ASSOCIATION
IRS Assaults

Latest threats:
Are lower 60/40 tax rates on futures in jeopardy? Click here for our July 12, 2011 blog.

The IRS is trying to deny trading losses and expenses with hobby loss rules. We've covered this on our Webinars of July 7 & 14, 2011 and plan a blog on it soon too.

The IRS is aggressively pursuing taxpayers again to improve compliance and increase tax revenues. It’s highly publicized “close the gap” offensive includes many different audit programs, campaigns and initiatives.

The IRS significantly stiffened tax preparer penalties and raised the bar for tax preparers to offer their services, requiring more education, training and certification. States are doing the same. This happened after the IRS realized storefronts were botching returns and even perpetuating tax fraud. New preparer tax penalties apply to anyone who helps in the preparation of tax returns. Traders and investment managers need to find qualified experts in their specialized fields and few CPAs and hardly any tax storefronts can help them in a proper way.

The IRS is beefing up its 1099-B reporting, especially for brokers on covered securities. The new rules are mandatory effective for 2011. Robert wrote about this in detail in Green’s 2010 Trader Tax Guide.

The IRS has new audit teams targeting certain groups for attack with intensive exams. These groups include the uppe income and offshore account holders. Complex Schedule Ds also draw attention since the IRS finds current Form1099-B reporting to be lacking.

The IRS is beefing up its random audits, and curiously many Americans abroad, especially those working for investment banks are being targeted.

The IRS is beefing up its interest and attacks on business traders and investment managers.

States have always been interested in non-resident vs. resident issues and now they seem bent on raising taxes on non-residents too. NYS recently proposed taxing non-resident hedge-fund managers – who are members of resident money-management firms – on their passed-through carried interest income. NYS backed down after Connecticut's governor invited those money-management firms to move over the border to Connecticut.

States are freezing NOL carryback rights and forcing clients to carry them forward (California and Hawaii).

Now more than ever, traders and investment managers need our Traders Association to watch out for their interest on the IRS and state assault front. Our Traders Association can combine forces to help certain traders in tax court too, if others chip in to the effort.