Uncertain Tax Position Statement – Form UTP – An Attachment to Federal 1120
By Danielle Felice, Senior Accountant - Tax & Business Services
On April 19, 2010, the IRS released a draft schedule and corresponding instructions to Form UTP, Uncertain Tax Position Statement. An attachment to Form 1120, Form UTP, is intended to be required for tax years beginning 2010 and forward for taxpayers with both uncertain tax positions and assets equal to or in excess of $10 million. Additionally, insurance companies who file Form 1120L and foreign corporations filing Form 1120F will also be required to file Form UTP. (So far, other taxpayers requiring filings in the Form 1120 series, such as real estate investment trusts, regulated investment companies, pass through entities or tax exempt organizations, will be exempt from filing Form UTP.)
Form UTP requires the reporting of federal income tax positions for which the corporation or related party has recorded a reserve in the audited financial statements. An example of such as a reserve would include:
- a contingent legal liability,
- an increase in liability for income taxes payable,
- or a reduction of income tax refund receivable.
The intent of the form is for taxpayers to disclose concise descriptions of uncertain tax issues surrounding the entity, rather than attachments of lengthy analysis or legal interpretations to the tax returns. The IRS will now require disclosure on such tax line items that may be subject to adjustments in the future because of uncertain tax positions in the present.
Currently, Form UTP would be required to be filed 60 days before the tax return is filed where a reserve is recorded with respect to the tax position or a decision was made not to record such a reserve. The tax position must be disclosed whether the financial statements were reported using GAAP, IFRS, or any other accepted reporting standard.
Form UTP may be viewed as duplicative of other Forms which require similar disclosures. Form UTP and instructions are open for public comment and should be submitted no later than June 1, 2010. All comments will remain open for public inspection until that date.
The tax advisors at Marcum will keep our clients and contacts up to date on the future requirements of this form. Should you have any further questions, please contact your Marcum tax advisor.