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Tax Alert: IRS Increases Focus on Transfer Pricing


The Internal Revenue Service ("IRS") is building a team dedicated to cracking down on transfer pricing practices, according to news sources. In May 2011, the IRS appointed Samuel Maruca as transfer pricing director and he has since appointed specialists from Big Four accounting firms and law and consultancy firms. Forty positions have been filled and the team is expected to add 60 more staffers, according to a March 20th Reuters article.

As stated in the same Reuters article, governments in the developing and developed world, many of them faced with crushing deficits, are working to curb transfer pricing because it reduces corporate tax revenues.

The U.S., and almost all of its major trading partners around the world, have transfer pricing rules that allow tax authorities to adjust items of income, expense, credit, or allowance in connection with transactions among related parties. The U.S. and most jurisdictions with transfer pricing regimes have instituted documentation requirements that necessitate taxpayers with related party transactions to develop documentation supporting the arm's length nature of their related party transactions. Such documentation must be prepared in a prescribed format and must be completed by the time the tax return, on which such transactions are reflected, is filed. If an adjustment is made by a taxing authority and the required documentation is not available, your company may face significant penalties.

Because of increased scrutiny from the IRS, businesses should closely examine their transfer pricing requirements.

For more information, please contact James Wall, principal and director of J.H. Cohn's International Tax Practice, at jwall@jhcohn.com or 646-254-7460; David Slemmer, a director in J.H. Cohn's International Tax Practice, at dslemmer@jhcohn.com or 646-625-5732; or your J.H. Cohn engagement partner at 877-704-3500.

Download the full PDF.

Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and J.H. Cohn LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. Published date: 3/26/2012

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