Uber Faces New Audit by IRS and Foreign Tax Authorities
The year has been off to a rocky start for Uber, as they are experiencing the highs and lows of going public. Although their tumbling share price is currently a main worry for the company, it seems that the rideshare giant may be facing even more problems regarding their tax situation. This week, Uber’s SEC filing showed that the company is currently under audit by the IRS as well as other foreign authorities.
The main tax returns under question are for the year 2013 and 2014, with the primary cause related to Uber’s transfer pricing positions. These are essentially how Uber allocates the locations of its different incomes and costs. Additionally, in many countries, including the United States, the United Kingdom, Mexico, Brazil, Australia, India, and others, the company’s 2010-2019 returns are still open and under question. Although Uber has stated they are prepared for the additional tax liability, the company cannot estimate the total liability at this time.
It is entirely possible that in the next year Uber’s gross unrecognized tax benefits will be subject to substantial changes, with the company noting they estimate that the reductions will be at least $141 million. Considering Uber has had tax issues in the past, particularly regarding international activities since its start in 2010, this might not be the end of the company’s struggles with the IRS and many foreign tax jurisdictions.
For the future, many predict that these audits may also lead to more problems for Uber’s tax situation with respect to the classification of its drivers. Over the years the company has tried to categorize its workforce as independent contractors rather than employees to save on tax liabilities. The increased attention on their financials and tax returns may lead to a larger investigation on this matter as well.
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