Posted tagged ‘disclosure’
December 16, 2011
By Phil Karter
In a recent TaxBlawg post, my colleague Jonathan Prokup discussed the IRS’ intention to begin requesting electronic files as part of taxpayer examinations so that it can analyze the “metadata” contained in those files. One of the concerns raised in the post, as announced in Chief Counsel Advice 201146017, was the possibility that such data in the hands of the IRS may be insecure and therefore potentially susceptible to theft by third-party hackers (which, by the way, could conceivably expose the IRS to damages for disclosure of taxpayer information under IRC § 6103). Concerns about metadata security, as highlighted in the post, are but one of a number of provocative issues arising from the explosive growth in electronic data (commonly referred to as “electronically stored information” or “ESI” in the parlance of the Federal Rules of Civil Procedure). Aldous Huxley’s Brave New Worldis upon us, and if your legal and IT departments are not already addressing these issues, tax executives should not be deterred from doing so. Among the issues implicated
- Does your company have a comprehensive records retention policy in place and, even assuming that it does, can the company adequately prove its compliance with such policies if ever challenged?
- Is that policy consistent with the requirements of IRC § 6001 and Treas. Reg. § 1.6001-1 to maintain and retain books and records “so long as the contents thereof may become material in the administration of any internal revenue law.” See Reg. § 1.6001-1(e).
- Should your company attempt to negotiate a records retention limitation agreement with the IRS?
- As part of its records retention policy, can and should your company institute a corporate policy of routine metadata scrubbing for certain types of corporate documents, and would such a policy be consistent with the requirements of Sarbanes-Oxley? (more…)
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Categories: Litigation, Corporate, Administrative, Audit, Tax Procedure
Tags: 6103, attorney-client privilege, Audit, compliance, disclosure, e-discovery, IRS, IRS Audits, metadata, Privilege, recordkeeping, records retention policy, Sarbanes-Oxley, Tax Litigation, Work Product
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December 8, 2011
By Phil Karter
As reported earlier this week in the tax press, the recently completed initial filing season for Schedule UTP produced at least one major surprise in the eyes of IRS officials, who had anticipated a much greater number of items listed on the average Schedule UTP than actually materialized. In fact, the IRS’s predictions were off by a wide margin, with the number of disclosed positions of the 1,500 or so Schedule UTPs filed averaging only slightly more than three items per schedule for CIC taxpayers, and less than two items for non-CIC taxpayers. Pre-filing expectations of item disclosures had been many multiples higher, perhaps even reaching as high as 100 or more separately stated positions. Although such predictions may have been wildly optimistic from the IRS’s standpoint, one must now wonder whether the apparent failure of the first filing season to meet the Service’s anticipated disclosure bonanza will hasten efforts to extend the penalty regime to specifically target what are viewed as incomplete or inadequate disclosures on Schedule UTP. (more…)
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Categories: Administrative, Audit, Corporate
Tags: Audit, CIC, disclosure, IRS, IRS Audits, Penalties, Privilege, schedule utp, tax penalties, tax workpapers, Work Product
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December 5, 2011
By Jonathan Prokup
Over the weekend, a variety of Canadian news sources (see, e.g., the Financial Post and the Edmonton Journal) reported on anticipated guidance from the IRS, which would result in the waiver of penalties on certain U.S. citizens living in Canada for past failures to file Form TD F 90-22.1, commonly known as the “FBAR.” According to the news reports, the IRS will waive failure-to-file penalties for such individuals who file delinquent tax returns and FBARS so long as the individual owes no taxes. In addition, taxpayers who were unaware of the FBAR filing requirement will be able to file delinquent reports and not be penalized so long as they can demonstrate reasonable cause in a disclosure statement accompanying the delinquent forms. At this point, it remains unclear how many years of tax returns and FBARs would be required to participate in this new opportunity. Interestingly, according the articles, taxpayers who participated in (and paid penalties under) the 2009 and 2011 offshore voluntary disclosure initiatives (OVDIs) would be permitted to opt out and reapply for the new zero-penalty offer. (more…)
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Categories: Administrative, Individual, International
Tags: bank accounts, Canada, disclosure, FBAR, IRS, OVDI
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April 7, 2011
By Jonathan Prokup
During a webinar the other week regarding the impact of the Mayo Foundation decision on taxpayers, I discussed the effect of Mayo on taxpayers’ decisions to take positions that are contrary to IRS rules or regulations. Part of that discussion examined the 20-percent accuracy-related penalty that can be imposed on such positions under Code section 6662.
As our readers may know, if a taxpayer takes a position on a return that is contrary to an IRS rule or regulation, the taxpayer may avoid the imposition of the accuracy-related penalty by following the requirements of Treas. Reg. § 1.6662-3. In general, that regulation provides that, when a taxpayer takes a position contrary to a regulation, the penalty for disregarding rules or regulations does not apply if (i) the position is disclosed on “a properly completed and filed Form 8275-R,” (ii) the position represents a “good faith challenge” to the validity of the regulation, and (iii) the taxpayer has a reasonable basis for the position. Treas. Reg. § 1.6662-3(a), (c)(1), (c)(2).
At the end of the webinar, an audience member asked whether the requirement to disclose a position on Form 8275-R included a position that was contrary to a revenue ruling. As so often happens in tax law, the answer creates as many questions as it resolves. Because one person’s question is likely shared by others, it seems appropriate to discuss the issue in a blawg post.
(more…)
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Categories: Administrative
Tags: disclosure, Penalties
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September 27, 2010
By Jonathan Prokup
The Internal Revenue Service on Friday released the final version of the much-anticipated Schedule UTP (and accompanying instructions) as well as additional guidance about changes that had been made the schedule. At the same time, the IRS also announced an expansion of the Compliance Assurance Program (CAP) as well as some other minor matters. In the face of much criticism of the draft Schedule UTP and instructions, the IRS made a numbers of significant adjustments; however, several issues remain unresolved.
(more…)
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Categories: Administrative
Tags: Audit, compliance, disclosure, FIN 48, instructions, schedule utp, uncertain tax position, Work Product, workpapers
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July 1, 2010
By Phil Karter
In Tuesday’s confirmation hearings for Supreme Court nominee Elena Kagan, one topic on which there appeared to be agreement between the nominee and the panel was concern about the dwindling number of cases heard by the High Court. In response to questioning from Senator Arlen Specter, Kagan had no explanation for the precipitous decline in the Court’s docket over the last 20 years, but agreed that it has led to an increase in unresolved conflicts among the circuit courts on “vital national issues.”
Quite naturally, those of us in the tax field like to think of our livelihoods as involving “vital national issues,” so perhaps we take it a little personally when the Supreme Court appears to hold a different perspective. The Court certainly surprised many tax professionals in May by declining to hear the Textron case, which presented one of the most prominent “hot-button” tax issues to come along in years. What perfect irony (and timing) it was then on the heels of Kagan’s congressional testimony for the issuance of a decision by the D.C. Circuit the same day in United States v. Deloitte LLP et al., No. 09-5171, that once again accentuated the differing views of the circuit courts on an issue of considerable importance to tax professionals. (more…)
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Categories: Corporate, Litigation
Tags: appeal en banc review, D.C. Circuit, Deloitte, disclosure, Elena Kagan, IRS, Kagan, Supreme Court, Tax Litigation, tax workpapers, Textron, Work Product, workpapers
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June 30, 2010
By Jonathan Prokup
Just when the Department of Justice must have thought that it could do no wrong in pursuing the workpapers of taxpayers and their auditors, it ran smack into the formidable blockade that is the Court of Appeals for the District of Columbia Circuit. In United States v. Deloitte LLP et al., No. 09-5171 (D.C. Cir. Jun. 29, 2010), the D.C. Circuit seems to have fired a shot across the bow of both the Department of Justice and the IRS’s brand-new Schedule UTP. (You can find the opinion here.)
(more…)
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Categories: Administrative, Corporate, Litigation
Tags: appeal, Deloitte, disclosure, IRS, schedule utp, Tax Litigation, waiver, Work Product, workpapers
Comments: 2 Comments
May 18, 2010
By David L. Bernard
Tax Blawg’s Guest Commentator, David L. Bernard, is the recently retired Vice President of Taxes for Kimberly-Clark Corporation and a past president of the Tax Executives Institute.
It is not too soon for in-house tax professionals to be thinking about how the disclosure of uncertain tax positions (required beginning with 2010 tax returns) will change their lives and perhaps their historical practices.
There are plenty of questions about the new requirement and, not least among them, doubts that it will produce the results the IRS anticipates. The most obvious question is whether the potential over-disclosure of temporary differences and the required disclosure of maximum exposure by issue will bog down the audit process and lead to more unagreed issues going to Appeals or to the courts. Notwithstanding the controversy, tax professionals would be wise to forget arguing about the merits of the new draft requirement and begin thinking about their responses; this is going to happen!
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Categories: Administrative, Appeal, Audit, Corporate, Litigation
Tags: ASC 740-10, disclosure, FIN48, tax returns, uncertain tax positions, UTP
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