Connect with us

Altcoin News

The IRS Continues To Clamp Down On Cryptocurreny

Published

on

The IRS Continues To Clamp Down On Cryptocurreny
The IRS Continues To Clamp Down On Cryptocurreny

Willful and non-willful tax flubs are different. Taxes are complex, and innocent tax mistakes can often be forgiven — maybe with no penalty. Even if there is a penalty, non-willful is vastly lower than willful. In a criminal tax case, this fundamental dichotomy can mean the difference between innocence or guilt, freedom or incarceration. 

But penalties in civil cases can be plenty bad — and most tax cases are civil — and to the United States Internal Revenue Service, bad intent may not be bad at all. With crypto, the IRS has said it is digging hard, investigating both tax evasion and just poor compliance. But any interaction with the IRS can routinely involve some kind of penalty. Sometimes, the IRS uses the threat of penalties to encourage payments. But in other cases, the IRS pursues penalties with a vengeance. 

A good example is offshore accounts, which have strong parallels to crypto tax-compliance issues. Both willful and non-willful failures to report offshore accounts can be penalized. Civil penalties for non-willful violations can be $10,000 per account per year. But if the IRS says you were willful, you can pay up to $100,000 or 50% of the amount in the account. This is for civil cases, imposed in the context of regular IRS audits, even through the mail. If the IRS says you were willful and wants big penalties, you can pay them or push back through the IRS Appeals Division. IRS Appeals is the classic place where the IRS and taxpayers settle disputes. 

But sometimes, either the IRS or the taxpayer won’t budge. Some courts say willfulness is a resolution to disobey the law, but one that can be inferred by conduct. Watch out for conduct meant to conceal. However, much less can now be willful. The IRS penalizes for willful blindness and recklessness. The IRS often refers to Section 6672 of the tax code, which involves payroll taxes. Every employer must withhold taxes and promptly send the money to the IRS. If you don’t, Section 6672 permits the government to collect it from officers, directors and even just check-signers — any “responsible” person who willfully fails to pay employment taxes. Willful mean in this context is very favorable to the government. 

Taxpayers are readily found to be willful if they merely ought to have known there were a risk withholding taxes were not being paid, and if they were in a position to find out. The IRS usually wins these payroll tax cases, so willful in this context means pretty little. Aren’t foreign bank accounts different? The IRS appears not to think so. In the case Bedrosian v. the U.S., Arthur Bedrosian opened two Swiss bank accounts in the 1970s but did not tell his accountant until the 1990s. The accountant advised him to do nothing. He said it would be cleared up at Bedrosian’s death when the assets in the accounts were repatriated as part of his estate. But in 2007, a new accountant listed one account and not the other. Eventually, Bedrosian amended his tax returns to correctly report both accounts. The IRS said the violation was willful and slapped on a penalty of $975,789 — 50% of the maximum value of the account. The District Court for the Eastern District of Pennsylvania found Bedrosian’s actions “were at most negligent,” and that the omission of the large account was “unintentional oversight or a negligent act.” So, the government appealed to the 3rd U.S. Circuit Court of Appeals. The 3rd Circuit reversed the lower court’s decision due to the IRS’ arguments about the much harsher willful standards from Section 6672 payroll tax cases. The 3rd Circuit cited two Section 6672 cases and quoted the standard for reckless disregard from one. The Bedrosian case was remanded to the District Court to apply the new standard. 

The fear is that willfulness is beginning to look quite broad — just as the IRS likes. The IRS can almost always show willfulness any time payroll taxes were not paid. The flimsy “in a position to find out” standard in the context of Section 6672 noncompliance is very broad. In short, is the government seeking a sort of carte blanche when it comes to proving willful FBAR penalties (i.e., when one fails to report a foreign bank account)? The Justice Department’s reply in the Bedrosian case claims that the taxpayer, by signing and filing his or her return without reviewing it, “ought to have known” that there was a “grave risk” the form might not be accurate. This argument suggests an attempt to use the signing of a return as inherent reckless disregard of the duty to report foreign accounts. The Justice Department has successfully argued in other cases that merely signing a return without the proper box checked is per-se willfulness — see United States v. Horowitz, et al., 123 AFTR 2d 2019-500 (DC MD); Kimble v. United States, 122 AFTR 2d 2018-7109 (Ct. Fed. Cl.). The courts in both cases said taxpayers have constructive knowledge of the content of their tax returns and cannot claim ignorance. In Horowitz, the taxpayers are arguing on appeal that the Section 6672 standard is inappropriate because FBAR willfulness occurs in a much different context.

Altcoin News

Binance To Start Lending XMR, ZEC and DASH

Published

on

Binance To Start Lending XMR, ZEC and DASH
Binance To Start Lending XMR, ZEC and DASH

Binance exchange will feature three new coins within the fifth phase of its crypto lending product available for subscription starting from Sept. 20.

After initially launching its Binance Lending Service on Aug. 28, Binance will now allow users to lend assets and earn interest with three major altcoins, including privacy-focused coin Monero (XMR), Zcash (ZEC) and Dash (DASH).

Similarly to the initial phase, lending products on the fifth phase on the platform will have a 14-day fixed-term lending period after subscription from Sept. 20 to Sept 21. According to the announcement, all cryptocurrencies will have the same annualized interest rate of 3.5%.

In the initial phase, Binance’s native crypto Binance Coin (BNB) had the highest annualized interest rate of 15%, while the fourth phase offered 10% and 6% interest rates for BNB. The phase also offered lending for Bitcoin (BTC), with 3% interest rate and a total subscription cap of 2,000 BTC as well as Ether (ETH), Ethereum Classic (ETC) and stablecoin Tether (USDT). 

The interest calculation period for the fifth phase will be from Sept. 20 to Oct. 4, while interest payout time will take place immediately after the loan term matures, Binance noted. Yesterday, Binance CEO Changpeng Zhao dispelled fears that a hacker had attacked its Bitcoin futures platform, launched on Sept. 2. Earlier today, the China-founded exchange was reported to have make its first strategic investment in a Chinese firm after leaving China amid the local crypto trading ban in 2017.

Continue Reading

Altcoin News

The Japanese Messaging Company Line Launches Trading Platform Bitmax

Published

on

The Japanese Messaging Company Line Launches Trading Platform Bitmax
The Japanese Messaging Company Line Launches Trading Platform Bitmax

Japanese messaging giant Line launched its new crypto trading platform Bitmax on Sept. 17, Following regulatory approval to operate a crypto exchange in early September.

Line’s blockchain arm LVC Corporation officially introduced its newly launched crypto platform today. Following the previous announcement, Bitmax will initially allow users to trade five major cryptocurrencies including Bitcoin (BTC), Ether (ETH), XRP, Bitcoin Cash (BCH) and Litecoin (LTC).

With exposure to 81 million users in Japan, Line now accepts deposits and withdrawals through its mobile payment service, Line Pay, while crypto trading service can be now accessed from Line Wallet, according to the announcement. The newly launched Japanese exchange welcomes newcomers to crypto trading by allowing users to make small transactions of under 1,000 Japanese yen — worth around $9 at press time.

As emphasized in the announcement, Bitmax is different from Line’s Singapore-based crypto exchange Bitbox, which operates globally, excluding Japan and the United States. Launched in July 2018, Bitbox is not accessible for Japanese traders due to Japan’s crypto exchange license requirements, as previously reported. Line has actively embraced crypto and blockchain technology so far. In 2018, Line launched its native cryptocurrency called Link along with the token-based blockchain network Link Chain. In June 2019, Line Pay Corporation, Line’s financial services arm, teamed up with global payment giant Visa to collaborate on new blockchain and electronic payments solutions.

Continue Reading

Altcoin News

Bitfinex Banking Partner Put Under Swiss Regulatory Supervision

Published

on

Bitfinex Banking Partner Put Under Swiss Regulatory Supervision

Switzerland-based financial services firm Global Trade Solutions AG has been put under supervision by Swiss financial regulators.

The action by the Financial Market Supervisory Authority (FINMA) seems to have been prompted by the firm’s association with an alleged scam worth $850 million involving cryptocurrency exchange Bitfinex and its sister organization Tether Ltd.

Global Trade Solutions (GTS) is the parent company of several subsidiaries including Crypto Capital, a payments processing firm with a direct connection to Bitfinex. Additionally, it may also be linked to Global Trading Solutions LLC, another financial services provider that came under the scanner of the US government earlier this year.

 Layers of Shady Deals

The alleged scam that eventually led to FINMA’s action against GTS AG is as elaborate as money laundering schemes usually get. It involves layers and layers of shadow banks and proxy companies set up to evade suspicion.

Troubles started brewing for GTS during an investigation against an alleged scam that involved the perpetrators using multiple bank accounts to transfer money to a number of cryptocurrency exchanges, some of them unnamed.

Two suspects — Reginald Fowler of Arizona and Ravid Yosef, an Israeli national — were charged with bank fraud and conspiracy to commit bank fraud, earlier in April 2019. This is where things become interesting in the context of this story.

Apparently, two of the bank accounts named by the U.S. Attorney’s Office for the Southern District of New York in the court documents were registered under the name Global Trading Solutions LLC (owned by Reginald Fowler himself).

Now, the court documents do not explicitly state that Global Trading Solutions is related to Global Trade Solutions AG. However, follow-up journalistic investigations show that the two entities are indeed related.

Besides, even if we ignore any direct link between Global Trade Solutions AG and Global Trading Solutions LLC for a moment, the latter is still believed to have direct ties with Crypto Capital, which in turn, names the Swiss financial services provider as its parent company.

Under these circumstances, it is hardly a surprise that the FINMA has decided to tighten the noose on Global Trade AG.

The Bitfinex Connection

There is documented evidence that Global Trading Solutions has offered services to Bitfinex in the past.

The same can be said about Crypto Capital, which touts itself as a one-stop-platform that enables investors and traders to “deposit and withdraw fiat funds instantly to any crypto exchange around the world.”

It has established links with several cryptocurrencies including Bitfinex, Kraken, and QuadrigaCX (now-defunct), among others. Basically, any cryptocurrency exchange that is denied access to banking services on regulatory grounds turns to Crypto Capital and other similar entities to use them as intermediaries for transferring funds to their customers.

Crypto Capital is currently under scrutiny for its role in the infamous $850 million shady transactions allegedly perpetrated by Bitfinex and Tether Ltd. For those out of the loop, Tether Limited is accused of colluding with Bitfinex to cover up an $850 million loss while misleading investors in the state of New York.

The lawyers representing both Bitfinex and Tether had previously argued that the fund in question wasn’t actually lost, but was seized from the accounts of Crypto Capital by the governments of the US, Portugal, and Poland.

Do you think this new development will somehow stir more trouble for Bitfinex and Tether? Share your thoughts in the comments below. 

 

Continue Reading

TRENDING

Copyright © 2015 Crypto Global News Team.