In our last post we discussed some different possibilities for how the Internal Revenue Service might tax the virtual currency known as bitcoin. The new type of currency has generated a lot of controversy and exists in a legal grey area because people are trading it for goods and services, holding it as an investment, and producing it as a business, but it is not recognized as a currency by any sovereign nation.
At this point in the year California taxpayers are getting serious about submitting their income tax returns. This means carefully combing through one’s finances and making sure that all income and deductions are properly accounted for and that the details are all correct on the forms being submitted to the IRS. For California residents who are holders of the virtual currency bitcoin, there are some important decisions to make about how to report bitcoins on a tax return.
The Internal Revenue Service is not particularly friendly toward small businesses. Year after year, the IRS accuses small business of cheating their way out of millions of dollars in taxes. Small business owners in California, however, know how complicated it is to file a tax return, and the IRS is unforgiving when mistakes are made. Now, tax collectors are utilizing new resources to make things even more difficult for business owners.
It may sound at first like a political talking point to say that there are more and more Americans giving up citizenship because of high tax rates, however, recent data shows that in fact more people are pursuing this option and that in many cases it can be linked to taxes. In 2013 3,000 Americans decided to give up their citizenship, according to government publications. This is a major increase from the previous year, when only 993 people gave up their citizenship.
This is the time of year when the issue of a tax audit is most on the minds of the average California residents, because many are in the process of preparing their yearly income tax return. Tax audits are a generally intimidating proposition and most people do everything they can to avoid an audit. However, without insight into how the IRS works and what types of things can trigger an audit, this can be hard to do.
Estate planning is not often an item that California readers see in the headlines, except for when an estate planning issue with a celebrity or other public figure makes the news. We can learn a lot from these examples about what sorts of contingencies to plan for and what sorts of unexpected issues may come up.