Tax Reporting Standards

Recently, I’ve seen several crypto tax articles and blog posts circulating about the new Form 1099-DA, and unfortunately, some of them contain incorrect or incomplete information. This isn’t surprising. The IRS’s digital asset reporting rules are brand new, highly technical, and still being phased in. But misinformation, even from people who call themselves “crypto tax experts”, can easily lead investors down the wrong path. Here’s the truth: - For 2025, brokers are required to report gross proceeds, but not cost basis, from digital asset sales. - The wallet-by-wallet cost basis method becomes mandatory starting January 1, 2025, under Rev. Proc. 2024-28. - The final regulations do not require decentralized exchanges or non-custodial platforms to issue 1099-DAs (at least not yet). The facts matter. If you base your tax compliance or planning on inaccurate online summaries, you could easily overstate gains, miss income, or trigger an IRS notice. 👉 Always verify crypto tax information directly from official IRS sources and work with crypto tax professionals who actually read and interpret the regulations, not just repost headlines. Crypto taxation is evolving quickly. Staying compliant isn’t about who sounds confident online — it’s about who understands the rules well enough to explain them clearly, correctly, and responsibly. If you’re unsure what Form 1099-DA means for you or how to prepare for the 2025 tax filing, feel free to reach out! #Form1099DA #CryptoTaxCPA #DigitalAssetReporting #WalletByWallet #RevProc202428 #IRSRegulations #CryptoCompliance #TaxCompliance

𝐃𝐚𝐲 39/365: 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐅𝐨𝐫𝐞𝐢𝐠𝐧 𝐈𝐧𝐜𝐨𝐦𝐞 𝐨𝐧 𝐈𝐑𝐒 𝐅𝐨𝐫𝐦 1120 Corporations with foreign income must report it on IRS Form 1120. This includes income from foreign subsidiaries, branches, and other foreign sources. Proper reporting ensures compliance with U.S. tax laws and helps avoid double taxation. 𝐊𝐞𝐲 𝐒𝐞𝐜𝐭𝐢𝐨𝐧𝐬 𝐚𝐧𝐝 𝐂𝐚𝐬𝐞 𝐋𝐚𝐰𝐬: Section 951: This section deals with the taxation of U.S. shareholders of controlled foreign corporations (CFCs). Section 960: This section provides rules for foreign tax credits, allowing corporations to offset U.S. tax liability with taxes paid to foreign governments. 𝐂𝐚𝐬𝐞 𝐋𝐚𝐰 - Bausch & Lomb Inc. v. Commissioner, 933 F.2d 1084 (2d Cir. 1991): This case addressed the allocation of income and expenses between domestic and foreign operations. 𝐏𝐫𝐚𝐜𝐭𝐢𝐜𝐚𝐥 𝐄𝐱𝐚𝐦𝐩𝐥𝐞: Consider VWX Corp, a U.S. corporation with a wholly-owned subsidiary in Germany. The subsidiary earns $500,000 in net income, and VWX Corp receives $200,000 in dividends from this subsidiary. VWX Corp must report the $200,000 in dividends on Form 1120. Additionally, if VWX Corp paid $50,000 in foreign taxes on this income, it can claim a foreign tax credit under Section 960 to reduce its U.S. tax liability. 𝐓𝐋;𝐃𝐑: Corporations must report foreign income on Form 1120, including income from foreign subsidiaries and branches. Key sections include IRC Sections 951 and 960, with relevant case law such as Bausch & Lomb Inc. v. Commissioner.

𝗙𝗼𝗿𝗲𝗶𝗴𝗻 𝗔𝘀𝘀𝗲𝘁𝘀 𝗮𝗻𝗱 𝗜𝗻𝗰𝗼𝗺𝗲 𝗥𝗲𝗽𝗼𝗿𝘁𝗶𝗻𝗴: 𝗦𝗺𝗮𝗹𝗹 𝗘𝗿𝗿𝗼𝗿𝘀, 𝗕𝗶𝗴 𝗖𝗼𝗻𝘀𝗲𝗾𝘂𝗲𝗻𝗰𝗲𝘀 As the ITR filing season gathers pace, taxpayers with foreign assets, overseas income, retirement accounts, ESOPs/RSUs, or foreign bank accounts should pay close attention to Schedule FA (Foreign Assets) disclosures. With increased information sharing under global reporting frameworks and greater scrutiny by tax authorities, accurate reporting is no longer a mere compliance formality; it is an essential part of tax risk management. I am glad to share my views in ET Wealth and The Times Of India on the importance of carefully evaluating foreign asset disclosure obligations and ensuring that the correct schedules are completed in the income-tax return. A recurring issue I continue to see is the assumption that disclosure is required only when foreign income is earned or funds are repatriated to India. In reality, reporting requirements can extend to a wide range of overseas holdings, including bank accounts, retirement accounts, stock-based compensation plans, and other foreign financial interests. Taxpayers should also be mindful of residency status, the correct reporting period for Schedule FA, and interactions with foreign tax credit claims, where applicable. Incomplete or inaccurate disclosures can invite unnecessary scrutiny and prolonged tax proceedings. The consequences of non-compliance can be significant. Failure to disclose foreign assets or overseas income may trigger enquiries under the Income-tax Act and, in appropriate cases, invite implications under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015. Given the heightened focus on cross-border transparency, maintaining robust documentation and reviewing foreign asset disclosures before filing the return is more important than ever. A timely compliance review today can help avoid costly disputes tomorrow. #ITR #ScheduleFA #ForeignAssets #ForeignIncome #TaxCompliance #ITRFiling #InternationalTax #BlackMoneyAct #Taxation #IncomeTaxReturn

Form 3CD Overhauled: 8 Key Changes Every Tax Professional Must Track Effective from 01.04.2025 | As per Income-tax (8th Amendment) Rules, 2025 The CBDT has notified major revisions to Form 3CD, bringing structural and compliance-level changes that are crucial for tax auditors and businesses preparing for AY 2025-26. Here’s a breakdown of what’s new: 🔹 Clause 12 – Section 44BBC Added → Introduces presumptive taxation for non-resident cruise operators. Aimed at ease of doing business for tourism-related shipping services. 🔹 Clause 19 – Obsolete Deductions Removed → Reporting on the following deductions no longer required: Section 32AC, 32AD, 35AC, 35CCB — as these provisions are no longer in force. 🔹 Clause 21 – Legal Contravention Expenses to be Reported → Any expenditure incurred for settlement of violations, fines, or penalties must now be disclosed. Brings reporting in line with disallowance provisions under Section 37(1). 🔹 Clause 22 – MSME Payment Reporting Expanded → Extended compliance under Section 43B(h). → Only timely payments to Micro & Small Enterprises (MSEs) will be allowed as deduction. Auditor must verify and report delays. 🔹 Clause 26 – MSME Dues Disclosure → New sub-clause (h) requires specific reporting of outstanding dues to MSEs. → Ensures alignment with 43B(h) and strengthens MSME protection. 🔹 Clauses 28 & 29 – Omitted → These clauses, dealing with TDS-related disallowances and interest defaults, are now removed. May indicate a shift in reporting structure. 🔹 Clause 31 – Dropdown-Based Classification Introduced → Loans, deposits, and specified sums now require selection from predefined categories, improving reporting clarity and consistency. 🔹 Clause 36B – New Reporting for Buybacks → Mandatory disclosure of buybacks deemed as dividends under Section 2(22)(f). → Adds a check against profit distribution bypassing dividend tax. Tax professionals must update documentation, audit checklists, and client communications to ensure compliance from FY 2024-25. Staying informed and prepared is now more critical than ever. #Form3CD #CBDTUpdate #TaxAudit #MSMECompliance #AuditSeason #IncomeTaxIndia #AY2025_26 #FinanceProfessionals #CharteredAccountants #Taxtown

New Digital Asset Broker Reporting Rules Finalized! As a tax lawyer specializing in digital assets, I’m excited to share that the IRS has finalized new reporting rules for digital asset brokers. Here are the key points: Highlights: 1️⃣ Enhanced Reporting:   - Brokers must report gross proceeds from digital asset sales and exchanges, aligning crypto with traditional financial reporting. 2️⃣ Form 1099-DA:   - New Form 1099-DA will streamline reporting, helping taxpayers accurately report digital asset income. 3️⃣ Broad Coverage:   - Includes exchanges, wallet providers, and DeFi platforms to capture a comprehensive market view. 4️⃣ Effective Date:   - Rules apply to transactions from January 1, 2024. Time to prepare and ensure compliance! Implications: 🔵 For Brokers: Adjust reporting systems to meet new requirements. 🔵 For Taxpayers: Simplifies tax reporting and reduces compliance risks. 🔵 For the IRS: Enhances market transparency and combats tax evasion. These rules are a vital step in the evolution of the digital asset market, fostering trust and ensuring fair taxation. Stay informed and compliant! #DigitalAssets #CryptoTax #IRS #TaxCompliance #Blockchain #CryptoLaw

Last month, I reviewed a return where nothing looked “𝘄𝗿𝗼𝗻𝗴.” Income was clean. Deductions were supported. Credits calculated properly. But something felt off. The client had foreign financial accounts. 𝗦𝗰𝗵𝗲𝗱𝘂𝗹𝗲 𝗕 𝘄𝗮𝘀 𝗺𝗮𝗿𝗸𝗲𝗱 𝗰𝗼𝗿𝗿𝗲𝗰𝘁𝗹𝘆. 𝗕𝘂𝘁 𝗙𝗼𝗿𝗺 𝟴𝟵𝟯𝟴 𝘄𝗮𝘀𝗻’𝘁 𝗮𝘁𝘁𝗮𝗰𝗵𝗲𝗱. The threshold was crossed. It was a small miss. No drama in the software. No red flag warning. Just one form not included. Now here’s why this matters. According to IRS enforcement data from recent years, penalties related to foreign information reporting can start 𝗮𝘁 $𝟭𝟬,𝟬𝟬𝟬 𝗽𝗲𝗿 𝗳𝗼𝗿𝗺 — 𝗲𝘃𝗲𝗻 𝘄𝗵𝗲𝗻 𝗻𝗼 𝘁𝗮𝘅 𝗶𝘀 𝗱𝘂𝗲. Not for fraud. Not for evasion. Just for not filing the right form. That’s what makes this interesting. The tax calculation was fine. The compliance layer was not. And that’s where most firms feel pressure today. Not in calculating income. But in tracking reporting obligations across: • 𝗙𝗕𝗔𝗥 • 𝗙𝗼𝗿𝗺 𝟴𝟵𝟯𝟴 • 𝗙𝗼𝗿𝗺 𝟱𝟰𝟳𝟭 • 𝗙𝗼𝗿𝗺 𝟴𝟴𝟲𝟱 • 𝗙𝗼𝗿𝗺 𝟯𝟱𝟮𝟬 Form 8938 thresholds vary based on filing status and residency. 𝗦𝗶𝗻𝗴𝗹𝗲 𝗹𝗶𝘃𝗶𝗻𝗴 𝗶𝗻 𝘁𝗵𝗲 𝗨.𝗦. → $𝟱𝟬,𝟬𝟬𝟬 𝗮𝘁 𝘆𝗲𝗮𝗿-𝗲𝗻𝗱. 𝗠𝗮𝗿𝗿𝗶𝗲𝗱 𝗳𝗶𝗹𝗶𝗻𝗴 𝗷𝗼𝗶𝗻𝘁𝗹𝘆 → $𝟭𝟬𝟬,𝟬𝟬𝟬 𝗮𝘁 𝘆𝗲𝗮𝗿-𝗲𝗻𝗱. 𝗟𝗶𝘃𝗶𝗻𝗴 𝗮𝗯𝗿𝗼𝗮𝗱? 𝗗𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝘁 𝗻𝘂𝗺𝗯𝗲𝗿𝘀 𝗲𝗻𝘁𝗶𝗿𝗲𝗹𝘆. Many preparers remember the form. Fewer double-check the threshold logic every year. Tax today is less about rates. It’s about reporting. And reporting penalties are often fixed amounts — not percentage-based. That changes the risk calculation completely. 𝗧𝗵𝗲 𝗹𝗼𝗻𝗴𝗲𝗿 𝗜 𝘄𝗼𝗿𝗸 𝗶𝗻 𝘁𝗵𝗶𝘀 𝗳𝗶𝗲𝗹𝗱, 𝘁𝗵𝗲 𝗺𝗼𝗿𝗲 𝗜 𝗿𝗲𝗮𝗹𝗶𝘀𝗲: Returns don’t usually break because of complicated math. They break because of overlooked reporting layers. That’s where discipline shows. — 𝗛𝗶𝘁𝗲𝘀𝗵 𝗣𝗮𝘁𝗲𝗹,𝗘𝗔 #USTax #TaxCompliance #Form8938 #InternationalTax #CPAFirm #TaxPreparation #IRSReporting TaxicMinds Yash Panchal, EA

🌏🇦🇺🇪🇺 Public Country by Country Reporting - "Approach to Tax" Statement One of the requirements in Australia's version of public CBC reporting is that the parent company prepares a statement on its approach to tax. 📃 The legislation currently before Parliament requires that the obligation be interpreted "so as best to achieve consistency" with certain parts of the Global Reporting Initiative's (GRI) Sustainability Reporting Standards. The GRI standard has 4 elements which must be addressed within the approach to tax: 💡 Whether the organization has a tax strategy and, if so, a link to this strategy if publicly available. 👁️ The governance body or executive-level position within the organization that formally reviews and approves the tax strategy, and the frequency of this review. ⚠️ The approach to regulatory compliance. ♻️ How the approach to tax is linked to the business and sustainable development strategies of the organization. In contrast, most of the disclosure requirements under PCBC are numerical. It will be interesting to see what statements are released, and whether any action is taken about statements that are non-compliant. #taxlaw #incometax #internationaltax #transferpricing #cbcreporting

📢 Tax Audit for FY 2023-24: Key Updates and Compliance Guidelines 📢 As the tax audit season for FY 2023-24 approaches, businesses and professionals need to stay updated with the latest guidelines under Section 44AB of the Income Tax Act. This year brings key changes that every taxpayer and auditor should be aware of to ensure smooth compliance and avoid penalties. 🔍 What's New for FY 2023-24? 1️⃣ Increased Tax Audit Threshold: For businesses, the tax audit threshold under Section 44AB(a) has been increased to ₹10 crore (turnover), provided 95% of receipts and payments are digital. This shift encourages digital transactions, reducing cash dealings. 2️⃣ Presumptive Taxation Scheme (Section 44AD & 44ADA): Professionals under Section 44ADA with gross receipts up to ₹50 lakhs can declare 50% of their income as presumptive income. Meanwhile, businesses with turnover up to ₹2 crores can opt for Section 44AD with presumptive income of 8% for cash transactions and 6% for digital. 3️⃣ Reporting Requirements on Foreign Transactions: With an increased focus on foreign transactions, auditors must report all international transactions, including foreign assets and income, to ensure compliance with the black money law and FATCA regulations. 4️⃣ Additional Reporting on CSR Spending: The Companies Act mandates reporting on Corporate Social Responsibility (CSR) spending. Auditors now need to ensure that this is properly accounted for in their reports to avoid any discrepancies. 📝 Important Deadlines: Tax Audit Report Submission (Form 3CA/3CB and 3CD): The due date to file tax audit reports is 30th September 2024 for taxpayers who require a tax audit. ITR Filing Deadline: The ITR filing deadline for taxpayers covered under the tax audit is 31st October 2024. ✅ Key Areas to Focus On: GST Reconciliation: Ensure proper reconciliation between GST returns and books of accounts to avoid mismatches. Form 3CD Changes: Be mindful of new changes in Form 3CD, particularly in reporting clauses related to GST and disallowance of expenses. Loan Reporting: Disclose loans accepted or repaid in cash exceeding the prescribed limits. 📌 How to Prepare for a Tax Audit? Organize Your Documents: Make sure all financial statements, invoices, and transaction records are accurate and up-to-date. Digital Record Keeping: Utilize accounting software that integrates well with GST and tax reporting systems for seamless audits. Regular Compliance Checks: Schedule internal audits or reviews throughout the year to stay on top of compliance. Tax audits are a critical part of ensuring tax compliance for businesses. Being proactive and adhering to the updated guidelines for FY 2023-24 will save time, reduce stress, and ensure your organization avoids hefty penalties. 👨💼 As a Chartered Accountant, it's essential to stay informed and guide your clients through the latest compliance requirements effectively. #TaxAudit #FY2023_24 #TaxCompliance #IncomeTax #AuditSeason #CA

Occasionally I’d just pick up a standard to read extensively. Yesterday, it was IAS 12. And as I was about to start reading, I took a pause to first understand the true rationale behind creating IAS 12. Because mehn, this was one of the standards that a lot of Accountants struggle with. So this was what I found out. IAS 12 was created to lead to more TRANSPARENCY in financial reporting. And I know that sounds like big grammar so let’s break it down. 🔘 First, imagine your company reported a profit of N100m for the year 2025. Now you know the company needs to pay taxes on that profit right? Well to calculate the tax payable, the tax authorities would usually say we need to adjust our Accounting profit first. They might say some expenses we recorded are not allowed yet or some income should be treated differently. So let’s assume N20m out of that N100m profit came from an unrealised foreign exchange gain. Maybe we had a dollar receivable, and because the exchange rate moved before year-end, accounting recognised a N20m gain. 🔘But tax law says: “We don’t tax unrealised gains. We tax it when it is actually realised.” So for tax purposes, that N20m is removed. Instead of taxing N100m, they tax N80m. Tax rate is 30%. 📌30% of 80m = N24m. 🔘Now if tax was calculated on the full N100m accounting profit, it would have been N30m. So this year, you paid N24m instead of N30m. It looks like you saved N6m. But did we really? Because that N20m gain does not disappear. When the receivable is eventually settled, tax will recognise it. 🔘So assume next year, accounting profit is again N100m. But this time, that N20m gain is now realised. Tax says, “Ah. This is now taxable.” So taxable profit becomes N120m. 📌30% of N120m = N36m. Now look at something. Year 1 tax = N24m Year 2 tax = N36m Total for 2 years = N60m. If tax had simply followed accounting profit of N100m each year, you would have paid N30m + N30m = N60m. Same total. So that N6m you “saved” in year 1? You didn’t save it. You postponed it. And this right here is the entire essence of IAS 12 Income Taxes. 👉IAS 12 exists because accounting profit and taxable profit are not calculated the same way. Those differences create timing gaps. And without IAS 12, financial statements can mislead. So IAS 12 says: If you have recognised profit today, and there is a future tax consequence attached to it, recognise it. That N6m difference? Record it as a Deferred Tax Liability. So your total tax expense still reflects N30m. Not because you paid N30m but because economically, that is the tax attached to that N100m profit. And that way your financial statement shows the true picture of your affairs. I hope this helps. Found this insightful? Please comment and repost so others can learn.

Big Changes in Tax Audit Form 3CD - Effective April 2025! If you're a business owner, CFO, or auditor — heads up! The CBDT has rolled out significant updates through Notification No. 23/2025. Here's what’s new: 🔑 8 Important Changes You Must Know: 1️⃣ Digital Income Now Fully Transparent (Clause 12) New Rule for Content Creators & Gig Workers: If you're earning from YouTube, Instagram, or freelancing — your income will now need clear disclosure. Example: A YouTuber earning ₹1.25 Cr must report this income separately, even under presumptive tax. 2️⃣ Old Deductions Wiped Out (Clause 19) Reporting of certain deductions like investment in new plants, backward areas, or rural projects is no longer required. Example: Deductions under Sections 32AC, 32AD, 35AC, 35CCB removed. 3️⃣ Settlement Payments Under Tax Lens (Clause 21a) Payments made to settle cases with SEBI or GST authorities must now be disclosed. Example: ₹75 lakh settlement to SEBI → Entire amount added back to taxable income. 4️⃣ MSME Payment Rules Tightened (Clause 22) Delays in payments to MSMEs will now cost you. Example: Payments beyond 45 days → No tax deduction allowed + full disclosure needed. 5️⃣ Clear MSME Definition Aligned (Clause 26) MSME classification will now match the new Section 43B(h) definition — ensuring no confusion. 6️⃣ Cash Payment Reporting Relaxed (Clauses 28 & 29) Earlier, cash payments needed detailed reporting. Now, they’ll only reflect in your ITR/AIS. 7️⃣ Loans & Deposits to Be Fully Reported (Clause 31) Even journal entries or small cash deposits under ₹20K must now be disclosed. Example: Loan to director via journal entry → Must be reported. 8️⃣ Buyback of Shares Disclosure (Clause 36B) All buybacks, even if reported elsewhere, need fresh disclosure in Form 3CD. Example: A ₹2 Cr buyback must be fully reported. 📌 Real Impact Examples: Influencers & Gig Workers: Full disclosure of every rupee earned. MSME Payments: Delay = No deduction + higher tax liability + risk of penalties. Disclaimer: This update is for educational purpose for the readers and shall not be construed as legal or professional advice. Follow Eswaraiah Kakarla for more..