Federal tax filing requirements have included some limited disclosure of the major differences between book and taxable incomes. But recent financial accounting scandals and a call for increased transparency pushed the IRS in 2004 to develop a detailed, three-page reconciliation schedule for large corporations called Schedule M-3, Net Income (Loss) Reconciliation for Corporations With Total Assets of $10 million or more. This year will see the introduction of similar Schedules M-3 for partnerships, S corporations, life insurance companies, and casualty insurance companies. Thus, more companies will be giving the IRS the exact information it needs to select them for an expensive and time consuming audit process.

Schedule M-3 has been very controversial since its introduction, with numerous questions regarding a variety of implementation and compliance issues. For example, which income figure is used for financial accounting purposes, particularly with an affiliated group of corporations? Is a book/tax difference temporary or permanent in nature? How do deferred tax issues in financial accounting affect book/tax reconciliations? How many Schedule M-3s are required to be filed for an affiliated group of corporations? How do the new Schedule M-3s for flow-through entities differ from the corporate Schedule M-3? The authors of an upcoming CCH publication on Schedule M-3 will tackle these and many more questions in a live 100-minute audio seminar. Register Today!