“An old-fashioned handshake is a good way to do business—unless the IRS demands a copy” — Source: Cullen Hightower
“The condition of being obvious or evident.” — Source: Oxford Dictionary
IN THIS DAY and age it is important that businesses take a more open-minded approach when it comes to tax compliance. The process of transparency is not confined to the completion of a tax return and the disclosure made to the IRS. It begins with transparency between the role players involved in a transaction, the key decision makers in the business, and the people responsible for understanding the tax implications and compiling the return. Taxpayers who are aware of the disclosing requirements of transactions are in a better position to avoid unnecessary taxes, additional taxes, interest, and penalties later on.
Transparent tax compliance is an essential element in obtaining finality of assessments issued by the IRS. Most tax legislation will empower the IRS to raise an additional assessment against a taxpayer at any time, even though an original assessment has already been raised, and the time period has lapsed where that original assessment has become final and conclusive. This leads to uncertainty in respect of a taxpayer’s tax exposure. Fortunately, this tax legislation does not usually give an IRS carte blanche in that it will usually limit the authority of the IRS to reopen an assessment and raise an additional assessment only after the IRS has satisfied itself of the fact that an amount that should have been assessed to tax was not so assessed due to fraud , misrepresentation, or nondisclosure of material facts. Unlike fraud and misrepresentation, nondisclosure of material facts could be an innocent mistake which nevertheless results in adverse tax consequences well after the original tax assessment has become final and conclusive.