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TAX PRACTICE & PROCEDURES
Updates and guidance on key
IRS practice developments.
Editor: Tax Position Statement; K-2, Partners’
Uzell T. Freeman-Williams, CPA Procedure & Adminstration Distributive Share Items — International
[or Shareholders’ Pro Rata Share Items
Authors: Adequate disclosure and — International]; and K-3, Partner’s [or
Mark Heroux, J.D. the IRS’s strategy of more Shareholder’s] Share of Income, Deduc-
Byron E. Shinn, CPA information reporting tions, Credits, etc. — International, that
Many practitioners will recall from their require substantially more information
formal tax training that when it comes than has been acceptable in the past
to adequate disclosure of an item on a (Schedule UTP) and substantially more
tax return, generally, a taxpayer must information than may be available to
Taxpayers must provide sufficient information so that the taxpayer (Schedules K-2 and K-3).
be careful to the IRS can make a determination of And Field Attorney Advice (FAA)
20214101F requires substantially more
an item based on the facts, issue, tax-
comply with payer’s positions, and the dollar amount information to support a research credit
increasingly onerous associated with it. The IRS provides refund claim than has been acceptable
much guidance in this area, including
in the past.
IRS disclosure Rev. Proc. 2021-52, the current annual Other government agencies are
requirements so statement on adequate disclosure for increasing the reporting pressure. The
they don’t lose key purposes of Secs. 6662(d) and 6694(a). FinCEN Corporate Transparency Act
proposed regulations (86 Fed. Reg.
Specific instructions in regulations and
tax benefits; the IRS forms add to the adequate-disclosure 69,920 (Dec. 8, 2021)) are evidence
provides relief for rules. As a result, there is significant of such pressure. Tax practitioners
risk when preparing a tax return and
and their organizations, including the
taxpayers who would determining whether all items are ad- AICPA, objected to these reporting
have qualified for equately disclosed. requirements to no avail (see AICPA
comment letter dated May 5, 2021).
The IRS has taken steps to increase
the foreign earned the information reporting burden on Recently, two courts have spoken,
income exclusion taxpayers. Notice 2007-83, making an holding that the IRS’s information
in 2019 and 2020 but identified abusive trust arrangement a reporting efforts violate the Administra-
listed transaction, requires taxpayers to
tive Procedure Act (APA). In Mann
for COVID-19. disclose substantial information regard- Construction, Inc., No. 21-1500 (6th Cir.
ing these transactions. Notice 2016-66 3/3/22), the Sixth Circuit, reversing a
requires taxpayers involved in certain district court, held that the disclosure PHOTO BY SEAN GLADWELL/HEMERA/THINKSTOCK
microcaptive insurance arrangements requirements of Notice 2007-83 were
to disclose substantial information re- such that the IRS was required to com-
garding these “transactions of interest.” ply with the APA. In CIC Services, LLC,
Recently, the IRS issued new instruc- No. 3:17-cv-110 (E.D. Tenn. 3/21/22),
tions to Schedules UTP, Uncertain a district court held that the IRS was
40 July 2022 The Tax Adviser
