The Large Business and International (LB&I) Division of the IRS is responsible for tax administration activities for domestic and foreign businesses with U.S. reporting requirements and assets of at least $10 million, as well as the Global High Wealth and International Individual Compliance programs. LB&I addresses taxpayer noncompliance related to unreported income, undisclosed assets, and any other tax avoidance scheme. In this series, we discuss LB&I’s active compliance campaigns.
Virtual Currency Compliance Campaign
The Virtual Currency Compliance campaign addresses noncompliance related to the use of virtual currency. Methods include examination. Taxpayers with unreported virtual currency transactions are urged to correct their returns as soon as practical. The IRS has made it clear that a voluntary disclosure program for tax noncompliance involving virtual currency is not contemplated. Enforcement is likely to be swift. For U.S. tax purposes, virtual currency is property. See IRS Notice 2014-21 for the federal tax implications of convertible virtual currency transactions.
FIRPTA Reporting Compliance for NRAs
Under the Foreign Investment in Real Property Tax Act of 1980, foreign persons are taxed on the disposition of their U.S. real property interests. Generally, the buyer/transferee who pays the foreign person is the withholding agent, and must withhold 15% of the amount realized on the sale, file the necessary forms, and remit the tax. The intent of the FIRPTA Reporting Compliance campaign is to increase voluntary compliance through issue-based examinations and other methods
Foreign Earned Income Exclusion Campaign
Certain U.S. citizens or residents living abroad qualify for the foreign earned income exclusion and the foreign housing exclusion or deduction. See IRC § 911.The Foreign Earned Income Exclusion Compliance campaign addresses taxpayers who claimed these benefits without meeting requirements. Methods include examination.
Forms 1042/1042-S Compliance
Taxpayers who make payments of certain U.S.-source income to foreign persons must comply with withholding, deposit, and reporting requirements. See Forms 1042 (“Annual Withholding Tax Return for U.S. Source Income of Foreign Persons”) and 1042-S (“Foreign Person’s U.S. Source Income Subject to Withholding”). This campaign addresses noncompliance and errors through methods including examination.
Expatriation of Individuals
U.S. citizens and long-term residents who expatriated on or after June 17, 2008, are subject to filing requirements and tax obligations. See IRC § 877A. The Expatriation of Individuals Compliance campaign addresses noncompliance through methods including examination.
Nonresident Alien Income from U.S. Real Property
Rental income from property located in the United States is considered U.S.-source income. I.R.C. § 861(4). Nonresident aliens who receive such income must comply with all U.S. tax reporting and filing requirements. The NRA Income from U.S. Real Property Compliance campaign addresses noncompliance through methods including examination.
High Income Non-Filer
U.S. citizens and residents are subject to tax on worldwide income, even if they do not receive Forms W-2, Forms 1099, or their foreign equivalents. The High Income Non-Filer Compliance campaign concentrates on taxpayers who have not filed tax returns. Methods include examination.