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Survey Says: Corporate Tax Audits on the Rise

An-Examination-at-the-Faculty-of-Medicine,-ParisA recent survey published by Sabrix indicates that corporate tax audits are on the rise.   Eighty-three percent of companies surveyed report an increased number of audits due to state and local tax revenue shortfalls.  Survey respondents comprised 140 tax executives from the Forbes Global 2000 Index.

Ninety-six percent of the attendees said that despite the recession, transaction taxes such as sales and use taxes will continue to be an area of focus. In response to the economic downturn, 45 percent of the attendees said their companies had reduced their employee headcount, but 45 percent also increased their investment in tax technologies.

Eighty-one percent of the respondents have made sales and use tax and value-added tax a more strategic focus of their company due to the economy. A similar proportion said they have implemented new programs and processes to remain compliant.

The IRS is under pressure to enforce compliance with federal tax statutes.  The US Treasury coffers are seriously depleted given all the stimulus and economic recovery expenditures.  The IRS is mandated to assure that corporations comply with all tax laws.  The IRS has developed an Industry Focus Issue, (IFI) audit strategy that  profiles high risk corporate tax compliance statutes.   IFI guides field audit personnel through a risk based assessment of corporate tax compliance.  The IFI aggregates and ranks  Three Tiers of high risk tax compliance issues.  Examiners will conduct rigorous reviews of these issue sensitive factors.  The factors concern revenue recognition, sales tax, partnership reporting, and the repatriation of revenue derived in foreign domiciles.

Sum2 has published a product, IRS Audit Risk Program (IARP) that guides corporate tax managers and tax professionals through a risk assessment of their exposure to IFI risk factors.  The IARP helps corporate tax professionals score tax risk exposures, determine mitigation actions, estimate remediation expenses and manage tax controversy defense strategies.  The IARP is available for purchase on Amazon.com.

Sum2 also has developed the Corporate Audit Risk Program (CARP).  The CARP is IRS tax risk assessment tool for corporate tax managers.  A  single user license for CARP can be purchased on Amazon.com.

Risk: compliance, tax audit, reputation, litigation

You Tube video: Stevie Ray Vaughan, Taxman

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October 23, 2009 Posted by | CARP, CPA, government, IARP, IRS, regulatory, risk management, Sum2, Tax, Treasury | , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

The Tax Man Cometh

taxmanThe IRS has reached agreement with UBS over disclosure of the identity of US citizens holding private bank accounts with the firm in Switzerland.  The agreement calls for UBS to release the names of 4,450 clients who are suspected of using the bank to hide assets and avoid taxation.   UBS has private banking relationships with with over 52,000 US citizens with assets approximating $15 billion.

Private banking is an important pillar of the Suisse economy.  This action may pose a significant threat to the Suisee banking industry.   Compliance with the IRS request for the names of private bank account holders  damages the venerated wall of secrecy Suisse banks employ to attract assets and clientele.  Other EU banking centers like Luxembourg and Liechtenstein may also feel pressure to comply with news standards of transparency and disclosure.  This may have the effect of driving investors to seek more exotic havens to park assets.  Offshore domiciles in the  Indian Ocean, Southeast Asia and Latin America may benefit from this action.  It may also add to the risk of investors seeking safe havens for their assets.

For US taxpayers, the resolution signifies that the IRS is serious about its intention to ramp up enforcement of the tax code.  The IRS has enhanced its focus on US citizens and corporations utilizing foreign banks and offshore investment vehicles.  The agency is concerned that investment products and financial services offered by foreign banks have enabled US citizens and corporations to avoid tax liabilities.  Products such as credit cards, hedge funds and other investment partnerships are coming under the exacting microscope of the IRS.

The IRS is under pressure to enforce compliance with federal tax statutes.  The US Treasury coffers are seriously depleted given all the stimulus and economic recovery expenditures.  The IRS is mandated to assure that compliance is adhered to so taxpayers pay taxes on all legal capital gains and income.  As this blog reported, the IRS has developed an Industry Focus Issue, (IFI) audit strategy that  profiles investment partnerships and other corporations that use offshore domiciles to harbor assets.  IFI guides field audit personnel through a risk based assessment of investment partnerships.  The IFI aggregates and ranks  Three Tiers of high risk tax compliance issues.  Examiners will conduct rigorous reviews of these issue sensitive factors.  Many of the factors concern the recognition of income and assets in custody outside of the US and repatriation of revenue derived in foreign domiciles.

Sum2 has published a product, IRS Audit Risk Program (IARP) that guides corporate tax managers and tax professionals through a risk assessment of their exposure to IFI risk factors.  The IARP is a strategic tool that corporate tax professionals utilize to score risk exposures, determine mitigation actions, estimate remediation expenses and manage tax controversy defense strategies.  The IARP is available for purchase on Amazon.com.

The IRS action against UBS is the opening salvo in the new era of enhanced compliance.  UBS is a marquee brand that indicates that the IRS is serious about compliance. As a result of the UBS settlement other Suisse banks are coming forward to make voluntary disclosures about US citizens suspected of tax-evasion.  Those bank  include, Credit Suisse, Julius Baer Holding, Zurcher Kantonalbank and Union Bancaire Privee.  UBS has  previously turned over approximately 250 names to the IRS.  It is believed that the IRS has issued indictments to 150 people from that list of names.

This high profiled action against UBS has helped to publicize the IRS amnesty program that expires September 23rd.  In an effort to encourage Americans to voluntarily disclose information about  accounts they illegally withheld, the IRS created an amnesty program. Under the amnesty program, any taxpayer who successfully completes the requirements will not be criminally prosecuted for their acts.  More details on the IRS amnesty program can be found here on the FIND LAW website.

Risk: tax, reputation, compliance,


August 21, 2009 Posted by | compliance, CTA, hedge funds, IARP, IRS, regulatory, reputational risk, Tax, Uncategorized | , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment