Editing Transfer pricing (section)

===Documentation and penalties===
If the IRS adjusts prices by more than $5 million or 10 percent of the taxpayer’s gross receipts, penalties apply.  The penalty is 20% of the amount of the tax adjustment, increased to 40% at a higher threshold.<ref>[https://www.law.cornell.edu/uscode/text/26/6662- 26 USC 6662] {{webarchive|url=https://web.archive.org/web/20100426064925/https://www.law.cornell.edu/uscode/text/26/6662- |date=2010-04-26 }}.</ref>

This penalty may be avoided only if the taxpayer maintains contemporaneous documentation meeting requirements in the regulations, and provides such documentation to the IRS within 30 days of IRS request.<ref>[http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&rgn=div8&view=text&node=26:13.0.1.1.1.0.16.256&idno=26 26 CFR 1.6662-6(d)(2)(iii)].</ref>  If documentation is not provided at all, the IRS may make adjustments based on any information it has available.  Contemporaneous means the documentation existed with 30 days of filing the taxpayer's tax return.  Documentation requirements are quite specific, and generally require a best method analysis and detailed support for the pricing and methodology used for testing such pricing.  To qualify, the documentation must reasonably support the prices used in computing tax.