IRS Releases Annual Revenue Procedure on Adequate Disclosure on a Tax Return

The IRS issued the annual return disclosure revenue procedure applicable for 2010 income tax returns (Revenue Procedure 2011-13).  The document outlines disclosures made on the return that will be deemed to be adequate to escape the penalty for substantial understatement of tax without having to file a Form 8275 or 8275-R for positions that have, at a minimum, a reasonable basis.  The requirements are listed generally by form and information type, and describe what items will and will not constitute adequate disclosure.

This year’s version of the form added references to newly enacted §6662(i) (accuracy related penalty for nondisclosed noneconomic substance transactions) and §6662(j) (accuracy related penalty for undisclosed foreign asset understatements.  The ruling also provides that a complete and accurate disclosure of a tax position on a corporation’s Schedule UTP, Uncertain Tax Position Statement, will be treated as if the corporation filed a Form 8275 or Form 8275-R regarding the tax position. However, the converse is not true.  The filing of a Form 8275 or Form 8275-R will not be treated as if the corporation filed a Schedule UTP.

The document outlines what the IRS expects of taxpayers when filling out tax returns forms to properly disclose items and should be reviewed by all individuals who are involved in the preparation of tax returns.

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