IR-2004-91, July 7, 2004
WASHINGTON ¡ª To increase the transparency of corporate tax return filings, today the Treasury Department and Internal Revenue Service released a draft of the final version of the Schedule M-3, Net Income (Loss) Reconciliation for Corporations with Total Assets of $10 Million or More, for use by certain corporate taxpayers filing Form 1120, U.S. Corporation Income Tax Return. The original draft version of Schedule M-3 was released for public comment on Jan. 28, 2004.
Schedule M-3 is effective for any taxable year ending on or after Dec. 31, 2004, and, in general, must be filed by a corporation required to file Form 1120, U.S. Corporation Income Tax Return, that reports on Form 1120 at the end of the corporation¡¯s taxable year total assets that equal or exceed $10 million. However, a corporation required to file Schedule M-3 is only required to complete certain sections of Schedule M-3 in the first taxable year the corporation is required to file Schedule M-3.
¡°The purpose of this project has been to make differences between financial accounting net income and taxable income more transparent. Schedule M-3 accomplishes this. Schedule M-3 provides information that will identify taxpayers that may have engaged in aggressive transactions and therefore should be audited,¡± stated Acting Treasury Assistant Secretary for Tax Policy Greg Jenner.
"The new disclosures will help us target our examination efforts on high-risk areas, thereby improving and speeding the audit process," said IRS Commissioner Mark W. Everson.
"The increased transparency and uniform reporting requirements for corporate taxpayers filing Schedule M-3 will allow agents to swiftly focus on emerging issues and evolving business trends. This will result in a quicker and more current and efficient examination process aimed at those returns with the greatest compliance risk," said Deborah M. Nolan, IRS Large and Mid-Size Business Division Commissioner.
The Schedule M-3, the draft instructions for Schedule M-3 released on March 11, 2004, and a set of Frequently Asked Questions to assist corporations, practitioners, and programmers preparing to implement Schedule M-3 are linked below. The final instructions for Schedule M-3 will be released later this year and will also be available on IRS.gov.
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