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January
29, 2010 |
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TAX
NEWS YOU CAN USE — |
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IRS
Commissioner Shulman Proposes Requiring Many Companies
to Disclose Uncertain Tax Positions on their Annual Tax
Returns
IRS
Proposal to Disclose Uncertain Tax Positions in Tax
Returns
On
Tuesday, January 26, 2010, the IRS announced a proposal
that, if effective, would require many companies to
disclose uncertain tax positions in their annual income
tax return filings. IRS Commissioner Douglas Shulman
made the announcement during
remarks to the New York State Bar Association Tax
Section, and indicated that this is a major step in the
move towards increased transparency.
This
proposal is the next
step in the continuing saga between taxpayers and the
IRS regarding tax accrual work
papers.
As
proposed, the requirement would apply to business
taxpayers who have both:
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a
financial statement prepared under FASB
Interpretation No. 48, Accounting
for Uncertainty in Income Taxes (FIN
48, now contained within FASB Accounting Standards
Codification (ASC) 740-10, Income
Taxes) or other similar accounting
standards reflecting uncertain tax positions (such
as International Financial Reporting Standards
(IFRS) or country-specific generally accepted
accounting standards), and
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total
assets over $10
million. |
A
schedule or form would be included in applicable
business tax returns annually. Each uncertain tax
position would require a concise description to
determine the nature of the particular issue and would
require the taxpayer to determine the maximum amount of
potential federal tax liability attributable to each
uncertain tax position. The IRS is evaluating additional
options for penalties or sanctions for lack of adequate
disclosure.
Commissioner
Shulman indicated that this proposal was intended to
improve the efficiency and effectiveness of tax
examinations and that he understands this is information
that taxpayers have already prepared for financial
reporting purposes. He stressed that taxpayers
would not be required to disclose how strong or weak
they regarded their tax
positions. |
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This
is not yet effective in its current form, and per
Commissioner Shulman is not applicable to the 2009
filing season.
However, it is presumed that the IRS intends to push
this proposal forward quickly so taxpayers and
practitioners will need to stay tuned for further
developments. The IRS has invited comments on the
proposal by March 29, 2010.
The
application and associated understanding of FIN 48 is
still fairly new to many accountants. FIN 48 was
generally effective for public companies for fiscal
years beginning after December 15, 2006. However, the
effective date for private companies was deferred, and
these companies are starting to see its application in
their financial statements for annual financial
statements for periods beginning after December 15,
2008. Therefore, many AICPA members may have been seeing
and experiencing the application of FIN 48 to financial
statements for the first time within the past year –
either as an audit or tax practitioner in public
accounting, or in an accounting or tax function of a
private company.
This
proposal also has many implications and will generate
much debate. The AICPA understands that this proposal
will have a significant effect on our members if it
becomes effective as initially proposed by the IRS and
we are considering an appropriate response on behalf of
our membership.
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Tax
Section Member Service Contact Information Members can update
their records and ask questions about Tax Section member
benefits at 800-513-3037 or taxsection@aicpa.org.
Disclaimer: This e-mail represents a general overview
of tax developments and should not be relied upon without an
independent, professional analysis of how any of these
provisions may apply to a specific situation. Any tax
information contained in the body of this e-mail was not
intended or written to be used, and cannot be used, by the
recipient for the purpose of avoiding penalties that may be
imposed under the Internal Revenue Code or applicable state or
local tax law provisions.
Tax Section E-Alert,
Vol. 7, No. 3, January 29, 2010. Prepared by the staff of the
Tax Division of the American Institute of Certified Public
Accountants, Inc. and edited by William R. Stromsem, Director
and Abraham Schneier, Senior Manager. Editorial offices at
1455 Pennsylvania Avenue, NW, Washington, DC 20004-1081.
Copyright © 2010 by the American Institute of Certified Public
Accountants, Inc., New York, New York.
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