IRS’ Latest Updates Address ERC, Digital Asset and Whistleblower Enforcement

The Internal Revenue Service (IRS) recently issued three News Releases that are noteworthy for Virginia business owners and other taxpayers in the Commonwealth. These News Releases highlight some of the IRS’ current enforcement priorities—and the efforts it is actively undertaking to combat federal tax fraud, evasion and abuse. Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains.

Employee Retention Credit (ERC) Fraud Enforcement

Uncovering and prosecuting Employee Retention Credit (ERC) fraud remains a top enforcement priority for the IRS in 2024. On August 8, 2024, the IRS issued a News Release discussing its ongoing ERC fraud enforcement efforts—including its efforts to “intensify[] audits and pursu[e] civil and criminal investigations of potential fraud and abuse.”

According to the IRS’ News Release, thousands of audits and hundreds of criminal cases are currently underway. While the IRS has restarted processing valid ERC claims, it is also closely scrutinizing pending claims for “warning signs” for fraud.

Digital Asset Income Tax Compliance

On August 9, 2024, the IRS released a new draft of Form 1099-DA, “which is the form for brokers to report certain sale and exchange transactions of digital assets.” Brokers will be required to begin using Form 1099-DA in 2025. Digital asset compliance has been an enforcement priority for the IRS in recent years as well, and by requiring brokers to disclose their clients’ transactions, the IRS hopes to significantly improve compliance rates going forward.

Like other forms of income, U.S. taxpayers have an obligation to report their worldwide income from digital asset transactions to the IRS. Taxpayers also have an obligation to report qualifying foreign financial assets to the IRS. This includes not only cryptocurrency holdings, but NFTs and other digital assets as well.

Working with Whistleblowers to Uncover Non-Compliance

National Whistleblower Day was July 30. To celebrate the occasion, the IRS issued a News Release touting the success of its whistleblower program on July 29, 2024. The IRS relies on whistleblowers—primarily current and former employees of corporate taxpayers—to come forward with information about tax violations that it doesn’t have a way of uncovering on its own.

According to the News Release, the IRS has paid more than $1.2 billion to whistleblowers since the inception of its whistleblower program in 2007. These whistleblowers have helped the IRS collect approximately $7 billion in previously undisclosed tax liability. The News Release also notes that “[i]n Fiscal Year 2023, the Whistleblower Office established 16,932 award claims, an increase of 44% compared to the average of the prior four years.”

Contact Virginia Tax Lawyer Kevin E. Thorn

Thorn Law Group is a tax compliance and defense law firm that represents businesses and individuals in all federal tax-related matters. If you need to know more about the IRS’ ongoing enforcement efforts in any of the areas discussed above, we invite you to get in touch. To request a confidential consultation with Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 703-752-3752 or contact us online today.