Are You Paying Taxes on Your Virtual Currency?

It’s tax filing season and time to gather your information and fill out your tax forms. But did you know that if you use virtual currency, like bitcoin, you may have to report it to IRS and include it in your taxable income?

Today’s WatchBlog looks at our recent report on how tax laws apply to virtual currency.

How do you know if you have to pay taxes on your virtual currency use? Answer: It depends.

IRS guidance says that virtual currency should be treated like property. So, you need to report income paid in virtual currency because all income is taxable. That also means that if you buy virtual currency and later sell it for a higher price, you may have to pay tax on the difference.

But it’s not always easy to keep track of these virtual currency gains and losses because virtual currency values can fluctuate and taxpayers need to calculate their gains and losses for every transaction. And it gets even more complicated if you had a hard fork (i.e., when a blockchain splits into 2 incompatible versions) or airdrop (i.e., when virtual currency is given out for free, often as a way of promoting new types of virtual currency).We found that IRS’s virtual currency guidance is not always clear for taxpayers. For example, IRS did not mention in its 2019 FAQs that the FAQs could change without notice and that taxpayers cannot fully rely on them. We recommended that IRS address this.

Who reports your virtual currency use to IRS?

Taxpayers need to report their income to IRS annually, and IRS has found that taxpayers are more likely to do it accurately if someone else, like an employer, financial institution, or another third party, also reports it.

Virtual currency users may have a hard time figuring out their taxable income from virtual currencies because there is limited third-party reporting. This is due to confusion about who is required to report, what they should report, and what tax forms they should use. We recommended that IRS take steps to improve third-party reporting for virtual currencies.

·         Comments on GAO’s WatchBlog? Contact blog@gao.gov.

·        Questions on the content of this post? Contact James R. McTigue at mctiguej@gao.gov

Image | Posted on by | Tagged , , , , , ,

How Prepared Are We for a Pandemic?

The outbreak and spread of COVID-19 from China to the U.S. shores has brought the term coronavirus into daily usage and raised the question “How prepared are we for a pandemic?”

Today’s WatchBlog explores GAO work looking at pandemic preparedness, starting with our most recent report on the national biodefense strategy.

What is a pandemic?

Pandemic, epidemic, outbreak. What do these terms mean? According to the Centers for Disease Control and Prevention (CDC):

  • Pandemic refers to an epidemic that has spread over several countries or continents, usually affecting a large number of people
  • Epidemic refers to an increase, often sudden, in the number of cases of a disease above what is normally expected in that population in that area.
  • Outbreak carries the same definition of epidemic, but is often used for a more limited geographic area.

The CDC also says pandemics happen when new (novel) viruses emerge which are able to infect people easily and spread from person to person in an efficient and sustained way. Because this strain of coronavirus is new to humans, very few people will have immunity against it, and a vaccine is not currently available. More on pandemic basics is available on the CDC website.

The Coronavirus

Currently, 7 strains of coronavirus have been identified that can cause illness in humans. The most recent coronavirus disease, COVID-19, was first seen in China in December 2019. Our recent Science & Tech Spotlight discusses these in more detail.

Coronaviruses are most commonly transmitted by coughing, sneezing, person-to-person contact, and touching objects that have viral particles on them, according to the CDC. Most infections result in mild to moderate symptoms, such as runny nose, headache, cough sore throat, fever, and a run-down feeling.

Since 2002, there have been 3 severe outbreaks of respiratory illnesses caused by coronaviruses. In 2012, an outbreak of Middle East Respiratory Syndrome (MERS) had a mortality rate of as high as 34%. As of February, COVID-19 had infected more than 70,000 people infected and had a 3% mortality rate, according to the World Health Organization.

The figure below shows electron microscope image and schematic of coronavirus particles (Middle East Respiratory Syndrome Coronavirus and general coronavirus respectively).

National Biodefense Strategy

In 2018, a National Biodefense Strategy was created to guide the nation’s strategy for building and maintaining capabilities to address biological threats ranging from naturally occurring diseases like the coronavirus to biological weapons. In a report issued February 19, we reviewed how well this strategy has worked so far.

While the strategy calls for joint efforts between federal agencies and the private sector, we found that there are no clear processes, roles, or responsibilities for making joint decisions. We made 4 recommendations to improve implementation efforts. Our report includes more information about our review and recommendations.

Long-Standing Challenges Related to Defending Against Biological Threats

In late June 2019, GAO’s Chris Currie testified before a House committee on long-standing challenges related to the nation’s ability to detect and respond to biological threats. These challenges included, among things the federal government’s ability to detect, assess and respond to threats.

Other related GAO work

GAO has a broad portfolio of work on the federal government’s response to and preparedness for infectious diseases, viruses, and biological threats including Zika, Ebola, Avian Influenza, and H1N1.

Posted in About GAO, Coronavirus | Tagged , , , , , , , , , , , , , , ,

Improper Payments on the Rise

Increasingly, the federal government is making payments it shouldn’t. Improper payments are when the federal government overpays, underpays, or makes payments to ineligible recipients. In FY 2019, federal agencies reported about $175 billion in estimated improper payments—up from $151 billion in FY 2018.

The majority of these improper payments were made in 3 federal program areas: Medicaid, Medicare, and the Earned Income Tax Credit.

Improper Payments in Federal Programs, FY 2019Improper Payments in Federal Programs, FY 2019

Improper payments are not always due to fraud. Here is Beryl Davis, a director in our Financial Management and Assurance team, talking about the factors that lead to an improper payment and how agencies can cut down on them.

spacer

We’ve found that federal efforts to resolve improper payments are hindered by (among other things) incomplete, unreliable, or understated estimates.

Learn more in our report.


  • Questions on the content of this post? Contact Beryl Davis at davisbh@gao.gov.
  • Comments on GAO’s WatchBlog? Contact blog@gao.gov.
Image | Posted on by | Tagged , , , , , , , , , , , , ,

Could AI Help Create New Medicines?

Developing and bringing a new drug to market is a lengthy and expensive process. Only about 1 in 10,000 chemical compounds that are tested makes it through the research and development pipeline and is approved by the FDA.

This process can take 10 to 15 years (and cost between $600 million and $1.4 billion) for a single drug.

We looked at how machine learning—a form of artificial intelligence in which software uses huge amounts of data to independently perform a task—could help speed up this process and make it cheaper.

Read on, and listen to our podcast with GAO’s Chief Scientist and Managing Director of Science, Technology Assessment and Analytics, to learn more.

spacer

Photo of Prescription Pills

AI could improve discovery and testing…

Machine learning is already being used throughout the drug development process.

  • Drug discovery: Machine learning is helping researchers identify and screen more chemical compounds, and screen existing compounds for new therapeutic applications.
  • Preclinical research: Researchers are using machine learning to augment preclinical testing and predict toxicity before testing potential drugs on humans. This could help weed out compounds that will fail in clinical trials, which could reduce costs.
  • Clinical trials: Machine learning is helping improve clinical trial design (a point where many drug candidates fail) by assisting in patient selection and recruitment.

Machine learning might screen more compounds and help develop drugs faster

Figure Showing How Machine Learning Might Screen More Compounds and Help Develop Drugs Faster

These improvements could save lives and reduce suffering by getting drugs to patients more quickly. This could also allow researchers to invest more resources in areas like rare or orphan diseases.

But challenges need to be addressed

Before patients see these benefits, however, researchers and drug companies will have to wrestle with a number of challenges. For example, a shortage of high-quality data is a major challenge for machine learning in drug development. Accessing and sharing data can also be difficult due to cost, legal issues, and reluctance to share data from some companies.

Additionally, a shortage of skilled workers makes hiring and retention difficult for drug companies and regulators. Gaps in research and uncertainty about federal regulations may also hurt the adoption of this technology.

We’ve identified a number of policy options that the federal government and other leaders could use to address these issues. These include creating incentives to increase data sharing, and developing a clear and consistent message regarding regulation.

Find out more by reading the full report.

This report is part of a larger collaboration between GAO and the National Academy of Medicine and includes an excerpt from the Academy’s 2020 special publication, Artificial Intelligence in Health Care: The Hope, the Hype, the Promise, the Peril.


Image | Posted on by | Tagged , , , , , , , , , , , , , ,

Taxing Times: Turning to IRS for Help

It’s that time of year again—tax filing season. As you prepare to file your tax return, where do you turn for help?

Millions of taxpayers visit irs.gov for information or contact IRS during the filing season either on the phone, in person, or by mail. Today’s WatchBlog takes a closer look at some of the services IRS provides, and how IRS can better serve taxpayer needs.

Photo of IRS Form 1040

IRS.gov services need your input

IRS offers a range of online services including:

  • Tracking your refund
  • Getting your tax transcripts if you need to obtain student loans or a mortgage
  • Making arrangements with IRS if you need more time to pay what you owe

But how does IRS choose which services to provide on its website? We looked into this question and found that IRS prioritizes services primarily based on their potential to benefit the agency’s operations or because they can be developed quickly. And although IRS recognizes that taxpayers want more online options, it doesn’t consider taxpayer input in its prioritization process.

We recommended that IRS include taxpayer input when prioritizing new services to help avoid developing services that taxpayers don’t use.

Comparing online tax services

We also compared IRS’ online services to other foreign and state revenue agencies, and found that IRS doesn’t let taxpayers file taxes directly on its website like some of its counterparts.

Figure Showing the U.S. Internal Revenue Service’s and Three Foreign Revenue Agencies’ Online Services

IRS has long had an agreement with the tax industry to offer free electronic filing for low- and middle-income taxpayers through Free File, but the agreement long prohibited IRS from developing its own online filing service.

IRS and the consortium agreed to remove this prohibition in December 2019—shortly after our report was issued. We continue to believe IRS should assess all the potential benefits and costs prior to renewing the agreement beyond its scheduled expiration in October 2021.

Listen to our podcast with Jessica Lucas-Judy to learn more.

spacer

Services for taxpayers with limited English-language skills

IRS offers a few services to taxpayers with limited-English proficiency. For example, Spanish-speaking taxpayers can call IRS to speak with a bi-lingual representative. However, we found that these services are very limited, and the translated content on its website is outdated (a summary of this report in Spanish is available here; un resumen de este informe en español está disponible aquí). IRS also hasn’t assessed whether to translate many of its common tax forms, such as the Form 1040.

We recommended that the IRS improve services to taxpayers with limited English skills, as this could improve taxpayer compliance.

Figure Showing Outdated Translated Information on IRS.gov for 2019 Filing Season

Calling IRS may not always get you an answer

IRS receives tens of millions of calls during the filing season from taxpayers seeking assistance. For the 2019 filing season, IRS successfully implemented major tax law changes but faced training and hiring delays due to a partial government shutdown. As a result, we found that fewer taxpayers reached someone at IRS in 2019 compared to prior years and those that did waited on hold for about 9 minutes.

Figure Showing IRS Telephone Level of Service and Wait Times during the 2019 Filing Season

In addition, if you call with a question, it might not be one that IRS can answer. Each year, IRS makes a list of topics it considers “out of scope” and refers the taxpayer to irs.gov or a tax professional for assistance. We recommended that IRS post a list of these topics online for taxpayers to know before they call whether or not IRS can answer their question.

You can read more of our tax-related work here.


Image | Posted on by

Deterring Financial Crime with the Bank Secrecy Act

Money laundering, terrorist financing, and other illicit activities pose threats to national security and the integrity of the U.S. financial system. The Bank Secrecy Act (BSA) requires financial institutions—such as banks and money transmitters—to verify customers’ identities and report suspicious activities to the federal government and law enforcement to help detect and prevent such crimes.

Today’s WatchBlog looks at our recent reports on how federal agencies and financial institutions share BSA information and federal oversight of banks’ compliance with certain BSA requirements—particularly when the banks’ customers are money transmitting businesses, such as Western Union or MoneyGram.

BSA Requirements

Financial institutions are generally required to:

  • collect and retain various records of customer transactions
  • verify customers’ identities
  • design and implement an anti-money laundering program that is tailored to an institution’s products and services offered and the customers and locations served
  • file certain reports (such as suspicious activity reports) that may help assist law enforcement investigations

 Who is involved?

The Treasury Department’s Financial Crimes Enforcement Network collects and disseminates BSA data. It collaborates with supervisory agencies, which include regulators of financial markets (like the Federal Reserve) that conduct BSA examinations; law enforcement agencies (like the FBI) that investigate using BSA information; and private financial institutions that report on suspicious activity.

Money transmitters—which need bank accounts to conduct business—play an important role in the financial system. This is in part because they provide financial services to people less likely to use traditional banking services, as well as their prominent role in providing international money transfers.

How could they improve?

Financial institutions have said that BSA reporting requirements can be overly burdensome. They have also said they don’t know whether their reports are actually used, for example, in law enforcement investigations. We found that the Financial Crimes Enforcement Network could do a better job communicating in these areas and recommended, among other things, that it find ways to improve information sharing.

We also found that federal banking regulators could better prepare their examiners to question banks and request information about their money transmitter customers. We recommended that regulators take steps to improve examiners’ evaluation of banks’ compliance with BSA requirements, such as by providing more training.

Check out our recently issued reports on BSA information-sharing and BSA bank exams for more information.


Image | Posted on by | Tagged , , , , , , , , , , , , , , , , , , , , , ,

Podcast Roundup – Podcasts You May Have Missed

2019 was a banner year for GAO podcasts. In addition to launching our new Deep Dig podcast series, we produced more podcasts than ever before—64 in total! In case you didn’t catch them all, today’s WatchBlog features a handful of podcasts from the end of 2019.

Nutrition Assistance for Older Adults

Federal nutrition guidelines are the basis for nutrition assistance programs that serve older adults. However, the guidelines don’t focus on the varying nutritional needs of many older adults—such as those over age 70 or those with common health conditions, like diabetes. Kathy Larin, a director in our Education, Workforce, and Income Security team, talks about why focusing on older adults in the next update to nutrition guidelines is important, and how federal agencies can better assure that older adults have the nutrition that they need. Check it out.

spacer

Imported Seafood Safety

Did you know that more than 90% of the seafood Americans eat is imported? If FDA it suspects that imported seafood may violate U.S. laws, it can detain the products at ports until the violation has been resolved—a process called an import alert. Listen to Steve Morris, a director in our Natural Resources and Environment team, discuss how FDA decides to remove import alerts, and our recommendations for improving the process.

spacer

Improving Naval Shipyards

The Navy’s public shipyards are critical to maintaining its nuclear-powered aircraft carriers and submarines, as well as supporting its operations around the world. In 2017, we found the shipyards were in poor condition and not meeting the Navy’s needs. In response, the Navy developed a 20-year, $21 billion plan to fix them. Diana Maurer—a director in our Defense Capabilities and Management team—talked about our review of that plan. Hear what she had to say.

spacer

FEMA’s Wildfire Response and Recovery

In 2017 and 2018, wildfires in California killed 159 people and destroyed more than 32,000 structures, including many homes. In response, FEMA put about $2 billion toward housing, debris removal, and other assistance. Listen to Chris Currie from our Homeland Security and Justice team discuss the unique response and recovery challenges wildfires bring, as well as additional actions FEMA can take to better prepare for large-scale fires in the future.

spacer

If you don’t want to miss out on what we do in 2020, you can subscribe to our podcasts through iTunes or the RSS feed.


Image | Posted on by

Our Guide to Tech Readiness

The development of cutting-edge technologies is critical to many of the government’s most costly acquisition projects, including new weapons, satellites, nuclear facilities, and homeland security systems. The federal government spends billions of dollars acquiring these technologies. However, these technologies can cause program delays and cost increases if the government decides to use them in new systems before they are ready.

Our new Technology Readiness Assessment Guide can help system engineers, program managers, technology developers, and auditors evaluate whether technologies are mature enough to be integrated in a new product or system.

This guide outlines 5 steps and associated best practices for developing and producing high-quality technology readiness assessments that include:

  1. Preparing the assessment plan and selecting the team
  2. Identifying critical technologies
  3. Assessing critical technologies
  4. Preparing the assessment report
  5. Using the report’s findings

The methodology we’ve developed can be applied across large and small acquisition projects. We have also outlined a roadmap for preparing technology maturation plans, evaluating software, and enhancing technology assessments.

Hundreds of public comments have been incorporated into our guide since 2016.

Our Technology Readiness Assessment Guide is a companion to GAO’s cost estimating and assessment guide and the schedule assessment guide.

For more information, check out the guide.


Image | Posted on by | Tagged , , , , , , , , , , , , , ,

The Rankings Are In—GAO Again Named Among Best Places to Work in the Federal Government

Continuing our streak, GAO has again been named one of the Best Places to Work in the Federal Government. This year, we rose to 3rd among mid-size agencies—up one place from last year.  We also once again ranked #1 in our support of diversity among mid-size agencies.

Logo for The Best Places to Work in the Federal Government

U.S. Comptroller General Gene L. Dodaro had this to say about the rankings:

This year’s list of the best places to work confirms GAO’s reputation as an employer of choice in the federal government.

The ratings reflect the high regard our employees have for the agency and their willingness to recommend GAO to others interested in public sector work.

Another point of pride is our continuing high score on diversity and inclusion.

Issued every year, the Partnership for Public Service’s rankings provide insights into how federal employees’ satisfaction with their jobs and offices. The 2019 ratings reflect the perspectives of more than 883,000 federal workers at 490 organizations, based on survey responses on a wide range of workplace topics.

Read our press release here and learn more about GAO’s work in our video.


Image | Posted on by | Tagged , , , ,

Home for the Holidays? Not So Fast…

Flights delayed or canceled, passengers bumped, family celebrations missed—we’ve all heard the air travel horror stories. What recourse do you have if it happens to you? Well, that can depend on what caused the problem. Today’s WatchBlog takes a closer look at two issues that can cause unexpected “turbulence” in your air travel plans—information technology outages and denied boardings.

A Photo of an Airplane Window Overlooking the Wings of the Plane

We apologize for the inconvenience

In recent years, some airlines have had well-publicized information technology outages. For example, in June 2018, American Airlines subsidiary PSA Airlines experienced an IT issue that led to the cancellation of about 3,000 flights over the following week.
The federal government does not track airline IT outages or their effects directly. Using multiple sources, we identified 34 IT outages from 2015 through 2017 affecting 11 of 12 selected airlines. About 85% of these outages resulted in flight delays or cancellations.

Figure Showing Examples of Airline Information Technology (IT) Systems and Potential IT Outage Effects

If you’re inconvenienced by IT outages, what rights do you have? Federal consumer protections don’t specifically address IT outages, but other protections may apply. For example, if an IT outage delays your plane on the tarmac, there are restrictions on how long the airline can keep you on the plane. If an outage cancels or significantly delays your flight, you are entitled to a refund if you request it, or you may receive a voucher for food or lodging—depending on the airline’s policies.

Ticket to ride?

Having a ticket isn’t a guarantee that you’ll be able to get on the plane. There are several reasons why airlines may deny boarding to a passenger:

  • Overbooking: Airlines overbook flights to avoid losing money when passengers don’t show up for their flights. Passengers can get bumped when there are fewer no-shows than expected.
  • Safety: An unruly or intoxicated passenger can be denied boarding to protect other passengers and crew.
  • Operations or personnel needs: Airlines sometimes need to accommodate flight crews that need to get to different locations, or air marshals—who tend to book flights near departure times.

Airlines can ask you to volunteer to give up your seat in exchange for some benefit, such as a travel voucher.

Figure Showing Example of an Airline's Process to Identify Volunteers for Denied Boarding

But if there aren’t enough volunteers, you can still get bumped. What rights do you have if airlines don’t let you board? In some cases, federal consumer protections require airlines to compensate you.

The number of passengers denied boarding has generally decreased in recent years. Almost all of those were volunteers, but the few passengers who were bumped against their will may have experienced considerable inconvenience and expense.

Figure Showing Passengers Denied Boarding Between 2012-2018

The decrease in denied boardings could in part be the result of actions airlines have taken, such as:

  • Reducing or eliminating overbookings
  • Requesting volunteers early (e.g., at check-in)
  • Increasing and diversifying compensation for volunteers
  • Inviting passengers to propose acceptable compensation

That said, we hope you don’t have trouble getting home for the holidays after all.


Image | Posted on by | Tagged , , , , , , ,