The tax community is abuzz with news regarding comments made by IRS Commissioner Douglas Shulman at a recent meeting of the New York State Bar Association Taxation Section. During the meeting held on January 26, 2010, Commissioner Shulman announced that the IRS will soon begin requiring many taxpayers to provide a listing of their uncertain tax positions at the time they file their tax returns.

Who’s Affected:

• Businesses with total assets in excess of $10,000,000
• Taxpayers that prepare financial statements
• Taxpayers that are included in financial statements prepared by related entities
• Businesses establishing reserves due to applying FIN 48 / ASC 740-10 (dealing with reporting of uncertain tax positions (UTPs) or other accounting standards for such uncertainties
• Businesses not establishing such reserves due to an expectation to litigate the position
• Businesses not establishing such reserves due to determining that the IRS has established an administrative practice not to examine the position

When:
This new reporting requirement has been proposed for tax returns filed after release of the new disclosure schedule. The IRS intends to publish the new schedule as soon as possible.

What to Report:

• Uncertainties that affect federal income tax liability
• Short description of each uncertainty (a few sentences has been suggested by Commissioner Shulman)
• Enough detail so the IRS can determine the nature of the position
• The rationale for the position
• The reasons for determining that the position is uncertain
• Implicated Internal Revenue Code (IRC) sections
• Taxable years to which the uncertainty relates
• Identification of whether the position involves items of income, gain, loss, deduction, or credit
• Whether the position results in a permanent difference, temporary difference, or both
• Whether it involves determination of the value of a property right
• Whether it involves computation of basis

Comment Period Deadline: March 29, 2010
The IRS has requested comments on this proposal. We know from discussions with our clients and others in the profession that there is strong sentiment regarding this new, dramatic proposal from the IRS. If you fall into that category, it would be wise to provide your thoughts directly to the IRS and your elected officials. The specific IRS contact information is included within IRS Announcement 2010-9. We’d be happy to provide a copy to you at no charge. Please let your contact at HEIN & Associates know and we’ll pass it along to you right away.

For more information, contact your tax professional or Bryan Valencia, Tax Partner at bvalencia@heincpa.com or 713.850.9814.

Click here to read additional news items.