A new round of audits by the Internal Revenue Service (IRS) is aimed at corporate travel.
Company jets offer convenience and security, and have long been seen as status symbols. As part of its increased scrutiny of large companies and complex partnerships, the IRS is now evaluating that perk of corporate life—the corporate jet.
This year, the IRS plans to undertake approximately four dozen audits of business aircrafts. Depending on the outcome of these audits, the IRS may expand into individual audits.
In a recent statement, IRS Commissioner Danny Werfel said, “During tax season, millions of people are doing the right thing by filing and paying their taxes, and they should have confidence that everyone is also following the law. Personal use of corporate jets and other aircraft by executives and others have tax implications, and it’s a complex area where IRS work has been stretched thin. With expanded resources, IRS work in this area will take off. These aircraft audits will help ensure high-income groups aren’t flying under the radar with their tax responsibilities.”
The use of a company plane is a perk usually reserved for executives, board members, shareholders, and other designated high fliers. Aircraft owned, operated, or leased by a company can expedite business and speed up the needs of executive personnel. The IRS has long allowed a business deduction for the cost and expense related to maintaining a company plane for business use.
Currently, the IRS is concerned that company jets for personal use are translating into inappropriate expense deductions on corporate tax returns. Similarly, individuals who use corporate jets for personal use may be underreporting their income on their personal tax return.
Because of the difficult nature of keeping careful records that delineate business airplane use from personal use, the IRS audits are planned to review the following:
- Review of corporate jet records for business and private use
- Examination of associated tax returns for expense or income allocations for business and personal use of corporate aircraft
This round of audits is part of the expanded review by the IRS of big business and high-asset earners. In this continuing effort, the IRS has collected $482 million in unpaid tax liabilities, so far, from 1,600 millionaires. If you have questions about corporate compliance or an impending IRS civil audit, reach out to an experienced tax attorney for assistance.
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Serving local and international clients from offices in Chicago and Cleveland, the tax firm of Robert J. Fedor, Esq., LLC offers skilled legal defense if you are challenged by tax litigation or a civil or criminal IRS tax audit. Call 800-579-0997 or contact us today.
