AICPA recommends changes to IRS draft revisions for Schedule UTP

By Martha Waggoner

The IRS should consider amending its draft revised Schedule UTP, Uncertain Tax Position Statement, "in light of the significant burden the draft Schedule UTP places on taxpayers and practitioners," the AICPA wrote in a letter to the agency.

The letter, dated Nov. 18, is in response to the draft Schedule UTP and Schedule UTP instructions for the 2022 tax year released in October. These revisions would be effective for the 2022 tax year (processing year 2023).

If the IRS does move forward with the revisions as written, it should delay implementation to make it effective for the applicable tax year and not retroactive, the letter reads.

"Our recommendations will simplify filing for taxpayers and practitioners and will reduce the administrative burden on IRS as well," reads the letter, signed by Jan Lewis, CPA, chair of the AICPA Tax Executive Committee.

For example, the AICPA recommends that if the IRS does revise Schedule UTP, it should develop further guidance for taxpayers and the IRS exam staff "to minimize the potential for disagreements regarding the sufficiency of required information," the letter reads.

A major change would require corporations to disclose "contrary authorities," i.e., language that disagrees with the corporation's stance on the Schedule UTP. The IRS should eliminate the language, the AICPA letter says, "because the requirement is not supported by current law or IRS policy."

Corporations must file Schedule UTP with their Form 1120, U.S. Corporation Income Tax Return, if their total assets equal or exceed the applicable asset threshold for the tax year, which was $10 million in 2022, and if they record a liability for unrecognized tax benefits for U.S. federal income positions in their audited financial statements.

The draft changes are the first to Schedule UTP since the IRS first started requiring the form in tax year 2010. The changes are in response to a March 2018 report from the U.S. Treasury Inspector General for Tax Administration recommending that the IRS either revise Schedule UTP to make it more useful or remove the filing requirement.

Although the IRS has not said when the final Schedule UTP will be published, the draft form has a December revision date on it. Final versions typically are close, if not identical, to the draft versions, although there are exceptions, IRS spokesman Eric Smith said in an email Tuesday.

The AICPA letter was sent to Douglas O'Donnell, the IRS acting commissioner, and to William Paul, the IRS principal deputy chief counsel.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.

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