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The future of tax controversies 

On Behalf of | Nov 10, 2022 | Tax Controversies

Not many people know that tax controversy is an actual area of legal practice. The field involves disputes between the IRS and taxpayers. 

Tax court dockets often carry tens of thousands of tax controversies per year. Tax controversy is recognized by the University of San Diego School of Law (UCLA Extension), the ABA, and New York’s University School of Professional Studies with yearly events.

An overview of the current state of tax controversy

The current presidential administration stressed it intends to increase enforcement on corporate taxpayers. Congress continues to develop resources for IRS enforcement.

The White House put together the “Build Back Better” initiative. It gives the IRS significant power to provide large funds to the agency, putting more resources into auditing. After 2020, the IRS transitioned into remote audits. That resulted in a noticeable increase in audits.

Pre-COVID, the IRS focused on in-person meetings with large corporations. The necessitated transition to remote audits has made in-person audits non-existent (though they are still possible). While the debate continues that this is an impersonal process, stats imply it has improved the efficacy of the agency’s APMA Program.

Examples of tax controversies

There is a wide range of cases in this area. Some of the issues addressed include:

  • Audits
  • Response to IRS notices
  • Tax agency appeals
  • Requests for penalty abatement
  • Representation before the IRS or other state or local tax agencies and before the U.S. Tax Court
  • ASC 740 services, determining if issues were sufficiently settled, focusing on the recognition of unrecognized tax benefits
  • Negotiation of issues linked to tax agency collection efforts
  • Innocent spouse relief
  • Aid from the Taxpayer Advocate
  • Asking for private letters and revenue rulings
  • Preparation of comments to proposed regulations and rulemaking
  • Appeals representation before the IRS

Going forward

We are currently waiting to see if any legislative changes to tax law come out of the White House. “Build Back Better” will mark significant changes in corporate taxation. Should the day come, expect higher tax rates and more tax controversy disputes. There will also be the possibility of the OECD implementing minimum global taxes, impacting the Global Intangible Low-Taxed Income.

Ultimately, all this will lead to an aggressive IRS. All U.S. taxpayers should stay abreast of proposed or executed legislative changes that impact tax controversies. Whether individual or corporation, any change will make a difference in how we interact with IRS tax collection.

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