Tax Issues to Be Aware Of

• Author: Caroline D. Strobel
• DOI: http://doi.org/10.1002/jcaf.22313
• Published date: 01 January 2018
• Date: 01 January 2018

163

© 2018 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22313

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IRS

Tax Issues to Be Aware Of

Caroline D. Strobel

TAX IMPACT ON TRANSFER

PRICING ISSUES

Previously, this column has

reported on 15 action items

the Organisation for Economic

Co-operation and Develop-

ment (OECD) released in

October 2015. The items have

the effect of preventing the

moving of profits from high-

tax jurisdictions to low-tax

jurisdictions. The Internal Rev-

enue Service (IRS) is requiring

that companies engaging in a

business that crosses interna-

tional boundaries prepare a

country-by-country analysis

of profit earned in each taxing

jurisdiction. The main idea is

that profits (and losses) should

be taxed where the business

functions and risks occur.

The House Republican tax

proposal contains the following

major provisions affecting cor-

porations:

1. The corporate tax rate

should be lowered from 35%

to 20%.

2. Businesses should be taxed

on activity conducted in the

United States and not on

worldwide income (territo-

rial taxation).

3. Pass-through entities would be

taxed at a maximum of 28%.

These provisions would

result in the significant lower-

ing of taxes on corporations

(and if included on pass-

through entities that conduct

an active trade or business), the

elimination of U.S. taxes on

profits earned in foreign coun-

tries, and an incentive to repa-

triate overseas profits.

As companies decide

whether to move operations,

a comprehensive approach

to transfer pricing through

value-chain analysis must

take place. Not only U.S.

transfer-pricing regulations

under Section 482 must be

considered, but the OECD

Transfer Pricing Guidelines

on transfer-pricing documen-

tation concerning a corpora-

tion’s value chain must be

included in the analysis. An

arm’s-length price must be

paid on any intercompany

exchange of goods or services.

This kind of analysis must be

performed before decisions on

operational changes are made.

IRS’S DIRTY DOZEN

TAX SCAMS

As it does every year, the

IRS has issued the 12 most

prevalent tax scams for 2017.

They are as follows:

1. Phishing schemes. Phishing

schemes involve fake e-mail

or websites that trick tax-

payers or practitioners into

giving personal informa-

tion such as Social Security

numbers, personal informa-

tion, credit card numbers

or bank account numbers,

and log-in or password

information. These schemes

target tax practitioners,

payroll and human resource

departments, government

agencies, and individual

taxpayers.

2. Phone scams. Calls purport-

ing to be from the IRS are

scams. The IRS never con-

tacts a taxpayer initially by

phone. You will always be

contacted by mail.

3. Identity theft. Tax-related

identity theft, together

with what the IRS calls the

related scams of stealing

personal and nancial data

from taxpayers or data

held by tax practitioners,

remains a top concern.

The IRS, state tax agen-

cies, and tax preparers

are working at providing

greater safeguards.

4. Return preparer fraud. Most

tax preparers are honest,

but each year unscrupulous

tax return preparers set up