When You Don’t Need a Schedule UTP

No Schedule UTP is necessary if the company didn’t establish reserves on its financial statements, either because the amount would be immaterial, or its tax positions were “sufficiently certain,” so no reserves were required. Similarly, companies normally aren’t required to report tax positions from prior years if they reported them on previous Schedules UTP. This doesn’t apply, however, if certain activity results in the company taking tax positions on multiple returns.

Companies that choose to avoid the entire issue of uncertain tax positions should contemplate several options that could help them gain certainty regarding any tax questions. One is a private letter ruling. This is a statement issued by the IRS for a fee in response to a taxpayer’s request for clarification. Essentially, the letter interprets and applies tax laws to the taxpayer’s situation. It can be used when a taxpayer wants verification with the IRS that a prospective transaction won’t result in a tax violation.

The Pre-filing Agreements Program offers taxpayers an option to ask the IRS to consider an issue before they file their tax returns. The intent is to resolve potential disputes sooner, rather than later.

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