Tax Alert

IRS Updates Schedule UTP FAQs

(Aug. 3, 2011)

Corporate taxpayers who record a financial statement reserve for uncertain tax positions (UTP) are required to file an Uncertain Tax Position Statement (Schedule UTP) if their assets exceed $100 million in 2010 (reduced to $50 million in 2012 and $10 million in 2014). On July 19, 2011, the Internal Revenue Service (IRS) revised and added to a series of frequently asked questions (FAQs) about Schedule UTP. Following are some of the most significant answers provided.

  • When determining the relative size of a tax position, interest and penalties are not considered if they are not separately identified as being associated with that tax position. (FAQ No. 4)
  • If a taxpayer has not recorded any reserve for a UTP, that taxpayer is not required to file Schedule UTP unless it did not record a reserve because it intends to litigate the UTP. (FAQ No. 5)
  • A reserve is considered recorded in financial statements when a UTP "is stated anywhere in a corporation’s or related party’s financial statements, including footnotes and any other disclosures.” (FAQ No. 6)
  • If a deduction claimed in 2011 is challenged by the IRS in 2013, for example, and the company records a reserve in 2013, the company must report that position on Schedule UTP in 2013 even though the IRS is aware of the UTP. (FAQ No. 7)
  • If a company has a UTP on an item recorded in a year where there is a net operating loss or credit carryforward, that position must be reported in the year of the loss or credit but does not need to be reported in any year the loss or credit is carried to. (FAQ No. 10)

Click here for further discussion of Schedule UTP reporting requirements.

For more information on how this might affect you, please contact David Holets at 317.706.2683 or, or any Crowe Horwath LLP tax professional.

Under U.S. Treasury rules issued in 2005, we must inform you that any advice in this communication to you was not intended or written to be used, and cannot be used, to avoid any government penalties that may be imposed on a taxpayer.

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