IRS considers changing reporting requirements on uncertain tax positions

The IRS is considering changes to reporting requirements regarding certain business taxpayers’ uncertain tax positions in order to improve tax compliance and administration.

The IRS proposal would require the reporting of uncertain tax positions at the time a return is filed by business taxpayers that have over $10 million in assets, and that have a financial statement prepared under FIN 48 or similar accounting standard. 

The business taxpayers would have to annually disclose uncertain tax positions in the form of a concise description of those positions and the maximum amount of U.S. income tax exposure if the taxpayer’s position is not sustained. The proposal does not require the taxpayer to disclose the taxpayer's risk assessment or tax reserve amounts.

IRS Commissioner Doug Shulman explained the goals behind the proposal to an audience at the New York State Bar Association Taxation Section Annual Meeting.

“We spend up to 25% of our time in a large corporate audit searching for issues rather than having a straightforward discussion with the taxpayer about the issues,” Shulman said. “The goals of our proposal are simple: to cut down the time it takes to find issues and complete an audit… ensure that both the IRS and taxpayer spend time discussing the law as it applies to their facts, rather than looking for information…and to help us prioritize selection of issues and taxpayers for examination.”

The public does have the opportunity to comment on the proposal. The IRS is accepting comments until March 29, 2010, and the proposal is not yet effective. 

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