Have an Uncertain Tax Position? Do Not Forget To Disclose.

You may remember when the IRS announced in September 2010 that uncertain tax positions (UTP) of certain corporate taxpayers would have to be disclosed on their respective federal returns.  What it meant for those affected taxpayers was that they had to include a UTP schedule in their returns if they had federal uncertain tax position subject to FIN 48 reporting for which either a reserve was recorded in its audited financial statements or the reason for not recording the reserve was that the corporation expected to litigate the position.

As a tax practitioner, I felt relief once I recognized that the threshold under which this requirement came into effect did not affect most of our clients. In particular, for 2010 and 2011 tax years, the required assets threshold on the financial statements was $100 million; for 2012 and 2013, the threshold was $50 million, yet for 2014, it has dropped to mere $10 million. Back in 2010, when most of our firm’s clients were below the required threshold, I could put it on the back burner and focus on other issues at hand.

However, here we are, finalizing the 2014 filing season, and the $10 million threshold affects more of our clients now. Therefore, it is important to determine who must actually file.

Who Must File

A corporation must file Schedule UTP with its 2014 income tax return if:

  • 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;
  • The corporation has assets that equal or exceed $10 million;
  • 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
  • The corporation has one or more tax positions that must be reported on Schedule UTP.

And remember:
Do not file a blank Schedule UTP if there are no tax positions to be reported.