IRS Horror Stories: Is Your Business at Risk?

Today we’re going to share a story about an Alaska-based airline and their battle with the IRS. It’s a small business, just like many of the businesses here in Oklahoma. It’s a story that illustrates just how hard the IRS can make life for small businesses. The Wall Street Journal reports:

A scene in National Geographic’s “Alaska Wing Men” television series shows pilot Jack Barber weaving his small charter airplane in and out of white plumes that hide the Merrill Pass’s jagged cliff line. A narrator explains that ice forming at such a high altitude threatened to pull Barber’s plane, loaded with bear-hunting passengers, to the ground.

The 13-episode show has filmed slippery glacier landings and merciless weather, but Barber and federal lawmakers say the state’s charter airplane industry of roughly 230 operators is also facing serious headwinds from a tax dispute with the Internal Revenue Service.

A fight over $1 million in unpaid taxes has already caused Barber to put his Anchorage-based company, Alaska Air Taxi LLC, and its fleet of seven small airplanes into Chapter 11 bankruptcy protection.

Alaska Democratic Sen. Mark Begich is accusing the IRS of trying to collect years’ worth of back payments from charter operators for a tax that he says is vaguely defined and shouldn’t be charged at all on certain flights. His office said that tax bills of up to $1 million have been sent to the state’s charter airline operators, which carry tourists to remote spots, support the oil-and-gas industry and deliver cargo to hard-to-reach villages in a state where 82% of communities are not accessible by road, according to the Alaska Air Carriers Association.

“This thing is going to affect all the tourism in Alaska, if not the United States,” Barber said of the IRS’s interpretation of the rules.

An IRS spokeswoman said she couldn’t comment on pending legislation or individual disputes.

The federal government charges flight operators a $3-per-passenger tax for trips that are flown at regular, scheduled intervals. Specifically, that tax is due on routes that are flown “with some degree of regularity,” according to the federal rulebooks.

The segment tax, as it’s called, is also chargeable every time the airplane touches down and takes off again during the same trip.

But the rulebooks don’t define “some degree of regularity,” and the IRS has been stricter about designating routes that some charter operators take as “regular,” according to the Alaska Air Carriers Association.

“This is a perfect example of the kind of confusing, nonsensical behavior from the federal government that drives ordinary people crazy,” Begich’s office said in a statement. “It doesn’t make sense, and it needs to be fixed.”

Unfortunately, millions of taxpayers and small business owners can identify with this scenario. The IRS often seems like its top priority is making life miserable for hard working men and women who are just trying to carve out a living in this tough economy.

If you’re currently dealing with an IRS dispute, we can help. Give us a call today and let us deal with the IRS so that you can focus on running your business!