If your company does business in more than one country, you should be aware that the IRS is stepping up its efforts on intercompany pricing compliance. As you are probably aware, the IRS has been focusing on individuals who have not reported their foreign bank accounts. Those IRS efforts are increasing taxpayer compliance, and the IRS is now increasing its focus on U.S. companies doing business in other countries.
The IRS is concerned that it may not be getting its fair share of the profit on international business operations. You may have been reading lately that many U.S. companies doing business outside the United States have been able to reduce their tax costs.
The key to making this work is actually locating an activity in a low tax country. The rules are complex, but they can work. Don't be shy! A review of your current business activities may show that you are actually over-paying your taxes.
If you are concerned that you may be vulnerable to an IRS audit, you should review your current pricing structure to determine that you are following U.S. rules. It is important to remember that an IRS challenge to your intercompany pricing can also affect your state income taxes.
If you do not review your intercompany pricing policies before the IRS "comes knocking", the IRS may be able to assert what they think is a fair allocation of profit, and the burden will be on you to prove otherwise.
Please contact us at (212) 759-0097 to set a meeting to review your current exposure to an IRS audit of your international business transactions. You can also reach us through our website at www.mbrlawfirm.com
