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What is a tax controversy?

On Behalf of | Nov 7, 2022 | Tax Controversies |

Whether a business owner or a CEO, you want to stay out of trouble with the IRS. That said, sometimes you may be in a tax controversy that can lead to litigation.

You need to know the following information if you are in this situation.

What are tax controversies?

Tax controversies are disputes businesses can take against their local, state or federal government. Often, companies take these against the IRS because of international, partnership and other taxation issues.

Tax controversies are often handled through administrative measures. However, sometimes litigation is necessary. Some entities that can encounter litigation due to a tax dispute include public companies, private businesses, partnerships, foundations, nonprofits and Native American tribes.

What would lead to litigation?

Some of these tax controversies are small enough to protest with the state. However, some of them are large enough that you could litigate the matter against your local, state or federal government in court. Some issues that could lead to litigation include:

  • International tax issues
  • Foreign bank and financial accounts
  • Partnership taxation
  • International transfer pricing
  • Foreign tax credits

Many of these situations can cause enough issues to land you in a courtroom. However, not all of these situations will be serious enough to demand litigation.

What are typical examples of administrative matters?

As mentioned, administrative action is also an option, such as when your business faces the following:

  • Bankruptcy
  • Foreign transfer taxes
  • Tax liability reduction
  • Ensuring IRS compliance
  • Reduction of penalties

Most of the time, you can resolve these issues through administrative measures. That means they do not demand litigation.

Even though you hope this situation never happens, you need to know when it is time to fight a tax controversy. That can ensure you maintain your business’s reputation and financial security.