KPMG report: Voluntary and mandatory disclosure requirements and options
Insights for taxpayers facing questions on if, when, and how to disclose on their tax returns
Insights on if, when, and how to disclose on tax returns
The Internal Revenue Code, Treasury regulations, and Internal Revenue Bulletin guidance contain myriad rules regarding disclosures on federal tax returns. Some disclosures are mandatory while others are voluntary. For example, some corporations are required to disclose their uncertain tax positions. On the other hand, taxpayers seeking to avoid penalties may voluntarily attach forms to their tax returns, disclosing the tax treatment of specific items. Similarly, eligible taxpayers that are part of the IRS large corporate compliance (LCC) program might make some disclosures at the beginning of an IRS audit (sometimes referred to as affirmative disclosures or “walk-ins”).
The ramifications of incomplete or missing disclosures can be dire, ranging from the imposition of penalties to the failure to start the running of the statute of limitations on assessment. On the other hand, properly made disclosures can protect against the future assertion of penalties (or preserve some penalty defenses) and ensure that the statute of limitations on assessment expires within the normal three-year period. Recent actions and guidance by the IRS reflect a trend toward sturdier and more transparent disclosures, creating challenging strategic questions for taxpayers not only as they prepare their tax returns but also when they receive notice of an IRS examination.
Read an October 2023 report* [PDF 840 KB] prepared by KPMG LLP professionals that touches on some of the disclosure requirements and options and provides insights for taxpayers facing questions on if, when, and how to disclose on their tax returns.
* This article appears in Tax Notes Federal (October 2, 2023) and is provided with permission.
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