Tax & Accounting Blog

Help with Accounting for Your Tax Reserves: Schedule UTP and Uncertain Tax Positions

Global Tax Compliance, Tax Provision, Transfer Pricing, US Income Tax Compliance August 11, 2011

Offering Compliance with the New IRS Reporting Requirements

Until now, spreadsheets were the most popular way of accounting for uncertain tax positions. While disclosure of uncertain tax positions have been a longtime requirement in company financial statements, On January 26, 2010, the IRS took a giant step with respect to transparency between financial accounting and tax treatment of uncertain tax positions. It announced that it was “considering” a new initiative.

This new initiative would become Schedule UTP. This mandates all public and privately held companies with more than $100 million in assets file a report with their annual income tax return. Any company with audited financial statements and uncertain tax positions now faces greater scrutiny and needs to ensure the accuracy and thoroughness of their calculations. However, there’s still a lot of confusion out there.

“Even companies that figure they have just two or three UTPs often find the calculations more involved than they initially assumed”, said Claire Crossman, Director of product management, corporate, the tax and accounting business of Thomson Reuters. “That’s because the positions often involve multiple years and jurisdictions.” For companies operating internationally, currency translations add to the complexity as well.

To add another layer of complexity, the IRS and SEC disclosure rules differ. For the SEC, companies need to rank their tax exposures after considering the probability that the position will be sustained. The IRS, on the other hand, requires companies to ignore the probability and report the maximum exposure.

To help ease the pain of accounting for global tax reserves, Thomson Reuters recently announced the latest release of ONESOURCE Tax Provision which includes a Schedule UTP report and software integration to help corporate tax departments more easily comply with recent IRS regulations.

More information on ONESOURCE Uncertain Tax Positions software (formerly TaxStream FIN 48).