You’ve probably experienced this scenario. You are building a business, trying out new things and you ask your adviser what the tax implications will be. The answer? I can’t be 100% sure. I know it’s frustrating. You diligently searched for a knowledgeable accountant but can’t seem to get complete and final answers on some of your most complicated issues.
Now, you probably know that I am an accountant, a CPA with a background in corporate and partnership taxation. I’m raised in the industry and have a vested interest in defending your adviser in this situation, but hear me out.
Your adviser may indeed be incompetent OR
You may be running into a well known problem with US Tax law.
The problem – The Uncertain Tax Position. These are tax deductions, credits or choices to exclude items from your tax return, where the law is uncertain. That means your adviser may have a theory about what the answer should be, but the IRS is welcome to have their own theory and the resolution of that matter may come down to your constitution in explaining and defending your position on examination.
The reality is, many US Tax Laws are written so that there isn’t a “one size fits all,” answer and the application of the law depends on the specific facts for your business and your transaction(s).
The IRS recently published the statics for taxpayers who self identified their Uncertain Tax Positions within their tax return filings for 2012. This disclosure was only required for certain Corporations with assets of $50 million or more. However the big four issues that were routinely disclosed as “uncertain,” are not, in my experience, unique to larger Corporations. I bet one or more of these issues effect your ability to plan for the tax results of your business transactions.
1. The claim of Research and Experimentation tax credits.
2. Transfer pricing between businesses. Often seen in the context of having business operations outside of the US.
3. Capitalization versus deduction of expenses.
4. Various trade and business deductions.
So what’s my point? The angst over a lack of certainty in your tax planning is more appropriately directed to Congress and the tax law. That being said if you have any of the issues listed above, you want the best adviser you can afford to help you understand the risks and opportunities.
Please contact me if I can advise on the tax issues related to your business planning. I provide complete consultation that helps you weight the risks and see the opportunities for maximizing your after tax cash flow.