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Department of Treasury – Transfer Pricing Examination Process And Updates – Appeals Phase (Part VIII)

Transfer Pricing Examination Process, Appeals Phase

(The Transfer Pricing Examination Process was recently updated by the Department of Treasury – June 2018. TaxConnections posts this valuable eight part a series to keep you informed of these changes.)

C. Appeals Phase
As a best practice, the issue team will begin preparing the pre-Appeals presentation immediately after closing the case. Upon contact from Appeals that the case has been assigned, the issue team should:
• Request a pre-Appeals conference using Forms 3198 and 4665
• Contact the Appeals Officer and request examination’s presence at the taxpayer’s portion of the presentation
• Determine which LB&I team members should attend the pre-Appeals conference
• Determine the roles and responsibilities of the issue team members
• Hold mock presentations to prepare for the pre-conference meeting
• Hold the Appeals pre-conference meeting

Request a post-Appeals Conference and attend the meeting. The issue team should:
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Department of Treasury – Transfer Pricing Examination Process And Updates – Resolution Phase (Part VII)

Transfer Pricing Examination Process Part VII

(The Transfer Pricing Examination Process was recently updated by the Department of Treasury – June 2018. TaxConnections posts this valuable eight part a series to keep you informed of these changes.)

III. Resolution Phase
The goal of the resolution phase is to reach agreement, if possible, on the tax treatment of each issue examined and, if necessary, issue a Revenue Agent Report (RAR) to the taxpayer. Starting with the development of the issue and continuing through resolution,
early and frequent discussions with the taxpayer are crucial for a complete understanding of the respective merits of an issue.

A. Issue Presentation and Resolution
The issue team should meet with the taxpayer to discuss results of all issues prior to finalizing the NOPA and the Economist Report.

Focus taxpayer discussions on the following:
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Department Of Treasury – Transfer Pricing Examination Process And Updates (Part III)

IRS, Transfer Pricing Examination Process

(The Transfer Pricing Examination Process was recently updated by the Department of Treasury – June 2018. TaxConnections posts this valuable eight part a series to keep you informed of these changes.)

D. IRC Section 6662(e) Documentation Request
The Initial Transfer Pricing Documentation IDR (formerly known as the Mandatory Transfer Pricing IDR) is no longer required for all cases. Follow the Interim Instructions on Issuance of Mandatory Transfer Pricing IDR in LB&I Examinations. The Senior Revenue Agent/Team Coordinator and the issue team members will collaborate on the issuance of the IDR. It is important to issue the IDR early in the audit process to start working the issue as soon as possible to close the case timely. Please review IRM Exhibit 4.46.3-4 – Transfer Pricing Compliance Processes for specific language:

• Treas. Reg. Sec. 1.6662-6(d)(2)(iii) IDR includes a request for principal documents and an index for background documents
• Internal Revenue Code Section (IRC Sec.) 6662(e) and Treas. Reg. Sec. 1.6662- 6(d)(2)(iii) require that the taxpayer respond within 30 calendar days. The 30 days starts with the date of the IRC Sec. 6662(e) IDR
• The 30 day response time is defined by statute and is an exception to the new IDR and related enforcement processes as described in LB&I Directive on IDR Enforcement Process
• The issue team should use this 30 day period to perform analysis of currently available information, which may include prior tax returns and financial statements

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Department Of Treasury – Transfer Pricing Examination Process And Updates (Part II)

IRS , Transfer Pricing Examination Process Update

(The Transfer Pricing Examination Process was recently updated by the Department of Treasury – June 2018. TaxConnections posts this valuable eight part a series to keep you informed of these changes.)

C. Initial Transfer Pricing Risk Assessment

1. Review Prior Year Workpapers

Risk assessment includes the review of prior year workpapers, if applicable, to identify potential controlled transactions. The issue team should analyze prior year documents including, but not limited to:

• Initial and mid-cycle risk analysis
• Taxpayer’s transfer pricing documentation
• Revenue Agent Reports and closing agreements
• Notice of Proposed Adjustments (NOPA)
• International Examiner’s Report
• Economist’s Report
• Other specialist’s reports
• Functional analysis
• Appeals Case Memorandum (ACM)

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Department Of Treasury – Transfer Pricing Examination Process And Updates (Part I)

IRS, Transfer Pricing Examination Process Update

(The Transfer Pricing Examination Process was recently updated by the Department of Treasury – June 2018. TaxConnections posts this valuable eight part a series to keep you informed of these changes.)

The Transfer Pricing Examination Process provides a guide to best practices and processes to assist with the planning, execution and resolution of transfer pricing examinations consistent with the Large Business & International (LB&I) Examination Process (LEP), Publication 5125. This guide will be shared with taxpayers at the start of a transfer pricing examination so they understand the process and can work effectively with the examination team.

Transfer pricing examinations are factually intensive and require a thorough analysis of functions, assets, and risks along with an accurate understanding of relevant financial information. They are resource intensive for both the IRS and taxpayers. To ensure
resources are applied effectively, LB&I is using data analytics to identify issues for examination that have the most significant risk for non-compliance. In addition, teams should continually assess the merits of issues during an examination.

Our goal in a transfer pricing examination is to determine an arm’s length result under the facts and circumstances of the case. Teams should keep an open mind during an examination to new facts as they are identified. Arm’s length results are rarely a precise answer, but instead may be a range of results. If the facts of the case show that the taxpayer’s results fall within an appropriate arm’s length range, then our resources should be applied elsewhere. Likewise, teams should continually assess opportunities for issue resolution with taxpayers during the examination process.

The Transfer Pricing Examination Process provides a framework and guide for transfer pricing examinations. Every transfer pricing issue is unique, and teams should exercise their judgment on how to best apply this guide. This guide will be updated regularly
based on feedback from examiners, taxpayers, practitioners, and others.

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TaxConnections Gift: Motivational Inspirations eBook

TaxConnections, Motivational Inspirations eBook

We are inspired by the number of tax and financial executives,  and CEOs of companies all over the world who visit TaxConnections to find a tax professional and ask tax questions. TaxConnections Members receive the attention of CEOs in Asia, Australia, Brazil, Canada China, India, Greece, Japan, Mexico, Singapore, Switzerland, Netherlands, Thailand, Russia and the United Kingdom(to name a few) who visit our site to gain the advice of tax experts worldwide.

In addition, TaxConnections Executive Search Services Division has conducted more than one thousand tax executive searches over the years. One of the many things I learned from CFO clients who retained us to conduct searches for tax experts you should learn. CEOs and CFOs search for tax experts who can break tax down into a simple language they can understand; they need a strong tax coach on their management team. They also want to find a tax professional who inspires and motivates a tax team to productivity.

TaxConnections Motivational Inspirations eBook is our gift to you to help inspire a new generation of tax professionals coming into the profession.

Click To Receive TaxConnections Motivational Inspirations eBook



Senior Vice President Tax – Family Office (Los Angeles, CA)

VP Tax Job, Tax Executive Search

Our retained search client is a global private family office that actively manages a global diversified portfolio of investments (including private equity and real estate), is seeking to hire a Senior Vice President, Tax. This executive will oversee the company’s global tax function and all matters concerning tax planning and strategy. The Senior VP Tax must have strong pass-through tax experience with M&A experience a plus. This is an exciting position with a direct impact on the success of the family office business operations as a whole.

• Responsible for global tax planning and compliance; reviewing and filing of all domestic and international corporate, personal, partnership and other income and indirect tax returns; implementing and managing company’s income tax and indirect tax compliance activities

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IRS Rules: FATCA Reporting For U.S. Taxpayers

IRS, U.S. Citizens Reporting Foreign Assets, TaxConnections

The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to combat tax evasion by U.S. persons holding accounts and other financial assets offshore. The Treasury Department and the IRS continue to develop guidance concerning FATCA. For current and more in-depth information, please visit FATCA.

Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. There are serious penalties for not reporting these financial assets (as described below). This FATCA requirement is in addition to the long-standing requirement to report foreign financial accounts on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) (formerly TD F 90-22.1).

FATCA will also require certain foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. The reporting institutions will include not only banks, but also other financial institutions, such as investment entities, brokers, and certain insurance companies. Some non-financial foreign entities will also have to report certain of their U.S. owners.

Therefore, if you set up a new account with a foreign financial institution, it may ask you for information about your citizenship. FATCA provides special (and lessened) reporting requirements about the U.S. account holders of certain financial institutions that do not solicit business outside their country of organization and that mainly service account holders resident within it. In order to qualify for this favorable treatment, however, the local foreign financial institution cannot discriminate by declining to open or maintain accounts for U.S. citizens who reside in the country where it is organized.

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Gift For Tax Professionals – Best Tax Jokes eBook

Best Tax Jokes eBook, TaxConnections

We know you will enjoy one of the most popular eBooks we provide to our tax professional members. In fact, TaxConnections members have written or provided many of the jokes in this eBook. With more than 111 tax jokes on a wide range of topics, we know you will have a few laughs with your family, friends and clients.

Tax professionals are a lot of fun and have many stories to share. We encourage you to send us your favorite tax jokes and we will include them in future editions submitted by you to promote your services.

Request – TaxConnections Best Tax Jokes eBook


Tax Professionals – Question Of The Week

Each week TaxConnections posts a question from one of our visitors. We encourage our members to provide their insight and comments:
Canadian resident looking to enter into some sort of partnership with US citizen (LLC or similar). What is the best arrangement? I’ve read on this forum that as Canadian citizen, owning part of a US LLC may not be the best. If we want to share equity and management of the entity, what is best? Is LLP a better option, or some other? Many thanks.

Tax Cuts And Jobs Act: How Will These Changes Affect You Or Your Tax Clients?

US Congress , TaxConnections, Tax Cuts And Jobs Act

According to Wiki…Tax reform is the process of changing the way taxes are collected or managed by the government and is usually undertaken to improve tax administration or to provide economic or social benefits. Tax reform can include reducing the level of taxation of all people by the government, making the tax system more progressive or less progressive, or simplifying the tax system and making the system more understandable or more accountable.

A progressive tax is a tax in which the tax rate increases as the taxable amount increases. The term “progressive” refers to the way the tax rate progresses from low to high, with the result that a taxpayer’s average is less than the person’s marginal. The term can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime. Progressive taxes are imposed in an attempt to reduce the tax incidence of people with a lower ability, as such taxes shift the incidence increasingly to those with a higher ability-to-pay. The opposite of a progressive tax is a regressive, where the relative tax rate or burden decreases as an individual’s ability to pay increases

The term is frequently applied in reference to personal income taxes, in which people with lower income pay a lower percentage of that income in tax than do those with higher income. It can also apply to adjustments of the tax base by using tax exemptions, tax credits, or selective taxation that creates progressive distribution effects. For example, a wealth or property tax, a sales tax on luxury goods, or the exemption of sales taxes on basic necessities, may be described as having progressive effects as it increases the tax burden of higher income families and reduces it on lower income families.

Here is what the 115th U.S Congress provides us in the 708 Page Bill signed by President Trump known as the Tax Cuts And Jobs Act.

What provisions in this tax Bill positively or negatively affect you and your tax clients?

Your comments and insights are most appreciated.



Small Business And Self-Employed: Business Expenses

Small Business expenses are the cost of carrying on a trade or business. These expenses are usually deductible if the business operates to make a profit.

What Can I Deduct?

To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

It is important to separate business expenses from the following expenses:

  • The expenses used to figure the cost of goods sold,
  • Capital Expenses, and
  • Personal Expenses.
Cost of Goods Sold

If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Some of your expenses may be included in figuring the cost of goods sold. The cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense.

The following are types of expenses that go into figuring the cost of goods sold.

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