What a Surprise! The IRS is Interested in FIN 48!

On January 26, 2010, the IRS released Announcement 2010-9, which announces the development of a tax return schedule to facilitate the disclosure of information with respect to uncertain tax positions. As announced, the new disclosure requirement would apply to public and private companies with assets over $10 million that have financial statements prepared under FIN 48 reflecting uncertain tax positions. The proposed effective date would be for returns filed after the release of the new schedule. However, the IRS will provide that it will not apply to tax returns related to 2009.

Companies would be required to provide a concise description of each uncertain tax position for which the taxpayer or related entity has recorded a reserve in its financial statements and the maximum potential federal tax liability attributable to each uncertain tax position. This disclosure would be made on the schedule currently being developed by the IRS. In defining “uncertain tax positions” for which disclosure would be required, Announcement 2010-9 includes a position related to the determination of federal income tax liability for which a reserve was not established because the taxpayer expected to litigate the position or because the taxpayer determined that the IRS has a general administrative practice not to examine the position.

In a speech, IRS Commissioner, Douglas Shulman, stressed that with respect to the concise statement of the issue, the IRS means a few sentences that inform the Service of the nature of the issue rather than pages of factual description or legal analysis. However, Announcement 2010-9, which further clarifies the description requirements, requires significant information.

Stay tuned!