WASHINGTON — The Internal Revenue Service today reminded taxpayers how to avoid common errors on their tax returns. This filing season, the IRS is seeing signs of a number of common errors, including some taxpayers claiming incorrect amounts of the Recovery Rebate Credit and Child Tax Credit.

To avoid errors on these common credits, there are some key steps people should remember. Taxpayers should refer to Letter 6419 for advance Child Tax Credit payments and Letter 6475 for third Economic Impact Payment amounts they received– or their Online Account – to prepare a correct tax return. Claiming incorrect tax credit amounts can not only delay IRS processing, but can also lead to adjusted refund amounts.

Here are other easy ways to avoid common mistakes being seen so far this tax season.

File electronically. Taxpayers can use their computer, smartphone or tablet to file their taxes electronically, whether through IRS Free File or other e-file service providers, to help reduce mistakes. Tax software guides people through each section of their tax return using a question-and-answer format. Enter information carefully. This includes any information needed to calculate credits and deductions. Using tax software should help prevent math errors, but taxpayers should always review their tax return for accuracy.

Use the correct filing status. Tax software, including IRS Free File, also helps prevent mistakes when selecting a tax return filing status. If taxpayers are unsure about their filing status, the Interactive Tax Assistant on IRS.gov can help them choose the correct status, especially if more than one filing status applies.

Answer the virtual currency question. The 2021 Form 1040 and 1040-SR asks whether at any time during 2021, a person received, sold, exchanged or otherwise disposed of any financial interest in any virtual currency. Taxpayers should not leave this field blank but should check either “Yes” or “No.”

Report all taxable income. Underreporting income may lead to penalties and interest. Organized tax records help avoid errors that lead to processing delays and may also help to find overlooked deductions or credits. Taxpayers should have all their income documents on hand before starting their tax return. Examples are Forms W-2, 1099-MISC or 1099-NEC.

Include unemployment compensation. The IRS is seeing situations where people are not including unemployment compensation they received in 2021 on their tax returns. Although a special law allowed taxpayers to exclude unemployment compensation from taxes in 2020, it was only for that year. Unemployment compensation received in 2021 is generally taxable, so taxpayers should include it as income on their tax return.

Double-check name, birth date and Social Security number entries. Taxpayers must correctly list the name, Social Security number (SSN) and date of birth for each person they claim as a dependent on their individual income tax return. Enter each SSN and individual’s name on a tax return exactly as printed on the Social Security card. If a dependent or spouse does not have and is not eligible to get a SSN, list the Individual Tax Identification Number (ITIN) instead of a SSN.

Double check routing and account numbers. Requesting direct deposit of a federal refund into one, two or even three accounts is convenient and allows the taxpayer access to their money faster. Make sure the financial institution routing and account numbers entered on the return are accurate. Incorrect numbers can cause a refund to be delayed or deposited into the wrong account. Taxpayers can also use their refund to purchase U.S. Savings Bonds.

Mail paper returns to the right address. Paper filers should confirm the correct address for where to file on IRS.gov or on form instructions to avoid processing delays. Note that processing paper tax returns could take much longer than usual. Taxpayers and tax professionals are encouraged to file electronically if possible.

Sign and date the return. If filing a joint return, both spouses must sign and date the return. E-filers can sign using a self-selected personal identification number (PIN). Taxpayers should review the special instructions to validate their 2021 electronic tax return if their 2020 return has not yet been processed.

Keep a copy. When ready to file, taxpayers should make a copy of their signed return and all schedules for their records.

Request an extension, if needed. Taxpayers who cannot meet the April 18 deadline can easily request a six-month filing extension to Oct. 17 and prevent late filing penalties. Use Free File or Form 4868. But keep in mind that, while an extension grants additional time to file, tax payments are still due April 18 for most taxpayers.

Revenue Ruling 2022-7 updates Rev. Rul. 2004-53 in accordance with the Taxpayer First Act by explaining that all recipients of returns or return information pursuant to section 6103(c), including government employees, are subject to the disclosure restrictions of section 6103(a). Rev. Rul. 2004-53 modified and superseded.

Revenue Ruling 2022-7 will be in IRB:  2022-14, dated 4/4/2022.

Notice 2022-14  sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for March 2022 used under § 417(e)(3)(D), the 24-month average segment rates applicable for March 2022, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv). 

Notice 2022-14 will be in IRB:   2022-14, dated April 4, 2022.

Understanding Crowdfunding
Crowdfunding is a method of raising money through websites by soliciting contributions from a large number of people. The contributions may be solicited to fund businesses, for charitable donations, or for gifts. In some cases, the money raised through crowdfunding is solicited by crowdfunding organizers on behalf of other people or businesses. In other cases, people establish crowdfunding campaigns to raise money for themselves or their businesses.   

Receipt of a Form 1099-K for Distributions of Money Raised Through Crowdfunding
The crowdfunding website or its payment processor may be required to report distributions of money raised if the amount distributed meets certain reporting thresholds by filing Form 1099-K, Payment Card and Third Party Network Transactions, with the IRS. If Form 1099-K is required to be filed with the IRS, the crowdfunding website or its payment processor must also furnish a copy of that form to the person to whom the distributions are made. The American Rescue Plan Act clarifies that the crowdfunding website or its payment processor is not required to file Form 1099-K with the IRS or furnish it to the person to whom the distributions are made if the contributors to the crowdfunding campaign do not receive goods or services for their contributions. 

Prior to 2022, the threshold for a crowdfunding website or payment processor to file and furnish a Form 1099-K was met if, during a calendar year, the total of all payments distributed to a person exceeded $20,000 in gross payments resulting from more than 200 transactions or donations. 

For calendar years beginning after December 31, 2021, the threshold is lowered and is met if, during a calendar year, the total of all payments distributed to a person exceeds $600 in gross payments, regardless of the number of transactions or donations. 

Accordingly, if a crowdfunding website or its payment processor makes distributions of money raised that meet the reporting threshold, and the contributors to the crowdfunding campaign received goods or services for their contributions, then a Form 1099-K is required to be filed with the IRS. Additionally, if the distributions of the money raised are made to the crowdfunding organizer, a copy of the Form 1099-K must be furnished to the organizer; alternatively, if the distributions of the money raised are made directly to individuals or businesses for whom the organizer solicited funds, the Form 1099-K must be furnished to those individuals or businesses that receive amounts that meet the reporting threshold.   

A person receiving a Form 1099-K for distributions of money raised through crowdfunding may not recognize the filer’s name on the form. Sometimes the payment processor used by the crowdfunding website, rather than the crowdfunding website itself, will issue the Form 1099-K and be included as the filer on the form. If the recipient of a Form 1099-K does not recognize the filer’s name or the amounts included on the Form 1099-K, the recipient can use the filer’s telephone number listed on the form to contact a person knowledgeable about the payments reported.

Box 1 on the Form 1099-K will show the gross amount of the distributions made to a person during the calendar year, but issuance of a Form 1099-K doesn’t automatically mean the amount reported on the form is taxable to the person receiving the form.  As discussed below, the income tax consequences depend on all the facts and circumstances. If the distributions reported on a Form 1099-K are not reported on the tax return of the recipient of the form, the IRS may contact the recipient for more information. The recipient will have the opportunity to explain why the crowdfunding distributions were not reported on the recipient’s tax return. 

Tax Treatment of Money Raised Through Crowdfunding
Under federal tax law, gross income includes all income from whatever source derived unless it is specifically excluded from gross income by law. In most cases, property received as a gift is not includible in the gross income of the person receiving the gift. 

If a crowdfunding organizer solicits contributions on behalf of others, distributions of the money raised to the organizer may not be includible in the organizer’s gross income if the organizer further distributes the money raised to those for whom the crowdfunding campaign was organized. 

If crowdfunding contributions are made as a result of the contributors’ detached and disinterested generosity, and without the contributors receiving or expecting to receive anything in return, the amounts may be gifts and therefore may not be includible in the gross income of those for whom the campaign was organized.  Contributions to crowdfunding campaigns are not necessarily a result of detached and disinterested generosity, and therefore may not be gifts.  Additionally, contributions to crowdfunding campaigns by an employer to, or for the benefit of, an employee are generally includible in the employee’s gross income.

Taxpayers may want to consult a trusted tax professional for information and advice regarding how to treat amounts received from crowdfunding campaigns. 

Recordkeeping for Money Raised Through Crowdfunding
Crowdfunding organizers and any person receiving amounts from crowdfunding should keep complete and accurate records of all facts and circumstances surrounding the fundraising and disposition of funds for at least three years.

Links

• About Form 1099-K, Payment Card and Third Party Network Transactions
• Understanding Your Form 1099-K
• General FAQs on Payment Card and Third Party Network Transactions
• Gig Economy Tax Center

WASHINGTON — The IRS reminds taxpayers that there is a virtual currency question at the top of Form 1040, Form 1040-SR and Form 1040-NR. It asks: “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”

All taxpayers filing Form 1040, Form 1040-SR or Form 1040-NR must check one box answering either “Yes” or “No” to the virtual currency question. The question must be answered by all taxpayers, not just taxpayers who engaged in a transaction involving virtual currency in 2021.

When taxpayers can check “No”
Taxpayers who merely owned virtual currency at any time in 2021 can check the “No” box when they have not engaged in any transactions involving virtual currency during the year, or their activities were limited to:

When taxpayers must check “Yes”
The list below covers the most common transactions in virtual currency that require checking the “Yes” box:

If a taxpayer disposed of any virtual currency that was held as a capital asset through a sale, exchange or transfer, they must check “Yes” and use Form 8949 to figure their capital gain or loss and report it on Schedule D (Form 1040).

If a taxpayer received any virtual currency as compensation for services or disposed of any virtual currency that they held for sale to customers in a trade or business, they must report the income as they would report other income of the same type (for example, W-2 wages on Form 1040, 1040-SR, or 1040-NR, line 1, or inventory or services from Schedule C on Schedule 1).

For more information, see page 17 of the 2021 Form 1040 Instructions and visit IRS.gov for general information on virtual currency and other related resources.

Revenue Procedure 2022-20 provides guidance regarding the public approval requirement under § 147(f) of the Internal Revenue Code for tax-exempt qualified private activity bonds.  Specifically, this revenue procedure provides that hearings held by teleconference as described in section 4 of this revenue procedure will be treated as held in a location that, based on the facts and circumstances, is convenient for residents of the approving governmental unit for the purpose of § 1.147(f)-1(d)(2) of the Income Tax Regulations.

Revenue Procedure 2022-20 will be in IRB:  2022-14, dated April 4, 2022.

Notice 2022-11 provides an indexing factor for the qualifying payment amount for items and services furnished in 2022 for purposes of sections 9816 and 9817 of the Internal Revenue Code, as added by the No Surprise Act, in the case of a group health plan or group or individual health insurance issuer that does not have sufficient information as of January 31, 2019 to calculate the median of the contracted rates or for new items and services.

Notice 2022-11 will be in IRB:  2022-14, dated 04/04/2022.

FS-2022-19, IRS-CI HIGHLIGHTS

FS-2022-18, IRS Spotlights Criminal Investigation Law Enforcement: CI pursues financial crimes like money laundering, terrorist financing, cybercrimes, and sanctions evasion—including investigating and seizing assets of Russian elites

Program Areas

Below is just a small example of the types of cases in which CI has led or been significantly involved in over the last few years. These cases show the breadth and skill of CI’s Special Agents in various types of fraud and criminal activity that have had significant impacts on the financial system at home and abroad. Despite having 25% less staff over the course of the decade, CI has consistently delivered strong results. An increase in funding would help to add more investigations to the pipeline, ensure more criminals are held accountable, and shore up the global financial system. 

Narcotics/Counterterrorism/National Security Investigations

IRS:CI targets the illicit financial flows of Transnational Criminal Organizations to reduce the economic incentive of narcotics trafficking, terrorist financing, and money laundering. IRS:CI has key positions to enhance operational coordination at DEA SOD, EO-OCDETF, OCDETF Fusion Center, FinCEN, IOC2, HIDTA, J-CODE in addition to Joint Terrorism Task Force (JTTF) and National Counterintelligence Task Force (NCITF). Investigations involve money laundering (Title 18) and currency violations (Title 31). IRS:CI is the largest user of Bank Secrecy Act data to identify significant financial criminal activity. Investigative areas include: money laundering, narcotics, public corruption, corporate fraud, terrorism, healthcare fraud, and financial institution fraud. 

Aguirre – 12/03/21

https://www.irs.gov/compliance/criminal-investigation/sinaloa-cartel-leader-convicted

• Herman Aguirre, the leader of transnational drug conspiracy tied to the El Chapo Mexican drug cartel, was convicted of narcotics conspiracy, and operating a continuing criminal enterprise and money laundering conspiracy. He was sentenced to serve life in prison.
• Aguirre was the leader of a transnational drug trafficking organization that utilized contacts and a source of supply whose territory included Mexico, Arizona, California, and elsewhere. The source of supply was the Sinaloa Cartel, led by Joaquín "El Chapo" Guzmán and Ismael "El Mayo" Zambada. 

Vasquez-Hernandez – 11/24/14

https://www.justice.gov/usao-ndil/pr/sinaloa-cartel-member-sentenced-22-years-federal-prison-plea-agreements-unsealed

• Alfredo Vasquez-Hernandez, 59, was sentenced to 22 years in prison for his role in a $1 billion trafficking conspiracy.
• Vasquez-Hernandez was a high-ranking member of the Sinaloa cartel and a close lieutenant of Joaquin 'El Chapo' Guzman.
• Hernandez was the logistics man behind shipping tons of drugs by train from Mexico to Chicago concealed amid furniture cargo. 

Singapore Solution – 9/28/2021

https://www.justice.gov/opa/pr/indictment-unsealed-against-six-individuals-and-foreign-financial-service-firm-tax-evasion

• Six offshore financial service executives and a Swiss financial services company were charged with conspiracy to defraud the IRS for allegedly helping three large-value U.S. taxpayer-clients conceal more than $60 million in income and assets held in undeclared, offshore bank accounts to evade U.S. income taxes.

Defense Attorney Money Laundering Conspiracy – 10/28/2021

https://www.irs.gov/compliance/criminal-investigation/federal-jury-convicts-baltimore-defense-attorney-for-money-laundering-conspiracy

• A federal jury convicted an attorney of conspiracy to commit money laundering after evidence showed that received drug proceeds from clients and associates who engaged in drug trafficking and used bank accounts of the law firm where he practiced to launder more than a million dollars. 

Zong Money Laundering Case – 12/7/2018

https://www.justice.gov/usao-ak/pr/former-anchorage-resident-sentenced-federal-prison-international-money-laundering

• In December 2018, in Anchorage, Alaska, Mitchell Zong was sentenced to 30 months in prison for conspiracy to commit money laundering with his father, Kenneth Zong. Mitchell Zong laundered approximately $980,000 of Iranian derived funds knowing the funds came from his father’s illegal transactions with Iranian nationals. 

UniCredit Bank IEEPA Case – 4/15/2019

UniCredit Bank AG Agrees to Plead Guilty for Illegally Processing Transactions in Violation of Iranian Sanctions | OPA | Department of Justice

• In 2019, UniCredit Bank AG (UCB AG), a financial institution headquartered in Munich, operating under the name HypoVereinsbank, and part of the UniCredit Group agreed to plead guilty to conspiring to violate IEEPA and to defraud the United States by processing hundreds of millions of dollars of transactions through the U.S. financial system on behalf of an entity designated as a weapons of mass destruction proliferator and other Iranian entities subject to U.S. economic sanctions. 
• UniCredit Bank Austria (BA), another financial institution in the UniCredit Group, headquartered in Vienna, Austria, agreed to forfeit $20 million and entered into a non-prosecution agreement to resolve an investigation into its violations of IEEPA.  UniCredit SpA, the parent of both UCB AG and BA, agreed to ensure that UCB AG and BA’s obligations are fulfilled. 

Cyber/Cryptocurrency Investigations

Since 2014, CI Cyber Crimes has proportionately grown in both resources and results. Beginning with one Cyber Crimes Unit in the Washington, DC area, CI was able to successfully prosecute some of the first known criminal actors in this space (e.g., Liberty Reserve, Silk Road and Btc-e). These investigations set the foundation and framework for our future efforts. Soon after, CI established a second Cyber Crimes Unit in the Los Angeles Field Office followed by cyber coordinators across the nation and additional support personnel to provide investigative research and analysis. 

In FY21, CI was responsible for the seizure of cryptocurrency valued at more than $3.5B. To date in FY22, CI has already surpassed that amount. 

BITCONNECT – 2/25/2022

https://www.justice.gov/usao-sdca/pr/founder-fraudulent-cryptocurrency-charged-2-billion-bitconnect-ponzi-scheme

• A citizen and resident of India was indicted for his alleged role in a massive criminal conspiracy involving the cryptocurrency company he founded, BitConnect.
• The individual and his co-conspirators allegedly defrauded global investors of over $2 billion—believed to be the largest cryptocurrency fraud ever charged. 

BITFINEX – 2/8/2022

https://www.justice.gov/opa/pr/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency

• Two individuals were arrested in Manhattan for an alleged conspiracy to launder stolen cryptocurrency from a virtual currency exchange, presently valued at approximately $4.5 billion. Thus far, law enforcement has seized cryptocurrency valued over $3.6 billion linked to that hack.

Silk Road $1B Seizure - 11/5/2020

https://www.justice.gov/usao-ndca/pr/united-states-files-civil-action-forfeit-cryptocurrency-valued-over-one-billion-us

• This case involved cryptocurrency CI traced which was stolen from the administrator of Silk Road that we indicted several years ago.

Bitcoin Hamas – 8/13/2020

https://www.justice.gov/opa/pr/global-disruption-three-terror-finance-cyber-enabled-campaigns

• Investigation revolved around cryptocurrency fundraising for several terrorist organizations.
• Hammas/Al Queda/ISIS used cryptocurrency fundraising intended to carry out criminal acts.
• IRS CI helped shut this down - largest crypto seizure tied to terrorism to date. 

Welcome to Video – 10/16/19

https://www.justice.gov/opa/pr/south-korean-national-and-hundreds-others-charged-worldwide-takedown-largest-darknet-child

• Largest darknet marketplace for child exploitation.
• Resulted in over 330 arrests and 23 kids saved who were being actively abused. 

Tax Investigations

IRS:CI is the only federal law enforcement agency authorized to investigate Title 26 (federal criminal tax) violations. Priority areas include: abusive tax schemes, employment tax fraud, non-filer, questionable refund program, abusive return preparers, and identity theft. Crossover between tax and non-tax crimes is common. 

Fisher Syndicated Conservation Easement – 3/1/2022

https://www.justice.gov/opa/pr/five-tax-shelter-promoters-and-two-appraisers-indicted-syndicated-conservation-easement-tax

• A federal grand jury returned a superseding indictment on Feb. 24 charging seven individuals with conspiracy to defraud the US and other crimes arising out of their alleged promotion of fraudulent tax shelters and $1.3Billion in alleged false tax deductions.

Kingston Investigation – 3/16/2020

https://www.irs.gov/compliance/criminal-investigation/jury-finds-los-angeles-businessman-guilty-in-1-billion-biodiesel-tax-fraud-scheme

• A federal jury convicted a California businessman of criminal charges related to a $1 billion renewable fuel tax credit scheme. The individual used his company as part of a conspiracy to corrupt the biofuel tax credit program in an effort to steal over $1 billion from taxpayers and to launder the proceeds of this fraud.  

Brockman Investigation – 10/15/2020

https://www.justice.gov/opa/pr/ceo-multibillion-dollar-software-company-indicted-decades-long-tax-evasion-and-wire-fraud

• The CEO of an Ohio-based software company, was indicted with tax evasion, wire fraud, money laundering, and other offenses. The charges stem from an alleged decades-long scheme to conceal approximately $2 billion in income from the IRS as well as an alleged scheme to defraud investors in the software company’s debt securities.