Uncertain Tax Positions: FIN 48, the IRS and the States??

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Uncertain Tax Positions; do you have any? Not sure? Well, the IRS wants to know!

As most companies are aware, FIN 48 has created the obligation for companies to identify their uncertain tax positions, determine the level of assurance or likelihood that they will or won't withstand audit, appeals and litigation scrutiny. Once that is determined, FIN 48 requires companies to disclose and create a reserve for those uncertain tax positions that reach the more likely than not (51%) threshold. With that said, up until now, this has only been a financial statement reporting standard. Now, the IRS wants to know.

The IRS has released Announcement 2010-9 which is a proposal to create a schedule requiring certain business taxpayers to report uncertain tax positions ON THEIR TAX RETURNS. Supposedly, the schedule will require the annual disclosure of uncertain tax positions in the form of a CONCISE description of those positions and information about their magnitude. The proposal does not require the taxpayer to disclose the taxpayer's risk assessment or tax reserve amounts.


The schedule would only require disclosure of FEDERAL TAX uncertain tax positions, but what about STATE uncertain tax positions?

If the IRS won't require disclosure of state uncertain tax positions, will the states follow suit and ask for similar disclosures on their returns? It's possible. I guess we will just have to wait and see.


The IRS is currently asking for public comments in response to the Announcement. Comments are due by March 29, 2010.

The Announcement states the new schedule will be required to be filed by a business taxpayer with total assets in excess of $10 million, and be attached to returns filed after the release of the schedule.

Stay tuned for the unveiling of the schedule and when you or your clients will be required to file the new schedule.

Author Comment:

Ahhhhhh, the era of transparency all in the sake of helping the IRS identify what returns to audit, and what tax positions to focus on. And taxpayers were worried about the IRS asking for tax accrual workpapers; skip that. The IRS just wants you to disclose it on the tax return.


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