After going public last year, Uber reported in its first quarter report to the SEC that they were currently under audit by the IRS. The 2013 and 2014 returns are being examined but no other information is available at this time. I know what you all must be thinking; can they really go back that far to audit returns?
Usually, the statute of limitations is only 3 years unless there is a big (I’m talking over 25%) understatement of income. Currently, Uber has 2010 through 2019 available if an audit were to arise in the U.S., Brazil, Netherlands, Mexico, United Kingdom, Australia, Singapore, and India tax jurisdictions.
Why doesn’t the 3-year rule apply to Uber? There are a few reasons why:
- Understatement of income: If they did understate their income by more than 25% it would only extend the statute to 6 years, so why 9 years?
- IRS Form 5471: Form 5471 is an IRS reporting form that is used to report a corporation’s involvement in foreign corporations. Failure to file this form would generate a $10,000 penalty for each form. A separate penalty would apply if the form was filed incorrectly. Bad news for companies, if this is the reason for the audit, the statute of limitations extends indefinitely!
- No return or fraudulent return filed: If you never file a return or prepare one fraudulently there is also no time limit when it comes to an IRS audit. Since Uber is a publicly traded company and very well-known this would likely not be the cause of the open years for audit.
What now for Uber? The audit will most likely end with Uber needing to provide additional support to address the red flags found by the IRS agents. No one is safe from an audit and taxes can be very complex.
Don’t be afraid to contact your friendly and knowledgeable Henry+Horne tax professional. It is imperative that we all keep good records to support our returns just in case we find ourselves in the same scenario as Uber.