Do Irs Audits Deter Tax Avoidance

In: Business and Management

Submitted By karleecr
Words 867
Pages 4
Do IRS Audits Deter Tax Avoidance?

RES 351
July 14, 2014 r

Research is done for many reasons. It can be used to solve problems or issues that a business is having. Research can be used by business to determine if making certain changes will yield the results the company desires. Many businesses use research when developing new products to determine what consumers think of the product. They are trying to determine if consumers will purchase the product if they continue with development. This particular essay is focusing on the IRS auditing of business and how they may or may not take aggressive approaches in order to avoid those audits. Three different universities compiled the research article used for this paper. It focuses on corporate tax avoidance and whether strict IRS monitoring deters corporate tax avoidance. When reviewing this article, it is apparent that they used the reporting study method for their research. This method uses previous data and data sources to reiterate the data for a better understanding. This article uses data from the TRAC (Transactional Records Clearinghouse), that the IRS provides data directly too. Next we will be discussing how the research is providing insight into the research question. There are many factors that the researchers took into consideration. Some factors include the perception of management; whether stricter IRS monitoring constrains some business' aggressive tax planning, and management's role in exploiting tax planning. Some of the data used was a survey that they conducted regarding managements perception of audits, rather than actual occurrence of audits. This survey showed that managers perceived that audits occurred more frequently than they actually did. Researchers also analyzed data from 1992-1980 that suggested that the occurrence of an audit has been declining through the…...

Similar Documents

The Process and Preventing the Risk of a Tax Audit

...AND PREVENTING THE RISK OF A TAX AUDIT 1 The Process and Preventing the Risk of a Tax Audit By Marivic Engquist National American University August 12, 2012 THE PROCESS AND PREVENTING THE RISK OF A TAX AUDIT 2 Abstract This paper illustrates how an Internal Revenue Service (IRS) audit strikes fears in individuals, small businesses and large corporations. By understanding the process of a tax audit and reporting information that is understandable, people can lesson some of the risk. According to Sidney Weisman, an attorney and senior editor with the Research Institute of America, publisher of tax materials for professionals, “the easiest way to survive a tax examination is to prepare for one at the time you fill out the tax return” (Rankin, 1981, p. 2.29). THE PROCESS AND PREVENTING THE RISK OF A TAX AUDIT 3 The Process of Lessoning the Risk of a Tax Audit The tax audit have been feared by many and embraced by the few. Even though there are ways to reduce the likelihood of an audit, one must understand how the audit process works. If selected, a tax audit usually means corresponding with the IRS, searching through files, and producing records. It can also mean paying additional taxes, interest, or a penalty. Reducing the likelihood of an audit, all income and deductions......

Words: 2563 - Pages: 11

Irs Income Tax 216

...INCOME TAX 216 The Most Notorious Tax Evaders Instructor : Mr. Carlisle November 16, 2011 Bettie Lawrence Here are some of the most famous tax evasion cases. It’s hard to believe these people, with all of their resources, get themselves in this position. These cautionary tales, straight out of Hollywood, will help you ring in the tax season. Marc Anthony Latino pop sensation Marc Anthony had a run in with the IRS when he had four years of unfilled tax returns. Anthony, along with a team of lawyers, convinced the IRS that he assumed that his financial team filed his tax return for him and that’s why he didn’t do it himself. He was able to get out of doing jail time but had to pay 2.5 million dollars in back taxes. Wesley Snipes Wesley Snipes, the star of martial arts action hits such as the Blade Trilogy and Passenger 57, didn’t file his tax returns for political reasons and was sentenced to 3 years in jail and had to pay millions in back taxes. Abbot and Costello The comedic duo Abbot and Costello were charged with tax evasion by the IRS in 1956 and had to sell their homes and most of their assets which included the rights to many of their blockbuster films, such as Abbot and Costello meet Frankenstein. Abbot and Costello are perhaps best known for their work in radio and their famous “Who’s on first?” joke. Al Capone In 1929 Eliot Ness lead an investigation on famous gangster Al Capone in hopes to get a conviction for tax evasion. Al Capone was......

Words: 471 - Pages: 2

Irs Tax

...Form 941 or Form 944 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 14. Federal Unemployment (FUTA) Tax . . . . . . . . 35 15. Special Rules for Various Types of Services and Payments . . . . . . . . . . . . . . . . . 37 16. How To Use the Income Tax Withholding Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Cat. No. 10000W Publication 15 (Circular E), Employer's Tax Guide For use in 2013 Future Developments For the latest information about developments related to Publication 15 (Circular E), such as legislation enacted after it was published, go to What's New 2013 withholding tables. Employers should implement the 2013 withholding tables as soon as possible, but not later than February 15, 2013. Use the 2012 withholding tables until you implement the 2013 withholding tables. Social security and Medicare tax for 2013. The employee tax rate for social security is 6.2%. Previously, the employee tax rate for social security was 4.2%. The employer tax rate for social security remains unchanged at 6.2%. The social security wage base limit is $113,700. (Continued on page 2.) Get forms and other Information faster and easier by: Internet Feb 05, 2013 Employers should implement the 6.2% employee social security tax rate as soon as possible, but not later than February 15, 2013. After implementing the new 6.2% rate,......

Words: 56257 - Pages: 226

Tax Avoidance

...a. Tax avoidance in Germany (Siddhart Medhi) A number of schemes exist in the tax system, which enables corporations to avoid taxes and some of these loopholes are perfectly legal. In 2009 the German newspaper, Der Spiegel, reported a scheme referred to as the Malta Loophole. It is quite simple and has been used by multinational corporations such as Lufthansa and Puma. It works by setting up a subsidiary in Malta and thus paying taxes to the Maltese state. The tax rate in Malta is 35% and is thus higher than in Germany, however, the shareholders can apply for a refund for most of the amount. The reason for this is that if profits are being distributed as dividends then the tax rate is only 5%. The scheme works in the following way: if the profit of the subsidiary is 100 million then 35 million is paid to the Maltese state where after the shareholders can get a refund of 30 million and return it to the German parent company. Returning the money from the shareholders is due to the German tax system 95% tax exempt. The effective tax rate is thus cut to merely 6.42% Another example of tax avoidance is when Volkswagen took full control of Porsche in 2012. Volkswagen at the time already owned 49,9% of the shares in Porsche and was interested in buying the remaining 51.1% in order to have full control and gain synergy effects worth €700 million a year (Bryant, 2012). The price of this was €4,5 billion, which would have to be taxed by €1,5 billion. However, they found a way around...

Words: 654 - Pages: 3

Double Tax Avoidance Agreement

...determination Section 90(2) of the IT Act Section 206AA of IT Act Issuance of Form 15CA / 15CB process Revised guidelines of NSDL (major differences) • • • • • • Why DTAA and What is DTAA? Principles and Purpose of DTAA Nature and Types of DTAA How do treaties remove Double taxation Structure of a typical DTAA and major Models Conventions used in world Applicability of DTAA Interpretation techniques of DTAA How to determine which DTAA is applicable and how to apply that DTAA Some important concepts used in DTAA Some important points to remember 3  Problems faced while uploading • Form 15CA • • • CA Dayavanti Khilolani                       28th January 2012  CA Dayavanti Khilolani                       28th January 2012  4  Tax Payer resident of  State A  Operating in   State A  State B  State C  Each state having its own tax system and rights over taxpayer  Double taxation  of Income in the  hands of  taxpayer  Economic  Double taxation  Juridical Double  Taxation  Same Income taxed in  two states in the same  period in the hands of  different taxpayer  Same Income taxed in  two states in the same  period in the hands of  same taxpayer  Elimination  of Double  Taxation Via  Double  Taxation  Avoidance ......

Words: 2077 - Pages: 9

Irs Audit Procedures As a taxpayer filing a tax return, I am sure one of the thoughts running through their mind would be “what are the chances that my tax return will be selected for examination?” Just because the taxpayer wonders if their tax return may be selected for an examination it does not mean they may know exactly how the returns are selected for examination. What most taxpayers don’t know is that there is various ways to have your tax return selected for an examination. If all taxpayers would know the various ways that the Internal Revenue Service selects tax returns for examination, I am sure that they would only report what truly occurred throughout the year instead of telling their tax preparers to please work some magic to get the max refund they could possibly get. Being that I have worked for various years at CPA firms, you hear it all when it comes to getting a max refund. Therefore, I would like to discuss the various ways that returns are selected for examination in order to educate these taxpayers. The first thing a taxpayer should know is that when their tax returns are received by the Internal Revenue Service Center there is computers and employees that regularly check for obvious errors such as a signature was omitted on the return or the taxpayers social security number does not appear. These computers also check for mathematical mistakes. Once this process has occurred then there is a magnetic tape with pertinent information from each return which is sent to......

Words: 1600 - Pages: 7

Tax Avoidance and Tax Evasion in Bangladesh

...“TAX EVASION & AVOIDANCE - A REAL PROBLEM FOR BANGLADESH” INTRODUCTION: Tax evasion and avoidance are both phenomena that are probably as old as taxation itself. Wherever and whenever authorities decide to levy taxes, individuals and firms try to avoid paying them. Though this problem has always been present, it becomes more pressing in the course of globalization as this process extends the range of opportunities to dodge taxation while simultaneously reducing the risk of being detected. Developing and emerging countries like Bangladesh are particularly vulnerable to tax evasion and avoidance activities of individual taxpayers and corporations. While tax revenues in OECD-countries are almost 35 per cent of GDP ,in case of Bangladesh it is only around 10%.This can be considered one of the primary reasons for large differences in the ability to mobilize own resources between developed and developing countries. Tax evasion and tax avoidance is a great problem in our country. In Bangladesh there are many individual taxpayers and corporations who are evading or avoiding tax. As a result government’s developments activities are hampered. So, we should know about the tax evasion and tax avoidance and thereby its preventives measures. For development of a country government needs to create infrastructure and invest in various sectors. For this activities government needs founds and tax revenue is the main source for the purpose. But due to tax evasion and tax avoidance......

Words: 5263 - Pages: 22

Audit/Tax Assistants

...chance to shine. If that sounds like the sort of employer you’d like to employ, please contact us right away. We currently have vacancies available for: Audit/Tax Assistants Requirements: ? University degree in Accounting or Finance, or those with a full or partial professional qualification (MICPA, ACCA, ICAEW, ICA, ICAA, CPA(A), CIMA or CTIM). ? Proficient in written and spoken English as well as possess excellent communication, report writing and computer skills. ? Proactive, resourceful, innovative and have an eye for details. ? Team players who are also able to work well independently and under a fast-paced, deadline driven environment. ? Fresh graduates are encouraged to apply. Interested candidates are invited to email a comprehensive resume detailing employment, experience and contact details with a recent photograph (for applications by mail, please print position applied for at the top left hand corner of the envelope) to: The Human Resource Department Crowe Horwath AF 1018 Chartered Accountants Melaka Office, 52 Jalan Kota Laksamana 2/15 Taman Kota Laksamana, Seksyen 2, 75200 Melaka Main +606 282 5995 | Fax +606 283 6449 | Only shortlisted candidates will be notified. Want to find out more about us? Visit us on Facebook Audit | Tax | Advisory Kuala Lumpur • Klang • Penang • Johor Bahru • Melaka • Muar • Kuching • Sibu • Bintulu • Miri • Kota Kinabalu • Labuan Crowe......

Words: 370 - Pages: 2

Truth in Sentencing Laws Do Not Deter Crime

...Sentencing Laws do not Deter Crime Truth in sentencing was developed to keep inmates (especially more violent) to serve 85% or more of their initial time in prison. Although it is to insure the safety and builds a better relationship within society, there can be some negative outcomes such as the availability of plea bargaining to receive lesser sentences or inmates who are serving their complete sentence have the inability to adapt to society once released. Using the plea bargaining system has saved a lot of time and money for the court work group because of the willingness of the suspect to forfeit their freedom whereas a person proceeds to trial and receive a harsher term “…more than 90 percent of all criminal cases do not go to trial because the offender pleads guilty to a lesser charge. Even violent crimes are routinely plea-bargained--an estimated 77 percent of rape cases, 85 percent of aggravated assault cases, and 87 percent of robbery cases.” (Anne Morrison Piehl, 1995) . Piehl and DiIulio explained that criminals almost always have the option to discuss a plea bargain to avoid trial, and also prosecutors are more than willing to proceed with the deal because it cuts time on their work load as well as reduce the funding to conduct these trials. In most cases, people eventually adapt to their environment. In cases when a person is in prison, he/she have molded to the familiar everyday lifestyle that comes with it. “A stronger penalty for robbery may deter some......

Words: 431 - Pages: 2

Amazon Tax Avoidance Tax Avoidance Business Strategy, How they did it, And how it affects me. Introduction: Amazon and Tax Avoidance Part I: Amazon Part II: Taxes in the U.S. Part III: The IRS/Penalty for Tax Avoidance Part IV: Amazon and Tax Avoidance Part V: Amazon in Europe Part VI: Amazon in 2014 Part VII: How does it affect me? Part VIII: Conclusion Introduction: The topic I choose to write about is how website avoided collecting sales taxes in the U.S. for nearly it whole existences. I’m going to introduce amazon and what the company is about and the role they played as more then successful online retailer. Then introduce the topic of taxes and state taxes, sales tax, and the importance collecting and paying taxes, and the benefits the country and its residents get for paying such taxes. The amazon company will then be analyze and in operating structure and design and learn how they avoided paying taxes in their home country and how they brought their operation over seas and did the same. And why this topic and subject matter is and should be severely important for future business owners and managers on business structuring operations. Part I: Amazon Amazon is the largest online retailer as of 2014. And how did they accomplish this? Jeff Bezo is the founder and and it all started in his garage in the state Washington. Amazon first started off as an online bookstore and soon began to venture off to selling CD’s, DVD’s, and......

Words: 6883 - Pages: 28

Tax Avoidance

...IoD Big Picture Summer 2013 Tax avoidance: remedies and collateral damage SNAPSHOT • The term ‘tax avoidance’ needs to be carefully defined and is not the same as ‘tax abuse’ or ‘tax evasion’. This article considers where avoidance becomes abuse and, in particular, the advantages and disadvantages of some measures to control it. Tax avoidance: remedies and collateral damage Richard Baron, former Head of Taxation at the IoD, and Stephen Herring, his successor, consider the proper use of the term ‘tax avoidance’, where avoidance becomes abuse, and the pros and cons of some measures to control it. • The basics of UK tax law are simple, but difficulties arise from complex transactions that require specific rules – which in turn create opportunities for aggressive tax avoidance and abuse. ax avoidance has rarely been out of the news over the past two years, although the term has also rarely been properly defined and has often been muddled both with tax abuse and, even more incorrectly, tax evasion. Commentary has focused on two separate assertions that tax avoidance is taking place. Firstly, claims that some multinational groups of companies, generally US-owned, have undertaken planning which might involve recognising profits in one country rather than another that has higher corporation tax rates. Secondly, introducing planning arrangements to secure better treatments of financing costs, intellectual property rights and undistributed profits by locating......

Words: 4175 - Pages: 17

Tax Avoidance

...APPLE TAX AVOIDANCE SCHEME DOUBLE NON-TAXATION April 2015 1 Apple International Structure Source: New York Times 2 Taxation Principles RESIDENCE: •  Incorporation •  Place of Management -> Case of Ireland SOURCE: •  Source jurisdiction is generally expected to have priority, but the concept of source is generally poorly developed in domestic tax legislation •  Notion of permanent establishment, head office and transfer pricing rules 3 Double Irish Arrangement •  The Double Irish Arrangement is a tax avoidance strategy that some multinational corporations use to shift income from a higher-tax country to a lower-tax country. •  It is called Double Irish because it requires two Irish companies to complete the structure. One of these companies is tax resident in a tax haven 4 Apple Operations International (AOI) •  AOI, the company's primary offshore holding company, made up 30% of Apple's total world profits. •  Residence: Irish and U.S. tax residency rules: •  Ireland uses a management and control test to determine tax residency. •  United States determines tax residency based upon the entity’s place of formation. •  AOI is incorporated in Ireland, it is not tax resident in Ireland, because AOI is neither managed nor controlled in Ireland. Because AOI was not incorporated in the United States, AOI is not a U.S. tax resident under U.S. tax law either. 5 Apple Sales International (ASI) (1) •  The......

Words: 741 - Pages: 3

Tax Avoidance by Multinational Corporations

...Drawing  on  some  real  life  examples  of  tax   avoidance  by  Multinational  Corporations   (MNCs),  what  are  the  advantages  and   disadvantages  of  global  MNCs’  using  loopholes   to  pay  less  corporate  tax?               Word  Count:    2074             Student  ID:  1308346         Introduction:     Taxation  is  the  main  source  of  income  for  most  of  the  developed  countries  in  the   world.  Multinational  corporations  with  subsidiaries  in  different  countries  use   loopholes  in  the  laws  to  reduce  their  tax  liabilities.  Needham  (2013)  has  defined  tax   avoidance  as  “seeking  to  minimize  a  tax  bill  without  deliberate  deception  but   contrary  to  the  spirit  of  the  law”.  Firms  evade  to  Tax  Havens  or  use  various  methods   such  as  transfer  pricing  and  corporate  debt-­‐equity  to  avoid  the  payment  of  taxes.   Palan  (2002)  defines  tax  havens  as  “countries  that  have  enacted  tax  legislation   especially  designed  to ......

Words: 2943 - Pages: 12

Case Analysis for Chapter 3, Case Number 3-5 Irs Whistleblower and Informing on Tax Cheats

...Case Analysis for Chapter 3, Case Number 3-5 IRS Whistleblower and Informing on Tax Cheats 1. The ethical issue in this case is Wall Street insider Mr. ABC disclosed the information of Illinois Tool Works Inc. (ITW) tax fraud to IRS and received a whistleblowing award of $2 million. 2. The accounting issue involved is ITW enlisted a Swiss bank to fabricate unauthorized tax deductions in order for ITW (bank’s client) to claim the same deductions as an offset to ITW’s otherwise taxable income. 3. The incorrect or improper action taken in this case was ITW conducted illegal tax avoidance by involving a Swiss bank to fabricate unauthorized tax deductions by duplicating same deductions for both of them. 4. The correct or proper action that should have been taken is ITW should have followed GAAP and related regulations to not duplicate tax deductions and avoid tax legally. 5. Answers to case questions: 5.1 Should we regard Mr. ABC as a new “caped crusader” or an opportunist? Explain the reasons for your response. In my opinion, Mr. ABC should be regarded as a “caped crusader”. As a Wall Street insider, he has a moral sensitivity that “it was just a fake deduction scheme”. His motivation is to criticize the government’s ability to identify and investigate sophisticated tax shelters. He took the ethical action to expose the fact to IRS. I don’t think Mr. ABC is an opportunist, who is totally self-centered and only took advantage. He has......

Words: 555 - Pages: 3

Improvement of Corporate Tax Audit: Factor of Increasing Tax Compliance in Malaysia

... | Improvement of Corporate Tax Audit: Factor of Increasing Tax Compliance in Malaysia | | Table of Contents Executive Summary 3 Introduction………………………………………………………………………………………..4 Tax Compliance, Tax Evasion and Tax Audit…………………………………………………….4 Tax Audit in Malaysia…………………………………………………………………………….6 Organization Structure…………………………………………………………………………….8 Tax Audit Process…………………………………………………………………………………9 Tax Audit: Constraints and Problems……………………………………………………………11 Recommendations………………………………………………………………………………..16 Conclusion……………………………………………………………………………………….18 References……………………………………………………………………………………….19 Appendix………………………………………………………………………………………...20 Executive Summary The Malaysian tax system follows the concept of self-assessment system (SAS). Under the SAS, the government trusts and gives taxpayers full responsibility to calculate, to pay and to report their tax due on their own. The success of SAS not only depends on the good tax administration but also depends on the taxpayer awareness, which is indicated by the taxpayer compliance in fulfilling his obligation. In order to enhance the level of tax compliance, the Inland Revenue Board of Malaysia (IRBM) considers that it can be achieved by law enforcement besides tax consultation and tax service. Law enforcement comprises of tax audit, tax investigation and tax collection. Tax audit becomes important since it can cause a deterrent effect to increase taxpayer compliance. Tax audit plays an important role in determining...

Words: 5470 - Pages: 22

Mobile Police Patlabor | [EX-TORRENTY ORG] Crazy Rich Asians 2018 PL 480p BDRip XviD AC3-AZQ | Beautiful Creatures