Udated Draft Forms 1120 and 1065, and New Schedules Required of Schedule M-3 Filers
Updated draft Forms 1120 and 1065, and new Schedule B (for the 1120) and Schedule C (for the 1065) have been released for tax years ending on or after December 31, 2008. The new schedules will be required of those filing Schedule M-3. The changes are designed to increase the transparency of the relationships between entities that make up complex business enterprises.
IRS Releases Final Schedule M-3 (1120-F)
The Internal Revenue Service has released a final version of Schedule M-3 (1120-F), new for tax years ending on or after December 31, 2007 for taxpayers with reportable assets of $10 million or more.
2006 Schedules M-3
2006 Schedules M-3, instructions, and related forms are available under the appropriate sub-headings below. The complete set includes Schedule M-3 for Forms 1120. 1120-L, 1120-PC, 1120S, and 1065, and instructions; and Forms 8916 and 8916-A, which have instructions included.
Prior News Releases:
Form 1065 Schedule M-3
Prior Drafts:
Note: IRS will remove line 24, Domestic production activities deduction, from Part III of the draft Schedule M-3 and instructions. That modification will be made during the comment and discussion period.
Form 1120 Schedule M-3
Prior Drafts:
Form 1120-PC Schedule M-3
Prior Drafts:
Form 1120-L Schedule M-3
Prior Drafts:
Form 1120S Schedule M-3
Prior Drafts:
Note: IRS will remove lines 11, Parachute payments, and 30, Domestic production activities deduction, from Part III of the draft Form 1120S Schedule M-3 and instructions. That modification will be made during the comment and discussion period.
Form 8916, Reconciliation of Schedule M-3 Taxable Income with Tax Return Taxable Income for Mixed Groups
Prior Drafts:
Note: The "How To File" instruction reflected on page 2 of the 4/25/06 draft Form 8916 will be revised as follows: "Attach Form 8916 to the consolidated Schedule M-3. Taxpayers must summarize the taxpayer tax return taxable income calculation workpapers on Form 8916 and retain those workpapers. The taxable income calculation workpapers need not be submitted with the Form 8916."
Form 8916-A, Reconciliation of Cost of Goods Sold Reported on Schedule M-3
Prior Drafts:
Related Financial Accounting and Disclosure Guidance
Revenue Procedure 2005-75 provides guidance on adequate disclosure on Schedule M-3 to avoid IRC 6662 penalties.
Notice 2006-06 eliminates the "large book-tax differences" as a category of transactions, pursuant to the Tax Shelter Disclosure Regulation 1.6011-4(b)(6), requiring disclosure on Form 8886, "Reportable Transaction Disclosure Statement". This change is due to the reporting requirements of the Schedule M-3 book-tax differences, and is effective for transactions that would have previously been required to be reported on or after January 6, 2006. For example, prior to Notice 2006-06, a transaction in 2005 for a taxpayer that has a December 31, 2005 year end would have had to be first reported in the return due on March 15, 2006; such reporting is no longer required. Notice 2006-06 does not relieve taxpayers of any obligation to file a Schedule M-3.
Prior to Notice 2006-06, Revenue Procedure 2004-45, issued in conjunction with the Form 1120 Schedule M-3, provided that filing Schedule M-3 by certain taxpayers in accordance with the Rev. Proc. satisfied the Treasury Regulation 1.6011-4(b)(6) requirements to disclose transactions with significant book-tax difference.
Form 1120 Schedule M-3 Frequently Asked Questions (FAQs)
The instructions to Form 1120 Schedule M-3 contain comprehensive information about the purpose of the form and the information to be reported. However, because Form 1120 Schedule M-3 is new and covers the very broad issue of book-to-tax reconciliation, important questions may arise that need answers. This site contains a complete set of FAQs to date.
How to Submit Your Question about Form 1120 Schedule M-3
IRS is partnering with stakeholder groups to provide answers to questions about the Form 1120 Schedule M-3 that are not covered in published material, such as the Form 1120 Schedule M-3 instructions and on-line FAQs. Please check these sources first for the information you need. If your question is not answered there, you should submit your questions(s) to one of the following stakeholder contact points with which you are affiliated. These participating groups have been requested to assist by eliminating duplication and offering taxpayers anonymity if desired.
Taxpayers who are not affiliated with any of the participating stakeholder groups listed above can submit their questions by emailing them to F1120 Schedule M3. Priority will be given, however, to questions submitted through the participating stakeholder groups.
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