Click above to hear Yelena Epova of Habif, Arogeti and Wynne discuss transfer pricing. Click here for the QuickTime version.

As more small- to medium-sized companies conduct business internationally, the Internal Revenue Service is looking more closely at their transfer pricing practices, according to Yelena Epova, a partner in the accounting and business advisory firm Habif, Arogeti and Wynne LLP.

“Companies that violate IRS transfer pricing guidelines may face stiff penalties amounting to as much as 40 percent of the value of a transaction,” she told GlobalAtlanta in a filmed interview. “From the beginning these companies should have a transfer pricing policy.”

The IRS requires that transfer pricing practices be conducted at “arms length” referring to the practice of making certain that transactions between two related or affiliated parties are conducted as if they were unrelated.

“A written policy helps to ensure that that is indeed the case,” she said.

The IRS traditionally has kept close tabs on the transfer pricing practices of large multinational companies. However, Ms. Epova said small- to medium-sized companies are receiving greater scrutiny and may be caught off guard if the IRS conducts an audit.

“They have only 30 days to provide documentation of the company’s policy,” she said, adding that it usually takes much longer than that to develop a policy from scratch.

 “They really need to be ahead of the curve,” she said.

Habif, Arogeti and Wynne provides a large variety of services for assurance, tax planning and compliance and retirement plan administration. It also has specialized services for high net-worth individuals. It is a sponsor of the GlobalAtlanta news service.