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Uncertain Tax Position FAQs Posted - Emil Estafanous, CPA : Emil Estafanous, CPA

Uncertain Tax Position FAQs Posted

The IRS has posted a array of questions and answers (FAQs) about a new requirement for vast companies to news their capricious taxation positions. The 7 FAQs residence both stating mandate for Schedule UTP, Uncertain Tax Position Statement, and a IRS’ routine of restraint.

For a 2010 taxation year, companies filing Form 1120, U.S. Corporation Income Tax Return, word companies filing Form 1120-L, U.S. Life Insurance Company Income Tax Return, or 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return, and unfamiliar companies filing Form 1120-F, U.S. Income Tax Return of a Foreign Corporation, contingency divulge their capricious taxation positions on Schedule UTP when a association or a compared celebration issues audited financial statements and a association has (1) one or some-more capricious taxation positions that contingency be reported on Schedule UTP (as tangible by a IRS in a instructions for Schedule UTP) and (2) sum resources equal to or in additional of $100 million. The sum item threshold will be reduced to $50 million in 2012 taxation years and to $10 million starting with 2014 taxation years. The IRS is deliberation either to extend UTP stating to other taxpayers over those remarkable above for 2011 or after years.

On Sep 24, 2010, a IRS announced that it was expanding a routine of patience in tie with a preference to need certain companies to record Schedule UTP and that it will abandon seeking sold papers that describe to capricious taxation positions and a workpapers that ask a execution of Schedule UTP (Announcement 2010-76).

Schedule UTP Requirements

The FAQs explain that a house theme to FIN 48 does not need to news a taxation position on Schedule UTP if a position is “highly certain” within a definition of FIN 48.

According to a FAQs, if a house annals a haven in an audited financial matter for a taxation position it expects to take in a 2010 taxation lapse though after eliminates a haven in a successive halt financial matter released before a filing of a 2010 return, it contingency news a taxation position on Schedule UTP if a halt financial matter is unaudited. The FAQs go on to say, however, that if a house reconsiders either a haven is compulsory for a taxation position and eliminates a haven in an halt audited financial matter released before a taxation position is taken in a return, a house does not have to news a taxation position to that a haven relates on a Schedule UTP.

The FAQs explain that companies do not have to news a use of a net handling detriment (NOL) or credit carryover in a post-2009 lapse if a apportionment of a NOL or a credit carryforward that is used includes a taxation position taken in a pre-2010 lapse for that a house has available a reserve. However, a IRS warns that this FAQ does not differently impact a requirement that a house news a taxation position claimed on a post-2009 lapse for that a house has available a haven that is enclosed in an NOL or credit carryover for intensity use in a after year. The IRS promises additional superintendence per stating mandate for a use of NOLs and credit carryovers.

The FAQs also state that, in last a distance and ranking of a taxation position on Schedule UTP, if an volume of seductiveness or penalties relating to a taxation position is not alone identified in a books and annals as compared with that position, afterwards that volume of seductiveness and penalties is not enclosed in a distance of a taxation position used to arrange that position.

Policy of Restraint

Two questions residence either a changes to a routine of patience announced in Announcement 2010-76 ask to papers requested by IRS Appeals and to papers requested by IRS Counsel after a filing of a Tax Court petition.

The FAQs attest that a changes to a IRS routine of patience ask to any ask for papers during a IRS’ executive routine of last a scold taxation liability, including Appeals’ care of due review adjustments.

The FAQs also contend that, in general, IRS attorneys will not emanate find requests for papers or information that a IRS would not find underneath a routine of restraint. However, a FAQs state that a focus of a routine of patience to actions taken by IRS Counsel in Tax Court lawsuit will be addressed in a rider to a Chief Counsel Directives Manual.

Announcement 2010-76 did not enclose an effective date, and a FAQs explain that a routine of patience changes in that proclamation ask to any ask for papers superb on or done after Sep 24, 2010, in any open examination.

AICPA Concerns About UTP Reporting

Throughout a phenomenon of a IRS’ capricious taxation position stating plan, a AICPA has lifted countless concerns and done many specific recommendations per a IRS’ proposals. These concerns include:

  • The weight that will be placed on smaller taxpayers when a devise is entirely implemented in 2014 (the AICPA believes a threshold should be significantly increased);
  • The intensity weight a devise might place in destiny years on pass-through entities and tax-exempt organizations; and
  • Duplicative stating and a ultimate advantage to a supervision of a information received.

The AICPA has submitted criticism letters per a proposal, and, according to Edward Karl, AICPA clamp president–taxation, it will continue to lift suitable issues with a IRS on this matter and pull for a investigate duration as summarized in a initial criticism minute and will continue to promulgate a concerns and disciple for a members per a avowal of capricious taxation positions.

About Emil Estafanous, CPA
Certified Public Accountant (CPA) Tax Professional committed in representing taxpayers and resolving their tax problems.

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