We previously discussed the Internal Revenue Service’s (IRS) announcement regarding draft changes to Schedule UTP, Uncertain Tax Position Return Statement, and Instructions to Schedule UTP (Form 1120). The IRS requested comments by November 18, 2022.
On November 14, 2022, we submitted our comments to the IRS outlining some of our concerns with the draft changes, focusing primarily on the scope of disclosure. We made the following recommendations:
- Reconsider whether any changes should be made to Schedule UTP given the current rules in place regarding other disclosures (g., Forms 8275 and 8275-R) and the serious privilege concerns raised by the additional disclosure requirements.
- Remove the requirement to disclose any positions that are “contrary” to any authorities or, at a minimum, to any Private Guidance.
- If changes are made to Schedule UTP, work with taxpayers to determine the appropriate standard for determining whether there is “contrary” authority and what steps a taxpayer or return preparer must take before being able to satisfy the jurat requirement.
- Issue published guidance clarifying that proper disclosure on Schedule UTP will satisfy the adequate disclosure requirement for purposes of both the disregard of rules and regulations and substantial understatement of tax grounds for imposing penalties under I.R.C. § 6662.
- If changes are made to Schedule UTP, delay the effective date to the 2023 tax year (processing year 2024).
We will continue to track potential changes to Schedule UTP and Form 1120 and will provide updates as they are made known.