Return Preparer
Signature Options •
Schedule M-3 (Box)
•
Missed GST Exemption Allocations (Box)
Lesli S. Laffie, J.D.,
LL.M.
From the IRS
Return Preparer Signature
Options
Notice 2004-54 allows
return preparers to sign original returns, amended
returns or extension requests by the following
alternative methods: (1) rubber stamp, (2) mechanical
device or (3) computer software program.
Overview:
Under Temp. Regs. Sec. 1.6695-1T(b), a return
preparer must sign each return he or she prepares after
completing it and before presenting it to the taxpayer. A
return preparer is subject to a $50 civil penalty for
each return he or she fails to sign (up to a maximum of
$25,000 per calendar year for any single type of failure,
according to Sec. 6695(b)).
Methods: In
Notice 2004-54, the Service authorizes return preparers
to sign original returns, amended returns and extension
requests by rubber stamp, mechanical device or computer
software program. These signing methods must include
either a facsimile of the preparer’s signature or
his or her printed name. Return preparers using one of
these alternative means are personally responsible for
affixing their signatures to returns or extension
requests. If they use an alternative signing method, they
must provide all of the other preparer information
required on returns and extensions, such as (1) name,
address and relevant employer identification (ID) number,
(2) individual ID number (Social Security number or
preparer tax ID number) and (3) phone number.
The notice applies only
to return preparers as defined in Regs. Sec.
301.7701-15(a). It does not provide alternative methods
for a return preparer’s signature for any other type
of document currently required to be manually signed,
such as:
- Elections;
- Applications for
accounting-method changes;
- Powers of attorney;
and
- Consent forms.
In addition, the IRS
emphasizes that the notice does not change the
requirement that returns or extension requests be signed
by the person (i.e., the taxpayer) making the return or
request, by handwritten signature or other authorized
means.
When effective: Notice
2004-54 applies to any original return, amended return or
extension request filed after 2003.
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Final Version of
Schedule M-3 Available
by Todd B. Reinstein, MAcc, J.D., LL.M., CPA,
Senior Associate, Gardner Carton and Douglas LLP,
Washington, DC, and Member, AICPA Tax Section
On July 7, 2004,
Treasury and the IRS released the final version
of Schedule M-3, Net Income (Loss) Reconciliation
for Corporations With Total Assets of $10 Million
or More, for reporting annual book-to-tax
reconciliations for tax years ending on or after
Dec. 31, 2004. The new schedule replaces current
Schedule M-1, Reconciliation of Income (Loss) per
Books With Income per Return, and requires
taxpayers to submit significant details beyond
the general “white paper” disclosure
required for many years. A corporation must file
Schedule M-3 if it is required to file Form 1120
and its assets equal or exceed $10 million at the
end of a tax year.
Overview
The schedule has
been combined and reformatted from the draft
released in January 2004. Part I, Financial
Information and Net Income (Loss) Reconciliation,
asks about the corporation’s financial
statements and reconciles worldwide financial
statement net income (or loss) to net book income
reported on the return. Part II, Reconciliation
of Net Income (Loss) per Income Statement of
Includible Corporations With Taxable Income per
Return, and Part III, Reconciliation of Net
Income (Loss) per Income Statement of Includible
Corporations With Taxable Income per
Return—Expense/Deduction Items, are
consolidating schedules that require corporations
to (1) separately report over 70 items of income
and expense in reconciling net income (or loss)
and (2) identify each as either a temporary or
permanent difference.
FAQs
In a list of
frequently asked questions (FAQs) (available at www.irs.gov/pub/irs-utl/m-3_faq.pdf), the IRS states in
Q&A-4 that a corporation must complete only
Part I and columns B and C of Parts II and III
for a “transition year” (i.e., the
first tax year the corporation is required to
file Schedule M-3). Q&A-6 clarifies that Part
I of Schedule M-3 must be completed once to
report consolidated information and activity for
an entire U.S. consolidated tax group; however,
Parts II and III must be completed separately by
each group member to reflect its own activity.
Another set of IRS FAQs (available at www.irs.gov/pub/irs-utl/m-3_faq_release_080604.doc) provides additional
guidance.
Rev. Proc.
2004-45
Along with the
release of final Schedule M-3, the IRS
simultaneously issued Rev. Proc. 2004-45, which
provides streamlined procedures for meeting a
taxpayer’s disclosure obligations for
reportable transactions with a significant
book-tax difference. The procedure states that a
corporation’s filing of Schedule M-3 with
its timely filed original return for the tax year
will be deemed to meet Regs. Sec. 1.6011-4’s
disclosure requirement for reportable
transactions with a significant book-tax
difference for the tax year. As a result, a
portion of the overlap between Form 8886,
Reportable Transaction Disclosure Statement, and
Schedule M-3 has been eliminated; however,
taxpayers still need to complete Form 8886 for
transactions classified as reportable for reasons
other than a significant book-tax difference
(e.g., Sec. 165 losses).
Conclusion
Schedule
M-3’s purpose is to increase the
transparency of corporate tax filings; it
requires more taxpayer disclosure and a
significant understanding of book-tax differences
in reporting events that must be taken into
account on a corporate return. Thus, corporations
and their tax advisers will need to spend more
time analyzing how corporate transactions will be
reflected on their returns.
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IRS Relief for Missed
Allocations of GST Exemption
by Eileen Sherr, Technical ManagerIn Rev. Proc. 2004-46, the
Service issued guidance allowing taxpayers to
apply for relief for missed allocations of the
generation-skipping transfer (GST) tax exemption
in a simplified format, under certain limited
circumstances and if certain conditions are met.
Generally, the relief applies to transfers that
occurred before 2001 and were within the gift tax
annual exclusion amount. The simplified format
allows the taxpayer to file Form 709, United
States Gift (and Generation-Skipping Transfer)
Tax Return, for the year in question (whether or
not that form was previously filed for that year)
and attach a notice of allocation showing the
relief requested.
Many situations
involving gifts to irrevocable life insurance
trusts may meet the procedure’s
restrictions. In contemplating the new procedure,
tax advisers should be looking for trusts (e.g.,
life insurance trusts) that were overlooked for
GST purposes, yet are intended to benefit
multiple generations and receive annual exclusion
gifts each year.
The AICPA Tax
Division’s Trust, Estate, and Gift Tax
Technical Resource Panel’s GST Regs Task
Force asked the IRS for this relief. See
www.cpa2biz.com/ResourceCenters/Tax/Estate%2c+Gift%2c+Trust%2c+Fiduciary/GST_Safe_Harbor.htm.
Prop. Regs. on
Electing Out
The IRS also
issued proposed regulations (REG-153841-02,
7/13/04) on electing out of the deemed GST
allocation under Sec. 2632(c)(1) for certain
transfers to a GST trust. The proposed rules also
provide guidance for making the election to treat
a trust as a GST trust. If you have any comments
or concerns about the proposed regulations,
please contact Eileen Sherr at esherr@aicpa.org.
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