Tax Controversy in 2020: What You Need to Know
by: The Knowledge GroupSeptember 24, 2020
The COVID-19 pandemic has created a domino effect of consequences that have spanned across every facet of our economy, government, and society. Looking ahead to the remainder of 2020 and beyond, one consequence of the pandemic that is likely to come is an increase in tax controversy. As the government looks to make up for some of the enormous spendings that have been required to combat COVID-19 and its effect on the economy, the number of audits is expected to rise dramatically.
At the same time, businesses that are already dealing with all of the challenges created by the pandemic are more poorly equipped than ever before to deal with this aggressive increase in audits. The confusion and lack of structure that these businesses have been struggling with are likely, in some cases at least, to have a negative impact on record keeping, which is sure to make dealing with an audit all the more challenging. At the same time, many business owners who have relied on Advance Pricing Agreements (APAs) to ease their tax burden may find that these APAs are not ideally suited for redistributing losses in the new environment that COVID-19 has created. Combine this with the fact that many businesses across the country are already struggling financially and this aggressive increase in audits that the government is likely to pursue is almost certainly a recipe for disaster.
In order to prepare for this likely increase in audits in a time that is already fraught with difficulties, business owners must be more vigilant than ever in developing a strategy that strikes the right balance between governance, transparency, and tax risk management. While creating such a strategy is challenging enough during a normal year and is sure to be all the more difficult in 2020, failing to do so could leave business owners dangerously vulnerable to the increase in tax controversy that is on the horizon.
Note: The Knowledge Group continuously produces webcasts on this topic and other hot-buttons issues relating to taxation to keep you ahead of the curve.