IRS Proposes to Require Disclosure of Uncertain Tax Positions!
If it wasn't already enough burden on small businesses reporting under U.S. GAAP to disclose uncertain tax positions and provide allowances for estimated unsustainable amounts, the IRS is planning to require business taxpayers with assets in excess of $10 million to report the same in a schedule with their Form 1120 returns or other business tax returns (Announcement 2010-9). Going beyond the requirements of FIN 48 which are applicable only to GAAP basis financial statements, it appears this proposal will apply to all corporate returns prepared using other reporting frameworks such as IFRS. Further, the Announcement states:
"In addition to those positions for which a tax reserve must be established unde FIN 48 or other accounting standards, uncertain tax positions will include any position related to the determination of any United States federal income tax liability for which a taxpayer or related entity has not recorded a tax reserve because (i) the taxpayer expects to litigate the position, or (ii) the taxpayer has determined that the Service has a general administrative practice not to examine the position."
Does this mean that all business tax returns have to disclose uncertain tax positions, even those not using U.S. GAAP or IFRS? You decide!
The Announcement also describes the contents of the schedule:
"The schedule will require (i) a consise description of each uncertain tax position for which the taxpayer or a related entity has recorded a reserve in its financial statements and (ii) the maximum amount of potential federal tax liability attributable to each uncertain tax position (determined without regard to the taxpayer's risk analysis regarding its likelihood of prevailing on the merits)."
We may have believed the current administration when they spoke words of concern over the plight of small businesses during the economic recession. Trying to force health care costs on small business, creating proposals to eliminate LIFO accounting and oil and gas drilling incentives among others, and now planning to force the costs of reporting uncertain tax positions onto all corporate taxpayers are actions that speak more loudly than their words!
What should we do abount this? Under the supervision of the Treasury Secretary, this proposal from the IRS will make all corporate tax return preparers unpaid IRS agents! Big Brother is getting really big! It's time to SPEAK OUT! Read Announcement 2010-9 at www.irs.gov/pub/irs-drop/a-10-09.pdf and let the IRS know how you feel about their plans by email at Announcement.Comments@irscounsel.treas.gov . Post a comment and share your feelings with our readers on this blog. Stick your head out the window and let your voice be heard!
by Larry Perry, CPA, CPA Firm Support Services, LLC - Larry has over 40 years experience as a CPA practitioner, author of accounting and auditing manuals, author and presenter of live staff training seminars and author of webcast and self-study CPE programs. He is co-founder of CPA Firm Support Services, LLC (www.cpafirmsupport.com), an organization providing resources, training and consulting to smaller CPA firms. Larry writes a weekly blog on AccountingWEB.com focusing on small audits, reviews and compilations. He is currently developing documentation manuals and handbooks for small audits, reviews and compilations and related electronic practice aids.