Coca-Cola's $3.3 Billion Tax Bill

It’s official, nobody has any right to complain about the taxes they owe.  Oh you owe $10k? $20k?  You think you’re in dire straits with your $50k or $100k tax debt?  That’s small beans.  The Coca-Cola company owes $3.3 billion!  The additional assessments came after a 5-year long audit associated with tax years 2007-2009.

Many of the tax disputes between the IRS and multinational corporations have to do with these companies trying to shift reportable income away from the US to avoid high domestic tax rates.  I say “avoid” and not “evade” because they all do this and they all claim that it is completely legal. However, I can’t imagine there is much legal precedent due to the fact that the vast majority of these cases settle, never making it to trial.

There are good reasons for settling, and they are all the standard reasons why parties in a lawsuit often choose to settle. One reason is to avoid the “hazards of litigation.” You never know with 100% certainty which way the judge and/or jury will go.  You can weigh the relative strengths on both sides, you can compare the evidence, and you can apply the law to the facts as done in similar cases. But surprises are common in litigation, and you can never predict for sure what will happen. Another good reason for settling is to avoid the high costs of litigation. Hundreds of thousands of dollars can be saved when parties agree to settle complex litigation cases. Of course the key is to settle early enough, before too much has been spent and before huge investments of time and emotion. Coca-Cola will need to decide whether it can justify the legal fees and risk the hazards of litigation.

Coca-Cola insists that it has been doing its taxes the same way for 30 years without any problems from the IRS.

IRS Appeals & Alternative Dispute Resolution

If you have an IRS tax debt and are unable to achieve a satisfactory resolution with the office originally assigned to handle your matter, you may need to call on the IRS Appeals Office to take a second look.  Last time I wrote about the procedures and steps leading up to Appeals.  Today I will discuss some of the options available to taxpayers already in Appeals.

Once the controversy has advanced to the stage of appeals the IRS offers a variety of “alternative dispute resolution” options designed to keep the matter out of court.

The mission of Appeals is to resolve tax controversies, without litigation, on a basis that is fair and impartial to both the Government and the taxpayer, and in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service.

~ IRS Pub 4167

Fast Track Mediation (FTM)

  • Intended for Small Business/Self Employed taxpayers
  • Case remains in SB/SE
  • Parties must agree to FTM using Form 13369
  • Taxpayer meets with IRS representative and third party Appeals personnel
  • Solution normally reached within 40 days
  • Solution is not binding (i.e., parties are not obligated to accept the outcome)
  • Automated Collection Service (ACS) cases excluded

Fast Track Settlement (FTS)

  • Available to most other taxpayers (not just SB/SE)
  • Must complete application, Form 14017
  • Decision normally reached with 60-120 days
  • Taxpayer may withdraw at any time and retains all traditional appeal rights


  • For factual issues only (no legal issues)
  • Outcome is binding
  • Most collection issues excluded

Abel Maldonado: Raises Taxes in 2009, Owes Taxes in 2012

Abel Maldonado, a Republican from Santa Maria, is running for Congress.  He voted with Governor Schwarzenegger and state Democrats to raise taxes in 2009.  Should that preclude him from seeking tax relief by disputing an IRS assessment?  Some think it should.

News sources have Maldonado owing as much as $470,000 in back taxes in connection with poorly-named family businesses, “Agro-Jal Farming” and “Tri-M Rental Group.”  The dispute is either currently in, or on its way to, US Tax Court where a judge will determine whether or not he will be held liable for the tax, plus whatever interest and penalties have accrued since 2006.  See full story here.

Of course the primary detractors are the rival congressional candidates, including Rep. Louis Capps, D-Santa Barbara, who are portraying Maldonado as a hypocrite.   This just goes to show that even the most staunch big-government Democrat usually doesn’t want to pay a penny more than he is legally obligated to pay.  I’m not sure that makes him a hypocrite.

If I voted to reduce the speed limit to 55mph, should I be morally obligated to drive 45?  No.  And if I got ticketed for driving 54mph, shouldn’t I have the right to dispute it?  Of course I should.  And the same things goes for payment of taxes.  Maldonado is no hypocrite; he’s just doing what every single warm-blooded American would do in his situation.