The IRS has never been known as a friend to business. OK, that's putting it mildly. The truth is that the IRS has a reputation for being a giant headache for businesses... and that's the best case scenario. The IRS has caused countless businesses to shut down for a variety of reasons, and they've harassed plenty of business owners who weren't able to jump through every single hoop that the agency created.
At the same time, there is a very real problem that the IRS must address – and that's the trend of US businesses moving their headquarters' overseas in order to avoid paying taxes. While you can't blame a business for trying to increase their profitability, the reality is that when a business avoids paying its fair share of taxes, even while benefitting from the infrastructure that our government is able to provide as a result of those taxes, the rest of us are left paying more as a result.
So clearly, stopping this trend is important. Now, most of us would suggest that the IRS could immediately put an end to the business exodus by NOT making life so difficult on them. But naturally, the IRS could not consider such a novel concept, so as a ThinkAdvisor article reports, the IRS is taking steps to keep businesses honest:
Just as the Treasury Department and the Internal Revenue Service issued guidance to curb corporate tax inversions late Monday, lawmakers said they would work to ensure legislation is passed to rein in such inversions.
Treasury and the IRS issued a joint notice, which they say takes "targeted action to reduce the tax benefits of — and when possible, stop — corporate tax inversions."
Treasury Secretary Jacob J. Lew explained in a statement that "these first, targeted steps make substantial progress in constraining the creative techniques used to avoid U.S. taxes, both in terms of meaningfully reducing the economic benefits of inversions after the fact, and when possible, stopping them altogether."
He continued: "While comprehensive business tax reform that includes specific anti-inversion provisions is the best way to address the recent surge of inversions, we cannot wait to address this problem."
Treasury will review "a broad range of authorities for further anti-inversion measures as part of our continued work to close loopholes that allow some taxpayers to avoid paying their fair share," Lew stressed.
Now, if all that is happening here is that the IRS is closing loopholes which really do allow certain businesses an unfair advantage, that's a good thing. But it's hard not to be cynical about any IRS activity towards businesses. It would not be surprising to see businesses who have done nothing wrong hit with additional requirements, penalties, and other harassment. We'll keep you posted.
If you or your business is facing an IRS tax controversy, we understand the stress that you are experiencing. And we can help. Please call us at 844-841-9857 to learn more!