2021 Year in Review: What Do U.S. Taxpayers in Massachusetts Need to Know?

As 2021 comes to a close, many people are already looking ahead to 2022. But, as we move into the New Year (and prepare for tax season), it is important to remember some of the key lessons we learned during the year that was. In this article, Boston tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, takes a look back at some of the key topics we covered in 2021.

Taxes and Cryptocurrency

Early in 2021, we published an article on how taxpayers should report cryptocurrency investments on their federal income tax returns. Later in the year, we covered the federal infrastructure bill and its potentially significant implications for investors, brokers and exchanges. Now that the bill has become law, it will be up to the U.S. Treasury to determine how to implement the law’s new reporting requirements in 2022. For more information on the tax implications of cryptocurrency investing, you can read:

• Do You Need to File an FBAR if You Own Virtual Currency Offshore?
• Should You Move to Puerto Rico to Avoid Cryptocurrency Tax Liability?
• IRS Sends “John Doe” Summons to Boston-Based Cryptocurrency Exchange

Taxes and Cannabis

With more states joining Massachusetts in legalizing the sale of recreational marijuana, tax compliance has become a key enforcement priority for the Internal Revenue Service (IRS). In September, the IRS released guidance intended to help legal cannabis business owners meet their federal tax obligations. We summarized some of the key takeaways here: IRS Releases Tax Tips and Resources for Cannabis Business Owners.

Offshore Asset Disclosures

Compliance with the FATCA and FBAR filing requirements is a longstanding IRS priority. These requirements are not well-understood by most taxpayers, and each year we represent numerous clients who have fallen behind on their offshore asset disclosure requirements. We publish a significant amount of information on this topic as well, including these articles from 2021:

• What Foreign Assets Must U.S. Taxpayers Disclose Under FATCA?
• Do You (or Did You) Need to File an FBAR with Your 2021 Federal Return?
• What You Need to Know if You Missed the IRS’ June 15 Overseas Taxpayer Deadline

New IRS Priorities

Along with cryptocurrency, cannabis, and offshore asset disclosure compliance, the IRS signaled that it would begin targeting a number of other priorities in 2021. These enforcement efforts are likely to continue into 2022; and, as a result, taxpayers will be well-served to ensure that they are giving due consideration to all of their federal tax compliance obligations:

• IRS to Focus on Sports, Gambling, Lending Practices and Trusts in 2021
• 7 Mistakes That Could Lead to Problems with the IRS in 2021
• Could You Be on IRS CI’s Enforcement Radar in 2021?

Taxpayers Should Be Prepared for More IRS Audits in 2022

The IRS Criminal Investigation (IRS CI) FY 2021 Annual Report shows that enforcement activity has remained high during the pandemic. It also shows that IRS CI is increasing its enforcement resources for 2022. As we reported earlier in the year, along with criminal investigations, more taxpayers may need to be prepared to respond to IRS audits in 2022 as well: IRS Audits May Increase in 2021 and Beyond.

Request an appointment with Boston Tax Attorney Kevin E. Thorn

If you have questions or concerns about your tax obligations heading into 2022, we encourage you to get in touch. To request an appointment with Boston tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 617-692-2989, email ket@thornlawgroup.com or contact us online today.