This Daily Tax Tip Spotify Podcast and/or WordPress Blog Post discusses the various issues with Disclosing Uncertain Tax Positions.
Certain corporations must disclose on Schedule UTP Uncertain Tax Position Statement, each federal income tax position taken on its federal income tax return for which the following two conditions are satisfied:
(1) the corporation has taken a tax position on its federal income tax return for the current tax year or for a prior tax year; and
(2) either the corporation or a related party has recorded a reserve with respect to that tax position for federal income tax in audited financial statements using Generally Accepted Audit Standards (GAAS), or the corporation or related party did not record a reserve for that tax position because the corporation expects to litigate the position.
A tax position taken on a tax return means a tax position that would result in an adjustment to a line item on that tax return (or would be included in certain accounting method change adjustments) if the position is not sustained. If multiple tax positions affect a single line item on a tax return, each tax position is a separate tax position taken on a tax return, and each such tax position must be reported separately on Schedule UTP.
A tax position for which a reserve was recorded (or for which no reserve was recorded because of an expectation to litigate) must be reported regardless of whether the audited financial statements are prepared based on Generally Accepted Accounting Principles (GAAP).
A tax position is based on the unit of account used to prepare the audited financial statements in which the reserve is recorded (or in which no reserve was recorded because of an expectation to litigate). A tax position taken on a tax return is a tax position that would result in an adjustment to a line item on that tax return if the position is not sustained.
The Schedule UTP disclosure requirements apply only to applicable corporations. A corporation is an applicable corporation if:
(1) the corporation files Form 1120 U.S. Corporation Income Tax Return;
- Form 1120-F, U.S. Income Tax Return of a Foreign Corporation;
- Form 1120-L, U.S. Life Insurance Company Income Tax Return; or
- Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return;
(2) the corporation has assets that equal or exceed $10 million;
(3) the corporation or a related party issued audited financial statements reporting all or a portion of the corporation’s operations for all or a portion of the corporation’s tax year; and
(4) the corporation has one or more tax positions that must be reported on Schedule UTP.
Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.
DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260
Toll Free: (877)CPA-Help or (877)272-4357
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Email: DonFitchCPA@paylesstax.com
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(Updated 05012021-1 320-810)