FIN 48 becomes effective December 15; AICPA offers helpful guidance.
Position | Tax info |
CPAs need to know about FIN 48, Accounting Jor Uncertainy, in Income Taxes. This interpretation applies to all GAAP clients--including closely held businesses--and requires a higher standard for accruing a tax benefit in financial statements than the Internal Revenue Service imposes on tax returns to avoid a penalty.
For tax years beginning after Dec. 15, 2006, the tax accrual may only contain positions that meet the "more-likely-than-not" standard, and any variances must be disclosed in the financial statements. This translates to more work for CPAs on the tax accrual, as you evaluate even garden-variety issues, such as unreasonable compensation or expensing versus capitalization. It also means that positions taken on the return (or that were taken in any open year) that do not meet the "more-likely-than-not" standard will be disclosed and will likely be subject to increased IRS scrutiny.
For calendar-year corporations, the new rules would seem to initially take effect with first quarter 2007 results. However, the new rules require calendar-year corporations to have a "clean" starting point for their tax accounts at Jan. 1...
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