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Tax Audits and Disputes: 3 Top Tips for C-Level Executives (video)

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May 2015 | Sharon Katz-Pearlman, Principal in Charge, Tax Dispute Resolution Services, KPMG LLP, discusses some tips for C-Level executives when faced with a tax audit or disputes.

With more than 25 years of experience, Sharon works with clients on all aspects of their IRS matters, dealing with a wide variety of domestic and international tax issues.

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When faced with a dispute, I think C-level executives have to focus on a number of things, but maybe the top three would be one, do I have a complete command of all the facts that surround this issue and this potential dispute.  And if I don't, then how am I going to fill in those gaps so that I know every aspect of what happened so that I can properly defend the tax treatment that I apply to those facts.

So know your facts and figure out what you might have to fill in and go back and make sure that you understand.  Make sure your records are intact.  Make sure you're ready.  So I guess maybe the banner would be "be proactive," number one.

Number two, challenge with information sharing, need for consistency. Cross-border information sharing is on the increase.  I know here in the US we have had a number of instances where the IRS has come in making requests on behalf of treaty partners, which is something they're permitted to do under the tax treaties.  They come in, they make a request on behalf of—we've had Spain, we've had Poland, we've had Kazakhstan, where they've come in as the IRS saying, "On behalf of our treaty partner, we need you to answer this question."

So this closing of the world, if you will, and the information sharing and the need for consistency is more critical today than ever.

And then I think the third thing that a C-level executive, or the head of a tax function really needs to be aware of and keep at the front of their mind is how can I help this situation, how can I diffuse it before there is a problem.  So proactive, but more than just being ready, think about a voluntary disclosure.  It really does offer great opportunities to engage with a revenue authority, address your issues, possibly avoid the imposition of penalties, and really move things along so that you don't have to worry about something two years down the road.


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The above information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The above information is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.