Tax strategies among huge corporations are incredibly complicated. Not only do they need to be concerned about employment taxes for hundreds and thousands of employees, but they also focus on minimizing their own tax obligations in transactions like sales, purchases and operations.
The various methods of tax payments and savings can have a huge impact on a corporation’s financial bottom line, but there are some occasions when these strategies come under scrutiny by the IRS.
Facebook is one company that has recently come into the IRS crosshairs. According to reports, the company has been targeted by the U.S. Justice Department for allegedly undervaluing property it transferred out of the country to save on taxes.
The social media giant transferred worldwide business rights to Ireland back in 2010 to capitalize on the fact that the country has a very low corporate tax rate. That transfer triggered some alarm bells for the IRS, which claims that the assets transferred to Ireland were undervalued by billions of dollars.
If this is the case, there is the potential for serious penalties to be issued.
However, there are issues that will affect any resolution that is ultimately reached. To begin with, Facebook has not responded to multiple summonses from the IRS; the deadline for the statute of limitations in this case also expires at the end of this month. Further, there has been a contentious relationship between tech companies and the IRS for some time now, and it is unlikely that these two sides will ever see eye-to-eye.
It will be interesting to see how this particular case plays out. In the meantime, this situation should remind all business owners in Atlanta — particularly those who are involved in international transactions — that tax-saving strategies are closely scrutinized by the IRS. Any red flags that come up could lead to extensive investigations and costly penalties, which is why legal representation is often critical.