Lawyers Fear IRS Overreach With Transfer Pricing Penalty Focus

An IRS push to assess more transfer pricing penalties has sparked concerns among taxpayers that the agency is able to penalize any position it disagrees with—and even solid supporting documentation isn’t enough to eliminate the risk.

Historically, taxpayers that provided documentation supporting their transfer pricing positions—or how they determine the value of intercompany transactions— rarely faced penalties for underpaying taxes.

Now, tax lawyers say the IRS could assess penalties whenever it disagrees with the transfer pricing method the taxpayer chooses in its analysis, even if that choice is supported by thorough documentation and robust data.

“The worry is if they ...