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FROM THE OFFICE OF PUBLIC AFFAIRS To view or print the PDF content on this page, download the free Adobe® Acrobat® Reader®. January 28, 2004js-1121 In an effort to increase
the transparency of corporate tax return filings, today the Treasury Department
and Internal Revenue Service released a new proposed draft form, Schedule
M-3, Net Income (Loss) Reconciliation for Corporations with Total Assets of $10 Million or More,
for use by certain corporate taxpayers filing Form 1120, U.S. Corporation
Income Tax Return. The new Schedule M-3 would expand the current Schedule
M-1, which has not been updated in several decades. Schedule M-1 reconciles
a corporation’s financial accounting income or loss with the taxable income
or loss reported on the Form 1120. Large and Midsize
Business (LMSB) taxpayers (those with total assets of $10 million or more)
will complete the new Schedule M-3 in lieu of completing Schedule M-1. Small
Business and Self-Employed (SB/SE) taxpayers will not be required to complete
the new Schedule M-3 and will continue to complete Schedule M-1. Other
federal tax returns that also require the completion of Schedule M-1 (e.g.,
Form 1065, U.S. Partnership Return of Income, and Form 1120S, U.S. Income
Tax Return for an S Corporation) may incorporate Schedule M-3 in the future.
“The proposed Schedule M-3 will make differences between financial accounting net income and taxable income more transparent. This
will help agents determine from the return whether the return should be audited
and identify the differences that matter most in the audit of the return.
We see benefits to taxpayers and the IRS from the new Schedule: a reduction
in unnecessary audits and a swifter focus on those differences that are more
likely to arise when taxpayers take aggressive positions or engage in aggressive
transactions. In addition, the increased transparency
will have a deterrent effect,” stated Treasury Assistant Secretary for Tax
Policy Pam Olson. "The new Schedule will
let the IRS sharpen and improve monitoring of corporate compliance," said
IRS Commissioner Mark W. Everson. "Our objective is to identify and resolve
potential audit issues promptly. This information will help us do so." “These
changes will enable us to focus our compliance resources on returns and issues
that need to be examined and avoid those that do not,” said Deborah M. Nolan,
IRS Large and Mid-Size Business Division Commissioner. “Increasing the transparency
of corporate tax returns is critical to our objectives to provide certainty
to taxpayers sooner and to improve overall compliance.” The Treasury and IRS expect
that the proposed Schedule M-3 will be finalized for use with federal income
tax returns for tax years ending on or after The draft Schedule M-3, along with a general description of Schedule M-3, is attached and may be accessed on www.irs.gov. Instructions for Schedule M-3 will be released in the future and will be available on www.irs.gov. Comments are requested regarding proposed Schedule M-3, including comments
on ways to minimize taxpayer burden. In addition, comments are requested
on significant difficulties that taxpayers may encounter if the use of Schedule
M-3 is required for a tax year that begins before Schedule M-3 is finalized. Comments should be submitted by April 30, 2004 to: Susan Blake ATTACHMENTS: Draft Schedule M-3 Schedule M-3 General Explanation -30- Related Documents: |
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