How the IRS is trying to nail crypto tax dodgers

(Source: cnbc.com) 

PUBLISHED WED, JUL 14 2021, 12:08 PM EDT; UPDATED THU, JUL 15 2021 2:00 PM EDT
MacKenzie Sigalos @KENZIESIGALOS

KEY POINTS

• The IRS treats virtual currencies like bitcoin as property, meaning that they are taxed in a manner similar to stocks or real property.
• The agency recently ramped up efforts to subpoena centralized crypto exchanges for information about noncompliant U.S. taxpayers.
• President Joe Biden’s 2022 budget proposal could lead to a raft of new crypto reporting requirements.

For years, the cryptocurrency holdings of U.S. taxpayers have existed in a sort of reporting gray zone. But now, those crypto wallets are getting a whole lot of attention from the Internal Revenue Service and President Joe Biden, who appear determined to crack down on tax cheats.

The timing makes sense.

The president needs to raise money, relatively quickly, for his own ambitious economic agenda. And the “tax gap,” which is the difference between taxes paid and taxes owed, is a big pool of cash ripe for the picking. IRS chief Charles Rettig says the country is losing about a trillion dollars every year in unpaid taxes, and he credits this growing tax gap, at least in part, to the rise of the crypto market.

The federal government is so convinced of the potential for income from back-due taxes that the White House wants to give the IRS an extra $80 billion and new powers to crack down on tax dodgers, including those parking their cash in crypto.

“The IRS is in the business of collecting revenue,” said Shehan Chandrasekera, a CPA and head of tax strategy at CoinTracker.io, a crypto tax software company.

“Historically, if they spend $1 for any type of enforcement activity, they make $5 ... I think crypto enforcement activities are even higher than that,” he said.

Noncompliance made easy

In the U.S., it is easy to be an unintentional crypto tax cheat.

For one, the IRS hasn’t exactly made it easy to report this information.

Tax year 2019 was the first time the IRS explicitly asked taxpayers whether they had dealt in crypto. A question on form Schedule 1 read, “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?”

But experts said the question was vague, and crucially, not everyone files this specific document. A Schedule 1 is typically used to report income not listed on the Form 1040, such as capital gains, alimony, or gambling winnings.

So in 2020, the IRS upped its game by moving the virtual currency question to the 1040 itself, which is used by all individuals filing an annual income tax return.

″[They put it] right after your name and Social Security number, and before you put any income numbers or deduction numbers in,” explained Lewis Taub, CPA and director of tax services at Berkowitz Pollack Brant. This made the question virtually impossible to miss.

But perhaps the bigger issue, according to Shehan, is that many filers have no clue how to calculate their crypto capital gains and losses.

If you trade through a brokerage, you typically get a Form 1099-B spelling out your transaction proceeds, streamlining the reporting process.

That doesn’t happen in the crypto world, Shehan said. “Many crypto exchanges don’t report any information to the IRS.”

While some crypto exchanges have begun to issue a tax form known as the 1099-K – which is traditionally given to an individual who engages in at least 200 transactions worth an aggregate $20,000 or more – in the context of crypto, this form only reports the total value of transactions. The total value does not factor in how much the person paid for the cryptocurrency in the first place, something referred to as the “cost basis,” which makes it hard to calculate the taxable gain.

“A lot of people have actually overreported their income, because they got confused,” Shehan said.

But the biggest issue driving noncompliance is the fact that the tax rules surrounding digital currencies are still being worked out, and in a state of constant flux.

‘Taxable event’

The IRS treats virtual currencies like bitcoin as property, meaning that they are taxed in a manner similar to stocks or real property. If you buy one bitcoin for $10,000 and sell it for $50,000, you face $40,000 of taxable capital gains. While this concept is relatively simple, it isn’t always clear what constitutes a “taxable event.”

Is buying dogecoin with your bitcoin a taxable event? Purchasing a TV with your dogecoin? Buying an NFT with ether?

All of the above are technically taxable events.

“The government says if I buy something with crypto, it is as if I liquidated my crypto no differently than if I sold any other property,” said Taub.

Mining dogecoin for fun qualifies as self-employment income in the eyes of the government. According to cryptocurrency tax software TaxBit – which recently contracted with the IRS to aid the agency in digital currency-related audits – tax rates vary between 10%-37% on mining proceeds.

“Crypto miners have to pay taxes on the fair market value of the mined coins at the time of receipt,” wrote crypto tax attorney Justin Woodward. While there are ways to get creative to minimize this tax burden, such as classifying mining as a business and deducting equipment and electricity expenses, it takes a bit of filing acrobatics to make it work.

Earning interest on the bitcoin sitting idle in your crypto wallet also counts as income and is taxed as such. Exchanges like Coinbase have also begun to send Form 1099-MISC to taxpayers who earned $600 or more on crypto rewards or staking.

The IRS crypto crackdown

Crypto trading volume may have fallen off a cliff in the last few weeks, but the overall market value of digital currencies is still up about 75% this year. The IRS has made it clear that it wants a piece of the action.

The agency recently ramped up efforts to subpoena centralized crypto exchanges for information about noncompliant U.S. taxpayers.

This spring, courts authorized the IRS to issue John Doe summonses to crypto exchange operators Kraken and Circle as a way to find individuals who conducted at least $20,000 of transactions in cryptocurrency from 2016 to 2020.

The IRS also put this same type of summons to use in 2016, when it went after Coinbase crypto transactions from 2013 to 2015.

Issuing these summons one exchange at a time is a clumsy way to capture noncompliant U.S. taxpayers, but it can be effective, according to Jon Feldhammer, a partner at law firm Baker Botts and a former IRS senior litigator.

In 2019, the IRS announced it was sending letters to more than 10,000 people who potentially failed to report crypto income.

Rettig said in a statement that taxpayers should take the letter “very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties.”

Sample Letter 6173
IRS

According to Shehan, the infamous “Letter 6173” gave individuals 30 days to respond to the IRS, otherwise they risked having their tax profile examined. Letters went out again in 2020, and a fresh round of these stern warnings are expected to be sent this autumn.

Even the threat of a letter has a lot of people seeking the counsel of accountants as to whether they should get ahead of a potential audit and be proactive about amending past returns.

“A lot of people ask me on Twitter: ‘Oh my god, in 2018, I had $200 worth of capital gains I didn’t report. What should I do?’” recounted Shehan. “In that case, it just is not worth amending the return to pick up $200 worth of income. ... The high-level thing is that if you didn’t do anything intentionally, you are fine.”

The IRS is also getting smarter about uncovering crypto tax evaders with the help of new data analytic tools it can employ in-house.

The agency’s partnership with TaxBit is a part of this effort. Taub describes the software as being able to go through cryptocurrency wallets and analyze them to figure out what was bought and sold in crypto. In addition to enlisting the services of the vendor itself, Taub says that IRS agents are being trained up on the software as a way to identify tax dodgers.

Biden’s new crypto rules

The president’s 2022 budget proposal could lead to a raft of new crypto reporting requirements for those dealing in digital coins.

The U.S. Treasury Department’s new “Greenbook,” released in May, calls for more comprehensive reporting requirements for crypto, so it’s as hard to spend digital currencies without getting reported as it is to spend cash today.

One proposal would require businesses to report to the IRS all cryptocurrency transactions valued at more than $10,000. Another calls for crypto asset exchanges and custodians to report data on user accounts which conduct at least $600 worth of gross inflows or outflows in a given year.

Another potential major blow to crypto holders: Biden’s proposal to raise the top tax rate on long-term capital gains to 43.4%, up from 23.8%.

“Crypto gains are being taxed as any other type of gain in assets, either at long-term capital gains or ordinary rates. President Biden has proposed to eliminate the difference between the two,” said David Lesperance, a Toronto-based attorney who specializes in relocating the rich.

Lesperance told CNBC the proposal would also function retroactively and apply to any transactions which took place after April 28, 2020.

“This translates into $19,800 in increased capital gains tax for each $100,000 in capital appreciation of crypto,” he said.

Amid the rising crypto crackdown here in the U.S., Lesperance has helped clients to expatriate in order to ditch their tax burden altogether.

“By exercising a properly executed expatriation strategy, the first $750,000 in capital appreciation is tax-free and the individual can organize themselves to pay no U.S. tax at all in the future,” he said.

But Lesperance warned that taxpayers need to move fast. “The runway to execute this strategy is very short,” he said.

Full-time minimum wage workers can’t afford rent anywhere in the US, according to a new report

(Source: cnbc.com) 

Alicia Adamczyk | Published Wed, Jul 14 2021

People working minimum wage jobs full-time cannot afford a two-bedroom apartment in any state in the country, the National Low Income Housing Coalition’s annual “Out of Reach” report finds. In 93% of U.S. counties, the same workers can’t afford a modest one-bedroom.

The report defines affordability as the hourly wage a full-time worker must earn to spend no more than 30% of their income on rent, in line with what most budgeting experts recommend. This year, workers would need to earn $24.90 per hour for a two-bedroom home and $20.40 per hour for a one-bedroom rental. That’s an increase from $23.96 and $19.56, respectively, from last year.

The average hourly worker currently earns $18.78 per hour, the report finds, more than $6 short of the wage needed to afford a two-bedroom rental.

Given each state and locality’s minimum wage, the report finds that the average minimum wage worker in the U.S. would need to work nearly 97 hours per week to afford the average two-bedroom home. That’s more than two full-time jobs.

The pandemic exacerbated housing issues, with low-wage workers facing the brunt of job loss. They were also more likely to contract Covid-19.

Additionally, the report finds that Black and Latino workers are more likely to spend more of their income on rent, as they make less, on average, than white workers. Over 40% of Black and Latino households spend more than 30% of their income on rent, compared to 25% of white households.

NLIHC is urging the government to ensure that Covid-era emergency rental assistance programs help those with the greatest need. It is also calling for policymakers to create permanent, universal rental assistance for eligible households, to invest in new affordable housing and to implement stronger renter protection laws.

Is the US labor shortage the big break AI needs?

(Source: techcrunch.com) 

Chetan Dube@ipsoft | July 9, 2021

Chetan Dube is the founder and CEO of Amelia, a former assistant professor at New York University and an expert on autonomics, cognitive computing and the future impact of a digital workforce.

The tectonic shifts to American culture and society due to the pandemic are far from over. One of the more glaring ones is that the U.S. labor market is going absolutely haywire.

Millions are unemployed, yet companies — from retail to customer service to airlines — can’t find enough workers. This perplexing paradox behind Uber price surges and waiting on an endless hold because your flight was canceled isn’t just inconvenient — it’s a loud and clear message from the post-pandemic American workforce. Many are underpaid, undervalued and underwhelmed in their current jobs, and are willing to change careers or walk away from certain types of work for good.

It’s worth noting that low-wage workers aren’t the only ones putting their foot down; white-collar quits are also at an all-time high. Extended unemployment benefits implemented during the pandemic may be keeping some workers on the sidelines, but employee burnout and job dissatisfaction are also primary culprits.

We have a wage problem and an employee satisfaction problem, and Congress has a long summer ahead of it to attempt to find a solution. But what are companies supposed to do in the meantime?

At this particular moment, businesses need a stopgap solution either until September, when COVID-19 relief and unemployment benefits are earmarked to expire, or something longer term and more durable that not only keeps the engine running but propels the ship forward. Adopting AI can be the key to both.

Declaring that we’re on the precipice of an AI awakening is probably nowhere near the most shocking thing you’ve read this year. But just a few short years ago, it would have frightened a vast number of people, as advances in automation and AI began to transform from a distant idea into a very personal reality. People were (and some holdouts remain) genuinely worried about losing their job, their lifeline, with visions of robots and virtual agents taking over.

But does this “AI takes jobs” storyline hold up in the cultural and economic moment we’re in?

Is AI really taking jobs if no one actually likes those jobs?

If this “labor shortage” unveils any silver lining, it’s our real-world version of the Sorting Hat. When you take money out of the equation on the question of employment, it’s opening our eyes to what work people find desirable and, more evidently, what’s not. Specifically, the manufacturing, retail and service industries are taking the hardest labor hits, underscoring that tasks associated with those jobs — repetitive duties, unrewarding customer service tasks and physical labor — are driving more and more potential workers away.

Adopting AI in manufacturing accelerated during the pandemic to deal with volatility in the supply chain, but now it must move from “pilot purgatory” to widespread implementation. The best use cases for AI in this industry are ones that help with supply chain optimization, including quality inspection, general supply chain management and risk/inventory management.

Most critically, AI can predict when equipment might fail or break, reducing costs and downtime to almost zero. Industry leaders believe that AI is not only beneficial for business continuity but that it can augment the work and efficiency of existing employees rather than displace them. AI can assist employees by providing real-time guidance and training, flagging safety hazards, and freeing them up to do less repetitive, low-skilled work by taking on such tasks itself, such as detecting potential assembly line defects.

In the manufacturing industry, this current labor shortage is not a new phenomenon. The industry has been facing a perception problem in the U.S. for a long time, mainly because young workers think manufacturers are “low tech” and low paying. AI can make existing jobs more attractive and directly lead to a better bottom line while also creating new roles for companies that attract subject-matter talent and expertise.

In the retail and service industries, arduous customer service tasks and low pay are leading many employees to walk out the door. Those that are still sticking it out have their hands tied because of their benefits, even though they are unhappy with the work. Conversational AI, which is AI that can interact with people in a human-like manner by leveraging natural language processing and machine learning, can relieve employees of many of the more monotonous customer experience interactions so they can take on roles focused on elevating retail and service brands with more cerebral, thoughtful human input.

Many retail and service companies adopted scripted chatbots during the pandemic to help with the large online volumes only to realize that chatbots operate on a fixed decision tree — meaning if you ask something out of context, the whole customer service process breaks down. Advanced conversational AI technologies are modeled on the human brain. They even learn as they go, getting more skilled over time, presenting a solution that saves retail and service employees from the mundane while boosting customer satisfaction and revenue.

Hesitancy and misconceptions about AI in the workplace have long been a barrier to widespread adoption — but companies experiencing labor shortages should consider where it can make their employees’ lives better and easier, which can only be a benefit for bottom-line growth. And it might just be the big break that AI needs.

Real Estate Agents Target Record $100 Billion as Home Sales Boom

(Source: bloombergquint.com)  

Noah Buhayar
Jul 09 2021

(Bloomberg) -- The hot U.S. housing market is poised to deliver a banner year for real estate agents.

Commission revenue -- the cut that brokers collect for helping buy and sell homes -- is on track to surge 16% in 2021, surpassing $100 billion for the first time, according to a new analysis by Knock, a property-technology company that lends customers money to buy a new home while helping them sell their old one.

Real Estate Agents Target Record $100 Billion as Home Sales Boom

The increase comes despite a slight dip in the rate that agents are charging customers. In 2021, the average commission rate is expected to be 4.94% -- 20 basis points lower than two decades ago, according to Knock.

Real estate agents have remained the dominant way to buy and sell homes in the U.S., even as companies promising to streamline the process with technology have proliferated. As home prices soar across the U.S., that’s led to a surge in revenue for the real estate brokers, who typically take a cut of every transaction.

While the increase in fees is boon for agents, it puts a spotlight on a revenue model that has drawn scrutiny. Earlier this month, the U.S. Justice Department pulled out of an antitrust settlement reached during the Trump administration with the National Association of Realtors, saying it intends to proceed with a probe of the organization.

©2021 Bloomberg L.P.

Demand For Digital Payments Drives Multifamily PropTech Upgrade

(Source: pymnts.com) 

By PYMNTS
Posted on July 9, 2021

There’s a reason why paper checks have stuck around for multifamily property management companies for so long, and it’s not just because the platforms they use to collect payment from renters have hardly seen in upgrade in the past few decades.

In addition to the familiarity of the payment method, there is a sense of security that can come with renters physically dating a check to prove payments have come in on time — and for property managers, that feature can be helpful for accounts receivable (AR) and reconciliation workflows in the back office.

But the benefits of checks no longer outweigh their risks and burdens, a fact that became painfully apparent during the pandemic. It was a period of “doom and gloom,” said Entrata President Chase Harrington, but one that showcased the power of electronic payments to endure the disruption.

In a conversation with Karen Webster, Harrington explained how the forced jump to electronic payment acceptance in the multifamily arena encouraged an acceleration of property management firms’ digitization efforts. Meeting these newfound expectations became an opportunity for technology providers like Entrata, but supporting modernization will require more than enabling ePayments or stitching together siloed services.

Beyond Rent Payments

FinTech innovation has opened the door for businesses across industries to access tools to automate financial workflows. For the multifamily property management space, these systems have focused mainly on helping firms accept electronic payments, a shift Harrington said was dramatically accelerated amid the pandemic.

“As leasing offices shut down, the paper didn’t work anymore,” he said, adding, “Finally, there was that paradigm shift.”

Industry players awoke to the realization that electronic payments work just as well as checks and, indeed, can be far more beneficial to accounting and cash management purposes.

But the health crisis went even further to change property managers’ mindsets.

“People started to say, ‘Wait, we can operate our business differently because of technology now,’” Harrington said.

Companies today demand far more than portals to accept payments or respond to maintenance requests. They need solutions that can support financial management and accounting, accounts payable (AP), and even marketing and prospect sourcing.

Increasingly, said Harrington, these organizations seek value-added solutions that can tackle other key frictions, like the risk of fraud, which he said is a “massive issue” in the multifamily industry, and saw an uptick amid the pandemic.

For Entrata, that means a significant push to add solutions like identity protection and income verification of housing applicants, identifying payment behaviors that could signal tenant fraud, and expanding these protections into firms’ own AP workflows with the ability to generate single-use virtual cards — a feature currently in the works for Entrata.

Unifying The Experience

In response to multifamily property management firms’ demands for greater functionality, industry technology providers have often turned to merger and acquisition (M&A) activity to scoop up ancillary service providers and incorporate them under one brand. But this can result in clunky interfaces and render a platform too rigid to continue adapting to future needs and market shifts, Harrington said.

Embracing a cloud-native, application programming interface (API)-friendly approach from the get-go means end users and their own clients do not have to bounce around from one system to the next, while the solution can also expand its integrated functionality more efficiently.

“That provides so many efficiencies from data integrity to process efficiency,” Harrington said.

That flexibility will be vital for Entrata as it expands across borders and allows property managers to seamlessly enter their own new markets with a platform that can adapt to local languages, currencies and the unique behaviors of renters.

This strategy also allows the portal to connect the dots for multifamily property managers in a variety of ways.

For example, the ability to loop directly into payroll systems or renters’ bank accounts means further mitigating the risk of photoshopped paystubs or income data errors. Similarly, if a property management firm wants to understand how they should invest in marketing efforts, a portal that offers both marketing and accounting tools can wield accounting data to assess how much a firm should spend to obtain the highest return.

Having raised $507 million this week from Silver Lake, Qualtrics Founder Ryan Smith, Vivint Smart Home Founder Todd Pedersen and others, Entrata will continue to prioritize this system flexibility as it expands not just into new geographic markets, but also within multifamily industry niches.

Harrington said there is significant activity “across the board,” with retirement and senior living an active space, while military and affordable housing are also expanding segments.

For multifamily property managers, the ability to step into these new segments, broaden their reach into new geographies, and streamline overall business management will need more than back-office digitization. It will require solutions that can unify and streamline workflows from AR to AP, with an interface that eases adoption for property managers and renters alike.

With its latest funding, Entrata will continue efforts to fill those gaps for the industry.

“We see the momentum we have,” Harrington noted. “We don’t want to lose the momentum; we want to keep pushing it forward.”

Parks Associates: 40% of MDU Renters are Interested in Bulk Broadband Internet Bundled with Their Rent

(Source: aithority.com)  

By AIT News Desk On Jul 9, 2021

New research from Parks Associates reveals 40% of MDU (multi-dwelling unit) renters in US broadband households are interested in bulk broadband internet bundled with their rent and 77% of those are willing to pay higher rent in exchange for these services. The firm also tracks growing ownership in smart home devices among MDU residents, with 41% of all MDU broadband households owning at least one smart home device, compared to 34% of single-family households. The firm’s latest whitepaper, Future-Ready Broadband: Ubiquitous Connectivity for MDUs, developed for Cox Communities, evaluates the benefits of next-generation connectivity services for MDU property managers and residents and the role of the service provider as a key partner in smart MDU living.

“Consumers need broadband to live, work, learn, shop, and connect to healthcare, banking, and more,” said Jennifer Kent, VP, Research, Parks Associates. “Social distancing during the COVID-19 pandemic has revealed consumer dependence on reliable connectivity and high-speed access, as it is the foundation for access to and quality of connected services like telehealth, video conferencing, and online fitness solutions to meet their daily needs.”

“Today’s homes are dependent on technology and connectivity, and this requires a strong need for consultative engagement for MDU developers and managers. From optimizing operational efficiencies, connectivity solutions, cloud-based services, device choices and integration, Cox supports as a trusted advisor in the industry,” said Vickie Rodgers, VP, Cox Communities. “Smart homes don’t work without great broadband connections and the appropriate integration and Cox Communities provides that solution.”

High smart home device adoption among MDU residents correlates with age. Consumers 25-34 years old are among those more likely to adopt smart home devices, and they are also the most likely to live in a multidwelling unit.

Building on a high-performing broadband backbone, MDU property managers can leverage connected devices and smart platforms that integrate connected solutions to streamline property management tasks and lower operating costs, attract and retain residents, and increase rental revenues. Sixty-five percent of MDU builders report their business model leverages smart home technology to differentiate properties and add value.

These remote-friendly jobs in cryptocurrency pay over $100,000

(Source: cnbc.com)  

Published Fri, Jul 9 2021 
Francisco Velasquez @_FRANVELA

Cryptocurrency is gaining popularity among young investors who are turning to the digital payment method in an effort to build wealth outside of traditional finance systems.

The industry is growing, with companies like Coinbase, the largest American cryptocurrency exchange platform, now at an estimated 56 million verified users and over 1,700 employees. Coinbase became the first cryptocurrency company to list its shares on the American stock exchange in April.

And despite a tight labor market, in part driven by the pandemic, blockchain topped LinkedIn’s most in-demand hard skills for 2020.

Recent job listings compiled by FlexJobs, a site for individuals interested in remote flexible work, found that companies hiring in cryptocurrency are looking for a wide set of skills with some specialized knowledge or experience in technical areas like software, technical content, development, data analytics or product development.

Combined with salary data from PayScale, a compensation platform, FlexJobs put together a list of cryptocurrency jobs currently listed on their site.

Here are some of the current job openings in the field across a variety of skill sets and positions that pay over $100,000:

1. Chief of Staff, President and Chief Operating Officer: about $144,000 per year
2. Director of Talent Management: about $142,000 per year
3. Director, Mergers and Acquisitions Integration: about $133,000 per year
4. Lead Ethereum Strategist: about $126,000 per year
5. Senior Software Engineer: about $119,000 per year
6. Corporate Counsel: about $113,000 per year
7. Quantitative Researcher: about $108,000 per year
8. Senior Backend Developer: about $106,000 per year

Some less technical requirements are common in high-level positions with large-scale teams: team management, organizational development, cross-functional relationship building, communication skills and problem-solving abilities, says FlexJobs career development manager and coach Brie Reynolds.

“We’ve seen a wide range of positions in the cryptocurrency industry offering remote jobs,” Reynolds tells CNBC Make It. “Those positions can range from global compensation and benefits manager, to a customer support analyst to influencer marketing positions.”