On September 18th Coca-Cola reported it's facing a huge multi-billion dollar potential penalty for under-reporting income over a three year period, and because of foreign transfer pricing issues.

In its Form 8-K filed with the Securities and Exchange Commission Coca-Cola reported that the Internal Revenue Service had notified it of a potential $3.3 billion federal income-tax liability. This comes due to foreign transfer pricing issues made worse by the IRS decision to recommend that the matter be designated for litigation. 

In addition a U.S. Treasury Department audit determined the company’s reported income from 2007 to 2009 should have been higher. Coke said it would file a petition in U.S. Tax Court challenging the notice.

Needless to say compliance with federal tax rules had better be on your radar as you revisit your vendor files prior to filing season. Furthermore, if your organization engages in cross-border transactions or issues payments to Non-U.S. Persons then please take the time to register for October's Form 1042/1042-S Year-End Reporting Online Seminar (and earn 3 CPE's).