SCOTTISH recruitment firm Incubate Consulting has a double reason for celebration this April, with the completion of a successful first 12 months in business and an award nomination.
The Bridge of Allan-based business has been shortlisted for Best Recruitment Consultancy (Newcomer) in the s1jobs.com awards.
Neil Brown, Incubate’s director of Recruitment and Search, said: “We’ve had a wonderful first year in business, which has exceeded our expectations and we now look forward to expanding our successes in the twelve months to come.
“We’re delighted and honoured to have been shortlisted for best newcomer.”
The awards ceremony is due to take place in Glasgow in October.
On May 12, the IRS issued a statement of work soliciting “consulting services to support a taxpayer examination involving virtual currency.” The SOW was sent to popular cryptocurrency tax software companies such as CyrptoTrader.Tax, among others, in an effort to provide the IRS with the industry expertise necessary to identify and pursue cases where taxpayers reporting (or lack thereof) of digital assets is inconsistent with their actual cryptocurrency transactions. In other words: the IRS is hiring outside contractors who are experts in cryptocurrency to help them identify cryptocurrency investors whose tax returns either omit or contain incorrect data regarding cryptocurrency transactions. There’s only one reason why the IRS would hire experts in cryptocurrency as outside contractors: because they plan to significantly increase the volume and scrutiny of cryptocurrency audits.
How Does the IRS Treat Cryptocurrency?
The IRS defines a virtual currency as “a digital representation of value” functioning “as a unit of account, a store of value, and a medium of exchange.” Any asset with these characteristics, “[r]egardless of the label applied, . . . will be treated as virtual currency for [f]ederal income tax purposes.” Some virtual currencies are convertible, which means that they have equivalent values in one or more traditional currencies (fiat) and may act as substitutes for them. The more well-known virtual currencies, such as Bitcoin, Ethereum, and Ripple, are termed cryptocurrencies because they use cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain.
IRS Guidance on Treatment of Cryptocurrency
In Notice 2014-21, the IRS issued the first formal guidance on how cryptocurrency should be taxed. In a surprising move, the IRS applied general principles of tax law to conclude that virtual currency is property, rather than “currency,” for federal tax purposes. Consequently, an exchange of one virtual currency for another (e.g., Bitcoin for Ethereum) is a taxable transaction, resulting in gain or loss as well as a reporting obligation on the part of the taxpayer. This makes a lot of crypto transactions subject to the favorable capital gain and loss treatment instead of the more onerous ordinary income treatment. Mining and other receipt of units of cryptocurrency, such as being paid in cryptocurrency, create tax obligations and may need to be reported as ordinary income if they constitute income. Much like with the purchase of stock traded on a public exchange, simply buying or investing in cryptocurrency does not create a taxable event. Rather, it is the sale or exchange of virtual currency, or receipt of virtual currency in exchange for services performed or other property, that creates a taxable event.
The IRS provided further guidance in Revenue Ruling 2019-24, finding that a cryptocurrency “hard fork” (a single cryptocurrency splitting into two) in which no units of a new cryptocurrency are received does not result in gross income, but an “airdrop” (free distribution of units of cryptocurrency) does. In addition, the IRS has released and published on its website a set of frequently asked questions addressing the tax treatment of other virtual currency transactions, including those in which the virtual currency is held as a capital asset.
IRS Cryptocurrency Enforcement
In 2017, the IRS filed a lawsuit against Coinbase (one of the largest crypto exchanges) to obtain account holders’ names and account information. Why? Because during the years 2013 through 2015 Coinbase had almost six million customers, but only 800 – 900 taxpayers filed tax returns that reported gains from cryptocurrency. That’s a huge gap, and the court agreed that the IRS had a legitimate interest in investigating further. In 2018, Coinbase turned over 13,000 names to the IRS as a result of the litigation.
Not surprisingly, just over a year after the IRS received 13,000 names from Coinbase, the IRS sent roughly 10,000 “soft letters” to Cryptocurrency account holders. A so-called “soft letter” is not an IRS audit, but instead warns the recipient that they may want to consider taking certain action on their tax returns before an audit happens. Soft letters certainly doesn’t feel “soft” to the recipient, because anyone who gets one knows that the IRS knows something specific about them. If that isn’t on the tax return, that’s when trouble starts. Those soft letters didn’t necessarily mean that something was wrong on the recipients’ tax returns, but it may have been, and gave everyone a good faith opportunity to check the return and make sure all crypto was reported correctly.
Just about a year has gone by, and now the IRS is looking to hire crypto experts to assist with audits of taxpayers who have crypto. The statement of work looks for contractors who can “ingest all data provided by the IRS, as well as any attendant or related data the contractor collects through their systems.” Even though a cryptocurrency blockchain is anonymous, it remains susceptible to tracing as a public ledger. According to the statement of work, contractors should be able to analyze blockchain data and application programming interface keys obtained from virtual currency exchanges. Further, a contractor should “be available to consult with the IRS during meetings with taxpayers or their representatives,” including meetings with IRS Appeals Officers, “assist the IRS with trial preparation,” and, if needed, “to testify at trial as a summary witness explaining the calculations derived from the underlying data.” In other words, play time is over.
Can the IRS Do That?
You might be thinking, wait, I thought IRS data is private and they can’t provide my tax return information outside of the IRS agency, right? Yes, in general that’s the rule: the IRS has to keep tax return information private. But there are exceptions to that rule, and the IRS has used outside contractors before. The IRS has long relied on such advice for valuation purposes—most frequently for valuing non-cash charitable contributions, gifts, and estates. Conservation easements and artwork are especially contentious valuation items, often pitting the IRS’ experts against the taxpayer’s. Indeed, for artwork, the IRS has institutionalized reliance on outside expert advice in the form of the Commissioner’s Art Advisory Panel, comprised of academics and industry representatives from the private, public, and non-profit sectors, and the Art Appraisal Services (AAS) unit in the IRS Appeals Office. The panel provides advice and makes recommendations to AAS regarding the acceptability of appraisals that taxpayers submit supporting the fair market value claimed on the wide range of works of art featured in income, estate, and gift tax returns. In addition, anytime a tax return selected for audit includes an appraisal of a single work of art valued at or more than $50,000, the examining agent or appeals officer is required to consult AAS for possible referral to the panel, which meets in closed session to review all referred appraisals.
Procedures adopted by the AAS ensure strict compliance with the confidentiality requirements. These procedures ensure that information provided to panel members does not include the taxpayer’s name, the type of tax, the tax consequences of any adjustments to the appraised value, or details regarding the appraiser. To minimize the possibility that panelists recognize a taxpayer’s entire collection, the works of art are usually discussed in alphabetical order by artist or, in the case of decorative art, by object type. If there is a conflict of interest with a panelist and a work of art under review, the panelist does not participate in the discussion and is excused from that portion of the meeting.
In sharp contrast with how it has routinely used outside expert advice on artwork appraisal audits, the IRS pushed the envelope when in 2014, it engaged the California-based litigation powerhouse Quinn Emanuel Urquhart & Sullivan to assist with Microsoft’s transfer pricing audit, spanning the company’s 2004 to 2006 tax years. The $2.2 million contract with Quinn Emanuel was authorized by a Temporary Treasury Regulation issued in June 2014, issued two weeks after the contract was awarded. The regulation was issued under the IRS’ authority for summoning “books, papers, records, or other data” for examination and summoning individuals for taking their testimony under oath. Those regulations have now been finalized, and provides that a contractors may “receive and review” the summoned materials and “participate fully” in taking the testimony of the summoned person “in the presence and under the guidance of an IRS officer or employee.”
News of the Quinn Emanuel contract provoked sharp criticism from practitioners and on Capitol Hill, with many questioning the propriety of the IRS’ delegating a core governmental function—a tax audit—to private litigators. In a summons enforcement action, Microsoft challenged the validity of the regulation on those grounds. But a taxpayer challenging summons enforcement is in for an uphill battle. Although the district court expressed concern at “Quinn Emanuel’s level of involvement in this audit” and was troubled by “[t]he idea that the IRS can ‘farm out’ legal assistance to a private law firm,” the court ordered enforcement of the summons. The case is United States v. Microsoft Corp., 154 F. Supp. 3d 1134, 1143-44 (W.D. Wash. 2015).
Although the Court upheld the summons, a warning that “this case may lead to further scrutiny by Congress” proved prophetic when, in 2019, Congress passed the Taxpayer First Act, which added a new Section of the Internal Revenue Code that expressly prohibits the type of Quinn Emanuel arrangement permitted in Microsoft. That new subsection precludes an outside consultant from examining summoned “books, papers, records, or other data,” except for “the sole purpose of providing expert evaluation and assistance to the Internal Revenue Service.” It also prohibits any person, “other than an officer or employee of the Internal Revenue Service,” from “question[ing] a [summoned] witness under oath.” It is a question of when and how the IRS’s use of outside experts in cryptocurrency cases will be challenged in court – not if.
The Bottom Line
The Coinbase reporting gap puts this problem in perspective: in just one exchange there were over six million customers and less than one thousand taxpayers who reported cryptocurrency transactions. The IRS is justifiably wondering who the rest of the account holders are, why they haven’t reported any cryptocurrency transactions on their tax returns, and will be looking soon to make some strong examples out of cryptocurrency account holders who fail to fulfill their income tax obligations.
Thank you to Tax Notes reporter William Hoffman for bringing this issue to my attention.
A consortium of media outlets are suing the Cooper administration over public records concerning the state’s response to coronavirus. We talk with Rose Hoban, editor of North Carolina Health News, about why her outlets and others are resorting to legal action for the records.
More than 102,000 people in the US have lost their lives to Covid-19 – by far the biggest death toll in the world.
What did Trump say?
“We will be today terminating our relationship with the World Health Organization and directing those funds” to other global public health charities, Mr Trump said in the White House Rose Garden.
“The world is now suffering as a result of the malfeasance of the Chinese government,” he said.
He added that China had “instigated a global pandemic that has cost over 100,000 American lives”.
The president accused China of pressurising the WHO to “mislead the world” about the virus.
What’s the background to this?
Mr Trump’s criticism of the WHO’s handling of the pandemic began last month when he threatened to permanently withdraw US funding, suggesting the UN health agency had “failed in its basic duty” in its response.
“It is clear the repeated missteps by you and your organisation in responding to the pandemic have been extremely costly for the world,” he wrote in a letter to WHO chief Tedros Adhanom Ghebreyesus on 18 May.
He later labelled the WHO a “puppet of China”.
China has accused the US of being responsible for the spread of the virus on its own soil, attributing the outbreak to American “politicians who lie”.
Earlier this month, Chinese Foreign Ministry spokesman Zhao Lijian said Mr Trump was trying to mislead the public, smear China and “shift the blame for [the US’s] own incompetent response”.
WHO member states have since agreed to set up an independent inquiry into the global response to the pandemic.
The UK’s coronavirus furlough scheme will finish at the end of October, Chancellor Rishi Sunak has confirmed.
At the No 10 briefing, Mr Sunak also set out how employers will have to start sharing the cost of the scheme.
From August, employers must pay National Insurance and pension contributions, then 10% of pay from September, rising to 20% in October.
Also, workers will be allowed to return to work part-time from July, but with companies paying 100% of wages.
Mr Sunak said the Coronavirus Job Retention Scheme will adjust so “those who are able to work can do so”.
Some 8.4 million workers are having 80% of their salaries paid for by the government – up to £2,500 a month – under the scheme, which was originally intended to last until the end of July.
Earlier this month, the chancellor extended the scheme until the end of October, but did not spell out how employers would start contributing.
Under Friday’s changes, furloughed workers will continue to get 80% of pay until the end of October, but by then a fifth of their salary will have to be met by employers.
“Then, after eight months of this extraordinary intervention of the government stepping in to help pay people’s wages, the scheme will close,” Mr Sunak said.
Asked if he would “switch the furlough scheme back on” in the case of a second peak in cases and the reintroduction of lockdown measures, the chancellor said the scheme “as it stands in a national way, in the way that it is designed” will end in October.
“Eight months, as I said, is I think a generous and long period of time,” he said.
The chancellor is attempting a delicate balancing act.
Slowly withdrawing very expensive government support programmes without crashing the economy.
Cash-strapped employers must decide if they can take on an increasing burden to keep workers for whom there may be little or no work.
The chancellor says the government can’t go on meeting the full cost of the furlough scheme.
But the withdrawal is more gradual than many had feared and the government hopes that the support withdrawal will be mirrored by business demand recovering.
We may be about to find out how many real jobs are left in the post-coronavirus economy.
Employers’ claims under the scheme have reached £15bn so far, however the scheme is expected to cost a total of around £80bn, or £10bn a month.
The Office for Budget Responsibility is set to publish detailed costings next week.
It comes as the latest UK-wide figures show another 324 people have died after testing positive for coronavirus in hospitals and the wider community, bringing the total to 38,161.
Some 131,458 people were tested for coronavirus on Thursday, with 2,095 more positive cases reported.
Restaurateur David Moore told the BBC he is “deeply, deeply worried” about the changes to the scheme.
Mr Moore, who owns London restaurant Pied a Terre, said it is unfair for hospitality firms to start paying towards wages when they do not have any revenues.
“It is massively disappointing and sheer lunacy to try to get an industry who hasn’t had any revenues for what will be then probably five months, to ask them to start contributing,” he told BBC Radio 4’s The World at One.
He warned that some businesses could go bust as a result.
“Will we have any money coming through the door to help contribute? If we don’t it is all too late, a lot of businesses are heading down the pan.”
Labour’s shadow chancellor Anneliese Dodds also warned about job losses.
“It is concerning that there is no commitment within these plans for support to only be scaled back in step with the removal of lockdown,” she said. “Nor is there any analysis of the impact on unemployment of a ‘one size fits all’ approach being adopted across all sectors.”
How will the scheme change?
From 1 July, businesses will be allowed to bring furloughed employees back part-time, a month earlier than previously announced. The move is aimed to help support people back to work, the government said.
It will be down to individual firms to decide what part-time means. They will be able to set the hours and shift patterns staff will work when they return, but companies will have to pay wages while they are in work.
“Extending the job retention scheme and making it more flexible is key to getting the economy back on its feet,” said Federation of Small Businesses national chairman Mike Cherry.
“By providing employers with the adaptability they’ll require as businesses adjust to a new normal, and bringing forward the flexible furlough launch date, the government is giving hope to small firms right across the UK.”
From 1 August the level of government grant will be reduced “to reflect that people are returning to work”.
Furloughed workers will continue to receive 80% of their pay, but from August it will include a growing employer contribution. It will start with bosses paying NI and pensions in August, plus 10% of pay in September, rising to 20% in October.
The details: How employers’ contributions will increase?
During August the government will pay 80% of wages up to a cap of £2,500. Employers will have to pay NI and pension contributions. For the average claim, that’s 5% of the gross employment costs the employer would have incurred had the employee had not been furloughed.
In September, the government will cut its grants to 70% of wages up to a cap of £2,190. Employers will pay NI and pension contributions and 10% of wages to make up the 80% total up to a cap of £2,500. That works out at 14% of the average gross employment costs the employer would have incurred.
In October the government grant will be cut to 60% of wages up to a cap of £1,875. Employers will pay NI and pension contributions and 20% of wages to make up the 80% total up to a cap of £2,500. That’s 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.
Forex news for North American trade on May 29, 2020:
Gold up $14 to $1732
WTI crude oil up $1.28 to $35.00
US 10-year yields down 4.3 bps to 0.65%
S&P 500 +0.5%
AUD leads, NZD lags
The main event of the day was China and Trump’s planned announcement to retaliate for the Hong Kong security law. That kept markets on edge and erased an early positive tone in risk assets.
As he began to speak and launched some tough talk, risk trades sagged but when it came time to deliver the US reaction, it was meek. All the announcements related to things that were leaked or rumored previously and stocks quickly rebounded along with commodity FX.
Earlier in the day it was all about flows. It was the final trading day of the month and there was a big bid in EUR/GBP and GBP/USD. The fixing demand arrived but sellers met it and both pairs sagged. Cable fell a full cent from the highs and as in negative territory on the day before a late bounce to a 16 pip daily gain.
The euro will close the week close to 1.1100 and that’s comfortably above the key 1.1020 zone but off the 1.1145 session high.
When you check the broader rundown in the market there wasn’t much to report in terms of daily moves in FX with most pairs finishing about 20 pips from starting levels. AUD had a bit more jam but the highs came early in Europe.
The gold and oil markets were more-lively as both were bid into month-end. Oil was quiet until the final hour of trading when a big bid came through ahead of the monthly fix. Gold rebounded for the second day then briefly dipped after Trump but was picked up again late.
President Donald Trump has announced that he will start to end preferential treatment for Hong Kong in trade and travel, in response to a new security law pushed by Beijing.
He described the Chinese government’s moves to introduce the measure in Hong Kong as a “tragedy”.
Mr Trump also said he was “terminating” the US relationship with the World Health Organization over Covid-19.
China has told the West to “stop interfering” in Hong Kong.
The territory, a former British colony, enjoys unique freedoms not seen in mainland China. But many people there see the looming security law as bringing an end to Hong Kong’s special status, agreed under a 1984 agreement between China and the UK.
There are fears the proposed measure – which has sparked a wave of anti-mainland protests – could end Hong Kong’s unique status and make it a crime to undermine Beijing’s authority in the territory.
On Friday, the UK Home Office confirmed that up to three million people with BNO status could acquire citizenship in this way – as long as they applied for and were granted a passport.
What did President Trump outline?
Mr Trump said that he no longer considered Hong Kong to be separate from China.
“China has replaced One Country, Two Systems with One Country, One System”, Mr Trump told reporters in the White House’s Rose Garden, in a prepared statement that attacked China on several fronts.
“This is a tragedy for Hong Kong… China has smothered Hong Kong’s freedom,” he said.
Mr Trump said sanctions would be imposed on Chinese and Hong Kong officials who were believed by Washington to be involved in eroding the territory’s autonomy. He did not outline what form these sanctions would take.
He added that the State Department would revise its travel advisory for Hong Kong in light of “increased danger of surveillance” from China.
The president also said the US would suspend the entry of foreign nationals from China identified by the US as potential security risks. There are fears that this could affect thousands of graduate students.
No further details were given on Mr Trump’s announcement that he would “terminate” the US relationship with the WHO. In April, the US president said he would halt funding to the UN agency because it has “failed in its basic duty” in its response to the coronavirus outbreak.
The Global Times newspaper – whose views are believed to reflect those of China’s leaders- called the move towards revoking Hong Kong’s special status with the US “recklessly arbitrary”.
Hong Kong’s Justice Secretary Teresa Cheng told the BBC’s Chinese Service earlier on Friday that any threat of sanctions was unacceptable.
“Are the sanctions being imposed with a view to coerce another state to change their policy…? Any such sanctions are not going to benefit anyone,” she said.
Adding a new edge to the deteriorating US-China relations
Analysis byZhaoyin Feng, BBC Chinese
The US removing Hong Kong’s special privileges sent a strong warning signal to China, which activists and protesters in the territory will welcome.
The announced measures include not only Hong Kong, but also intellectual property theft and Chinese firms listed in the US.
According to media reports, Washington is expected to revoke more than 3,000 Chinese graduate students’ visas. While this accounts for only 1% of the total number of Chinese students in America, Washington’s move will open yet another front of the bilateral tensions.
But the separate punishments announced for China may not be as harsh as what had been expected, as indicated in the stock markets’ rise after his speech.
Beijing will probably match some of Washington’s sanctions and restrictions in a tit-for-tat manner. After a short-lived honeymoon since the trade deal, China and the US appear to be heading towards the abyss at an accelerating speed.
What is the security law about?
China has proposed security legislation which would make it a crime to undermine Beijing’s authority in Hong Kong, and could also see China installing its own security agencies in the region for the first time.
China’s parliament has backed the resolution – which now passes to the country’s senior leadership.
Full details about exactly what behaviour will be outlawed under the new security law are not yet clear. It is due to be enacted before September.
However, it is expected to criminalise:
secession – breaking away from China
subversion – undermining the power or authority of the central government
terrorism – using violence or intimidation against people
activities by foreign forces that interfere in Hong Kong
Experts say they fear the law could see people punished for criticising Beijing – as happens in mainland China. For example, Nobel Laureate Liu Xiaobo was jailed for 11 years for subversion after he co-authored a document calling for political reform.
China’s foreign ministry in Hong Kong described US criticism of the new draft law as “utterly imperious, unreasonable and shameless”.