Schedule M-3.

• Author: Laffie, Leslie S.
• Position: FROM THE IRS

By the end of 2005, the IRS may require additional taxpayers to file a form containing the income or loss reconciliation concept of Schedule M-3, Net Income (Loss) Reconciliation for Corporations With Total Assets of $10 Million or More, according to IRS Senior Technical Adviser Bob Adams.

Taxpayers with assets exceeding $10 million who file Form 1120 are required to file Schedule M-3 for tax years beginning on or after Dec. 31, 2004. Taxpayers required to file Schedule M-3 no longer need to file Schedule M-1, Reconciliation of Income (Loss) per Books With Income (Loss) per Return.

The IRS unveiled Schedule M-3 on Jan. 28, 2004, hoping to increase the transparency between financial accounting net income and taxable income, identify taxpayers who may have engaged in aggressive transactions and target high-risk taxpayers for audit. (For background, see Reinstein, News Notes, "FinalVersion of Schedule M-3 Available," TTA, October 2004, p. 597.)

According to Adams, the Service is considering Schedule M-3's "future application" to other taxpayers. The filing requirement could take effect for tax years beginning on or after Dec. 31,2005.

It is not yet known whether additional taxpayers may need to...