The federal level of taxation is considered the first and mandatory for all companies in the USA. It is important to note that when a company is incorporated in the US, it does NOT automatically become tax-registered at its inception.
The new company must register for tax purposes by submitting an application to the regional tax office (we will discuss this issue in more detail when we talk about registering a company). This must be done BEFORE the start of the company.
And here you have to pay attention to an interesting nuance: if the American company has not had any operations for the reporting year – it can file a blank statement. The exception – LLC with one owner, such companies can not file a report.
Who controls taxation in the USA?
The function of tax control is performed by the Internal Revenue Service (IRS), which was established back in 1862 and is part of the U.S. Treasury Department. With just under 80,000 employees (as of 2015), the IRS processes more than 240 million tax returns annually.
The IRS has experienced several major IT system failures in recent years in 2016 and 2018, which is why one of the largest and most expensive IT upgrades has been initiated in 2019. Its total cost will be $2.7 billion. Does it work efficiently and is it worth the money? Judge for yourself: only 48 cents is spent to collect 100$ of taxes in the USA.
If a U.S. company had no transactions during the reporting year, it has to file a blank report. The exception is a single-owner LLC.
The structure of the U.S. IRS includes:
- Central Tax Commissioner’s Office (Washington, D.C.)
- 7 regional offices
- 62 taxing districts
The central commissioner’s tasks include managing the regional offices and developing tax programs, as well as overseeing their implementation.
The local tax districts are tasked with collecting budget revenues, controlling their volume and identifying violators of tax laws.
Tax evasion in the U.S. is a serious crime for which the penalty can be seizure of property or even imprisonment.
Another interesting fact: the IRC cooperates closely with the Federal Bureau of Investigation, as well as Europol and Interpol. Information about bank transfers and one-time cash payments over $10,000 are sent to the local offices of the FBI. This makes it possible to successfully combat terrorist threats, drug trafficking and cybercrime.
There is also a special tax court in the U.S., which also has its own peculiarities. For example, if you do not agree with the amount of tax deductions, you must first pay the required amount of taxes and all penalties, and only then provide documentary evidence of the right to tax credits and discounts. After you win your case, you will be reimbursed.