The IRS Multinational Audit: How Multinational Corporations Can Survive Five Common Targets of an IRS International Tax Audit
By Anthony Diosdi An exam of a multinational’s tax return(s) will begin much the same manner as any other audit in that the corporation will receive a letter from the Internal Revenue Service (“IRS”) notifying it of the audit. However, unlike a typical garden variety audit which tends to focus on substantiating expenses claimed on a tax return or a probe of the income, an international audit will likely focus on cross–border transfers and reorganizations, transfer pricing, foreign tax credits, bilateral tax treaties, and international information returns. These matters tend to be extraordinarily complex. Furthermore, special procedural issues may arise in international audits that do not typically arise in more traditional audits. This article explores five areas that in our experience tend to come up in international tax audits of…