IRS Replaces TP Roadmap With Transfer Pricing Examination Process

; posted on
July 10th, 2018

The Internal Revenue Service (IRS) in the US released the Transfer Pricing Examination Process (TPEP) to be uses in transfer pricing examinations. The TPEP, issued by the Treaty and Transfer Pricing Operations (TTPO) of the Large Business and International (LB&I) division, is a guide of best practices and processes to assist with the planning, execution and resolution of transfer pricing examinations consistent with the LB&I Examination Process. With the issuance of TPEP, the Transfer Pricing Roadmap is retired.

General Information

The TPEP provides a framework and represents a guide for transfer pricing examinations. Every transfer pricing case is unique and requires ongoing exercise of judgment and discretion. The TPEP guide will be shared with taxpayers at the start of a transfer pricing examination to facilitate an understanding of the process and give insight into what is expected during a transfer pricing examination. This transparency is intended to help improve communications and efficiency, for the benefit of both the IRS and taxpayers. TTPO will continue to review the TPEP and make changes over time as new techniques appear or additional reference materials become available.

Three Phases of TPEP

The examination procedure includes three phases in total:

  • Planning phases. This phase of the examination process determines the scope of the audit. Issues selected for examination should have the broadest impact on achieving compliance regardless of the size or type of entity. The examination plan will be issue-focused and contain the following: issues identified, audit steps, timeline(s), and communication agreements.
  • Execution Phase. Stages of issue development include determining the facts, applying the law to those facts, and understanding the various tax implications of the issue. Every effort should be made to resolve any factual differences. Open communication and continuous reassessment should continue throughout the Execution Phase.
  • Resolution phases. 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.

Source: IRS

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