrency
A digital asset is a digital representation of value that is recorded on a cryptographically secured, distributed ledger. Common digital assets include:

• Convertible virtual currency and cryptocurrency.
• Stablecoins.
• Non-fungible tokens (NFTs).

Everyone must answer the question
Everyone who files Forms 1040, 1040-SR, 1040-NR, 1041, 1065, 1120 and 1120S must check one box answering either "Yes" or "No" to the digital asset question. The question must be answered by all taxpayers, not just by those who engaged in a transaction involving digital assets in 2023.

Checking “Yes”: Normally, a taxpayer must check the "Yes" box if they:

• Received digital assets as payment for property or services provided;
• Transferred digital assets for free (without receiving any consideration) as a bona fide gift;
• Received digital assets resulting from a reward or award;
• Received new digital assets resulting from mining, staking and similar activities;
• Received digital assets resulting from a hard fork (a branching of a cryptocurrency's blockchain that splits a single cryptocurrency into two);
• Disposed of digital assets in exchange for property or services;
• Disposed of a digital asset in exchange or trade for another digital asset;
• Sold a digital asset; or
• Otherwise disposed of any other financial interest in a digital asset.

In addition to checking the "Yes" box, taxpayers must report all income related to their digital asset transactions. For example, an investor who held a digital asset as a capital asset and sold, exchanged or transferred it during 2023 must use Form 8949, Sales and other Dispositions of Capital Assets, to figure their capital gain or loss on the transaction and then report it on Schedule D (Form 1040), Capital Gains and Losses. A taxpayer who disposed of any digital asset by gift may be required to file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.

If an employee was paid with digital assets, they must report the value of the digital assets received as wages. Similarly, if they worked as an independent contractor and were paid with digital assets, they must report that income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). Schedule C is also used by anyone who sold, exchanged or transferred digital assets to customers in connection with a trade or business and who did not operate the business through an entity other than a sole proprietorship.

Checking “No”: Normally, a taxpayer who merely owned digital assets during 2022 can check the "No" box as long as they did not engage in any transactions involving digital assets during the year. They can also check the "No" box if their activities were limited to one or more of the following:

• Holding digital assets in a wallet or account;
• Transferring digital assets from one wallet or account they own or control to another wallet or account they own or control; or
• Purchasing digital assets using U.S. or other real currency, including through electronic platforms such as PayPal and Venmo.

For more information, see the list of frequently asked questions (FAQs) and other details, visit the Digital Assets page on IRS.gov.

Gig economy earnings
Typically, income earned from the gig economy is taxable and must be reported to the IRS on tax returns. Examples of gig work include providing on-demand labor, services or goods, or selling goods online. Transactions often occur through digital platforms such as an app or website.

Taxpayers are required to report all income earned from the gig economy on a tax return, even if the income is:

• From temporary, part-time or side work.
• Paid through digital assets like cryptocurrency, as well as cash, goods or property.
• Not reported on an information return form like a Form 1099-K, 1099-MISC, W-2 or other income statement.

Taxpayers can visit the gig economy tax center for more information on the gig economy.

Service industry tips
Individuals who work in service industries such as restaurants, hotels and salons often receive tips from customers for their services. Generally, tips like cash or non-cash payments are taxable and should be reported.

• All cash tips should be reported to the employer, who must include them on the employee’s Form W-2, Wage and Tax Statement. This includes direct cash tips from customer to employee, tips from one employee to another employee, electronically paid tips and other tip-sharing arrangements.
• Noncash tips include value received in any medium other than cash, such as: passes, tickets, or other goods or commodities a customer gives the employee. Noncash tips aren't reported to the employer but must be reported on a tax return.
• Any tips the employee didn't report to the employer must be reported separately on Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to include as additional income with their tax return. The employee must also pay the employee share of Social Security and Medicare tax owed on those tips.

Service industry employees don't have to report tip amounts of less than $20 per month per employer. For larger amounts, employees must report tips to the employer by the 10th of the month following the month the tips were received.

See Tip Recordkeeping and Reporting for more information on how to report tips.

Foreign source income
Generally, A U.S. citizen or resident alien’s worldwide income is subject to U.S. income tax, regardless of their residence. They're also subject to the same income tax filing requirements that apply to U.S. citizens or resident aliens living in the United States.

U.S. citizens and resident aliens must report unearned income, such as interest, dividends and pensions, from sources outside the United States unless exempt by law or a tax treaty. They must also report earned income, such as wages and tips, from sources outside the United States.

An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are available only if an eligible taxpayer files a U.S. income tax return.

A taxpayer is allowed an automatic two-month extension to file a tax return to June 15 if both their tax home and abode are outside the United States and Puerto Rico. Even if allowed an extension, a taxpayer will have to pay interest on any tax not paid by the regular due date of April 15, 2024.

Those serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return also qualify for the extension to June 15. The IRS recommends attaching a statement if one of these two situations applies. More information can be found in the Instructions for Form 1040 and Form 1040-SR, Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad and Publication 519, U.S. Tax Guide for Aliens.

Foreign accounts and assets
Federal law requires U.S. citizens and resident aliens to report their worldwide income, including income from foreign trusts and foreign bank and other financial accounts. In most cases, affected taxpayers need to complete and attach Schedule B (Form 1040), Interest and Ordinary Dividends, to their tax return. Part III of Schedule B asks about the existence of foreign accounts such as bank and securities accounts and usually requires U.S. citizens to report the country in which each account is located.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.

In addition, U.S. persons with an interest in or signature or other authority over foreign financial accounts where the aggregate value exceeded $10,000 at any time during 2023 must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Because of this threshold, the IRS encourages U.S. persons with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is available only through the BSA E-filing System website.

The deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is April 15, 2024. FinCEN grants U.S. persons who miss the original deadline an automatic extension until Oct. 15, 2024, to file the FBAR. There is no need to request this extension. See FinCEN’s website for further information.

WASHINGTON – Margie Rollinson took the oath of office today to become the 49th IRS Chief Counsel and the first woman to permanently hold the top legal position at the nation’s tax agency.

Rollinson was sworn in and began work today at the IRS.

“Margie brings a wide range of experience from inside and outside government to this important role,” said IRS Commissioner Danny Werfel. “She will provide leadership and guidance on tax issues during a critical time in the history of the IRS. Her background and insights will be a great addition to the IRS leadership team and the Chief Counsel organization.”

With her new role, Rollinson marks a historic milestone for the IRS and nation’s tax system. She is the first woman to ever formally serve as IRS Chief Counsel, a position that dates back to 1866. While the Chief Counsel position has had several women serve temporarily in an acting capacity, there had never been a woman formally confirmed by the Senate until she was confirmed Feb. 29 to lead the Chief Counsel organization.

At the IRS, Rollinson will lead one of the largest legal teams in the nation. The Chief Counsel organization has approximately 2,600 employees.

As a traditional part of her role as Chief Counsel, Rollinson will also serve as assistant general counsel at the Treasury Department. The Chief Counsel and the Commissioner are the only two Senate-confirmed positions at the IRS.

She rejoins the IRS following a variety of roles in the tax world. Rollinson retired from the firm Ernst & Young, where she served as the Deputy Director of the National Tax Department since the start of 2019. She began her career at Ernst & Young in 1987 (known then as Ernst & Whinney), becoming a partner in 1997. In 2003, she became the Director of the International Tax Services National Tax Group, where she served clients directly and also led the International Tax Technical Committee.

Her work at the IRS began in 2013 when she became Technical Deputy Associate Chief Counsel in the Office of the Associate Chief Counsel International, and she was named Associate Chief Counsel International in 2016. In this role, Rollinson oversaw an office of 100 tax lawyers who were responsible for issuing published guidance and providing technical expertise on international tax rules.

Rollinson received her B.A. from Wellesley College in 1984, and her J.D. from the University of Maryland School of Law in 1987. She is a member of the Maryland Bar Association.

WASHINGTON – The Internal Revenue Service (IRS) today issued final regulations that provide guidance for the entities choosing the elective payment for the advanced manufacturing investment credit, established by the CHIPS Act of 2022.

The final regulations include special rules for partnerships and S corporations making the election. In addition, the final regulations provide rules related to the mandatory pre-filing registration requirement that were previously issued as temporary regulations.

This credit will incentivize the manufacturing of semiconductors and semiconductor manufacturing equipment within the United States. The credit is available to taxpayers that meet certain eligibility requirements, and there is the ability for taxpayers to make an elective payment election to be treated as making a refundable payment against the tax equal to the amount of the credit. A partnership or S corporation can make an elective payment election to receive a payment, instead of claiming the credit.

The final regulations provide guidance related to the mandatory IRS pre-filing registration process, which is available through pre-filing registration tool. The pre-filing registration process must be completed, and a registration number received, prior to making an elective payment election.

For more information, see Publication 5884, Inflation Reduction Act (IRA) and CHIPS Act of 2022 (CHIPS) Pre-Filing Registration Tool -- User Guide and Instructions

Treasury, IRS finalize rules on elective payments of certain clean energy credits under the Inflation Reduction Act

WASHINGTON — The Department of the Treasury and Internal Revenue Service issued final regulations today for applicable entities that earn certain clean energy credits and choose to make an elective payment election.

For tax years beginning after Dec. 31, 2022, applicable entities can choose to make an elective payment election, which will treat certain clean energy credits as a payment against their federal income tax liabilities rather than as a nonrefundable credit. This payment will first offset any income tax liability of the applicable entity and any excess is refunded to the applicable entity.

Applicable entities generally include tax-exempt organizations, state and local governments, Indian tribal governments, Alaska Native Corporations, the Tennessee Valley Authority and rural electric cooperatives. Electing taxpayers, which includes other taxpayers, may elect to be treated as an applicable entity for a limited number of credits.

Previously, the IRS issued proposed regulations for the elective payment of applicable credits and temporary regulations that provide rules for the mandatory IRS pre-filing registration process through the Inflation Reduction Act (IRA) and CHIPS Act of 2022 (CHIPS) pre-filing registration tool.

For detailed instructions on how to use the tool, refer to Publication 5884, Inflation Reduction Act (IRA) and CHIPS Act of 2022 (CHIPS) Pre-Filing Registration Tool -- User Guide and Instructions.

The IRS also updated the elective payment frequently asked questions based on the final regulations.

The pre-filing registration process must be completed, and a registration number received, prior to making an elective payment election.

Proposed regulations were also issued today regarding elections by certain unincorporated organizations that are owned by one or more applicable entities to be excluded from the application of the partnership tax rules. These proposed regulations would provide certain exceptions to the existing regulations for certain unincorporated organizations with one or more applicable entities and would allow such entities to make an elective payment election.

Finally, the IRS issued Notice 2024-27 that requests additional comments on any situations in which an elective payment election could be made for a clean energy credit that was purchased in a transfer, which is referred to as chaining.

Notice 2024-27 requests additional comments on any situations in which an election under § 6417(a) could be made for a credit that was purchased in a transfer for which an election under § 6418(a) is made. Such sequence of events is referred to as “chaining” in this notice.

Notice 2024-27 will be in IRB: 2024-12, dated March 18, 2024.

WASHINGTON – The Internal Revenue Service today reminded those who may be entitled to the COVID-era Recovery Rebate Credit in 2020 that time is running out to file a tax return and claim their money.

Most taxpayers eligible for Economic Impact Payments linked to the Coronavirus tax relief have already received or claimed their payments via the Recovery Rebate Credit. But for those who haven’t yet filed a tax return for 2020, the legal deadline is May 17, 2024.

The Recovery Rebate Credit is a refundable credit for individuals who did not receive one or more Economic Impact Payments, also known as stimulus payments, distributed in 2020 and 2021. Eligible taxpayers must file a tax return first to claim a Recovery Rebate Credit, even if their income from a job, business or other source was minimal or non-existent.

For individuals wanting to claim the 2021 Recovery Rebate Credit, they have until April 15, 2025, to file the required tax return.

Taxpayers owed a refund have three years after the filing due date to file and claim any money entitled to them. For 2020 tax returns, this year’s May 17 due date is three years after the original May 17, 2021, tax deadline.

The IRS also reminds other people who haven’t filed a tax return for 2020 to check their records; it’s possible they may be overlooking a potential tax refund that will no longer be available after May 17. The IRS plans to provide more detailed state-by-state information later this month for taxpayers who may have overlooked filing and getting a refund for 2020. These taxpayers will also face a May 17 deadline to file.

Who’s eligible?
Eligibility for the 2020 and 2021 Recovery Rebate Credit generally requires being a U.S. citizen or U.S. resident alien in the respective year, not being a dependent of another taxpayer and having a Social Security number issued before the tax return's due date.

Additionally, the 2020 Recovery Rebate Credit can be claimed for someone who passed away in 2020 or later.

Free help is available
Qualified taxpayers can also access free tax preparation assistance through the Volunteer Income Tax Assistance and the Tax Counseling for the Elderly programs. This is an ongoing effort by the IRS to encourage individuals who are not typically required to file tax returns to explore the potential benefits under the tax law. Use the VITA Locator Tool or call 800-906-9887 to locate the nearest VITA site.

The IRS also reassures taxpayers there is no penalty for claiming a refund on a late-filed tax return. Direct deposit is recommended as the quickest and simplest way to receive a tax refund.

Individuals with an IRS Online Account can check to see if they received any Economic Impact Payments, along with the total amounts.

Any Recovery Rebate Credit received does not count as income when determining eligibility for federal benefits such as Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF) and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). Claiming the credit does not affect an individual's immigration status or their ability to secure a green card or immigration benefits.

High-income non-filers: IRS compliance letters coming

The IRS also announced Feb. 29 a new effort focused on high-income taxpayers who have failed to file federal income tax returns in more than 125,000 instances since 2017.

The new initiative, made possible by Inflation Reduction Act funding, began with IRS compliance letters going out last week on more than 125,000 cases where tax returns haven’t been filed since 2017. The mailings include more than 25,000 to those with more than $1 million in income, and over 100,000 to people with incomes between $400,000 and $1 million between tax years 2017 and 2021.

On Friday March 1, 2024, the U.S. District Court for the District of Alabama declared the Corporate Transparency Act (CTA) unconstitutional. In the case of National Small Business Association v. Yellen (Case No. 5:22-cv-01448) [1], initiated by the National Small Business United, the challenge was against the CTA's mandate for small businesses to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).
 
The ruling has the effect of suspending all BOI filing requirements for now, all enforcement actions, and all compliance concerns including questions of "practicing law without a license." Experts believe the ruling will be appealed, probably to the Supreme Court, so this is a temporary filing requirement suspension until a final appeal is exhausted. Voluntary filing appears to still be allowed if for some reason a client desires to file. For those that followed Taxspeaker's advice to "wait until late October" this should make you feel better!
 
Now back to tax returns!

Registration opens for 2024 IRS Nationwide Tax Forum; five cities to host special sessions this summer Tax pros can earn continuing education credits while learning about the latest tax developments, IRS transformation efforts IRS YouTube Video: 2024 IRS Nationwide Tax Forum WASHINGTON — The Internal Revenue Service announced today that registration for the agency’s 2024 Nationwide Tax Forum is now open, providing tax professionals the opportunity to attend special continuing education sessions this summer in five cities across the nation. For more than 30 years, the IRS Nationwide Tax Forum has provided a unique setting for the tax professional community to gather and learn about important developments. In 2023, nearly 12,000 tax professionals attended the program. The IRS-sponsored event offers continuing education and networking opportunities to Enrolled Agents, Certified Public Accountants, attorneys and other tax professionals. Each forum is a three-day event with more than 40 seminars and workshops on a wide variety of federal and state tax issues presented by experts from the IRS and its partner associations. Attendees may earn up to 18 continuing education credits. In addition to learning about the latest developments in tax law and other issues affecting the tax community, attendees will also have a chance to meet in-person with IRS hiring experts. The IRS looks to hire talented people in the tax community and other industries as the agency continues the historic transformation work under the Inflation Reduction Act. Each tax forum runs from Tuesday through Thursday, with special pre-event sessions taking place on the Monday afternoon before. Featured cities: Chicago, Orlando, Baltimore, Dallas, San Diego The forum begins this year in Chicago and wraps up two months later in San Diego. Specific cities and dates are: City Date Chicago, Illinois July 9 – 11 Orlando, Florida July 30 – Aug. 1 Baltimore, Maryland Aug. 13 – 15 Dallas, Texas Aug. 20 – 22 San Diego, California Sep. 10 – 12 The IRS encourages tax pros to register early both the conference sessions and Forum hotels. Each year, the IRS sees instances where the conference or sponsoring hotel fills up. In addition to continuing professional education seminars from IRS and tax industry leaders, forum attendees get access to: The popular case resolution room, where tax pros can take their toughest cases to get help from the IRS. The forum expo hall, where they can see the latest technology and products and meet with dozens of industry representatives, association partners and IRS staff. A special Monday evening session on practice management to help tax pros run their business. The Annual Filing Season Program refresher course, also presented on Monday, for unenrolled tax preparers who participate in the IRS Annual Filing Season Program. Special focus group sessions, where tax professionals can share their experiences and discuss innovative ideas. Meet and ask questions with leaders from IRS and the tax professional community and network with other tax pros. For more information and to register, visit 2024 IRS Nationwide Tax Forum .

What taxpayers should do if they received a Form 1099-K in 2024

If a taxpayer sold goods or services in 2023 and received payments through certain payment apps or online marketplaces or accepted payment cards, they could have received a third party reporting document Form 1099-K, Payment Card and Third Party Network Transactions.

Following feedback from taxpayers, tax professionals and payment processors, and to reduce taxpayer confusion, the IRS announced Notice 2023-74, which delayed the new federal law $600 reporting threshold for tax year 2023 on Form 1099-K, Payment Card and Third Party Network Transactions. The previous reporting thresholds remained in place for 2023, which are more than $20,000 in payments and over 200 transactions. Taxpayers could have still received forms below the threshold.

It’s important to know that regardless of if a taxpayer received a Form 1099-K or not, they must report their income. This includes payments they receive in cash, property, goods, digital assets or foreign sources or assets.

The Form 1099-K should not report personal payments like gifts and reimbursements.

What to do when filing taxes

It’s important to understand why an individual received a Form 1099-K. Taxpayers can then use it with their other tax records when it’s time to file their return. The form provides the gross amount of payment card/third party network transactions and may include a combination of different kinds of total payments received.

It's important to note, just because a payment is reported on a Form 1099-K does not mean it’s taxable.

Taxpayers should review the form or forms, determine if the amount is correct, and determine any deductible expenses associated with the payment they may be able to claim when they file their taxes.

Selling personal items at a loss

If an individual sold items at a loss, which means they paid more for the items than for what they sold them, there is not a tax liability. They’ll be able to zero out the payment on their tax return by reporting both the payment and an offsetting adjustment on a Form 1040, Schedule 1. This will ensure if they received these forms, they don't have to pay taxes they don't owe.

Selling personal items at a gain

If an individual sold items at a gain, which means they paid less than for what they sold it, they will have to report that gain as income, and it's taxable.

See IRS.gov What to do with Form 1099-K for specific instruction on how to report personal item sales.

What to do with a Form 1099-K received in error

People may get a Form 1099-K when they shouldn't have if it:

• Reports personal payments from family or friends like gifts or reimbursements.
• Doesn't belong to them.
• Duplicates a Form 1099-K or other information reporting form they already received.

If this happens:

• Contact the issuer immediately – see "Filer" on the top left corner of Form 1099-K to find out the name and contact information of the issuer.
• Ask for a corrected Form 1099-K that shows a zero amount.
• Keep a copy of the original form and all correspondence with the issuer for your records.
• Don't wait to file taxes. File even if a corrected Form 1099-K is unavailable.

What to do with an incorrect Form 1099-K

If the payee Taxpayer Identification Number (TIN) or gross payment amount is incorrect taxpayers should request a corrected form from the issuer.

• See "Filer" on the top left corner of Form 1099-K to find the name and contact information of the issuer. If a taxpayer doesn't recognize the issuer, they should contact the Payment Settlement Entity (PSE) identified on the bottom left corner of the form above their account number.
• Keep a copy of the corrected Form 1099-K with other tax records, along with any correspondence from the issuer or PSE.
• Don't contact the IRS. The IRS can't correct a Form 1099-K from an issuer.

Don't wait to file taxes. To file a tax return, take these steps:

• If the Payee Taxpayer Identification Number (TIN) is incorrect report payments from the Form 1099-K and any sources of income on the appropriate tax return you normally file.
• If the gross payment amount is incorrect report the amount from your incorrect Form 1099-K on Schedule 1 (Form 1040), Additional Income and Adjustments to Income.

More Information

See What to do with Form 1099-K for more information on how to report an incorrect Form 1099-K.

See Understanding Your Form 1099-K and Form 1099-K FAQs for more information.

Revenue Procedure 2024-15 sets forth the Federal income tax treatment that may apply to certain legislatively authorized transactions entered into by a public utility to recover specified costs through a surcharge to customers within the utility’s service area. The transactions in question involve a securitization in which the issuance of debt instruments is by a qualifying State financing entity. The revenue procedure also modifies Rev. Proc. 2005-62, 2005-2 C.B. 507.

Revenue Procedure 2024-15 will be in IRB: 2024-12, dated March 18, 2024.