The Internal Revenue Service has released updated draft instructions for the new Schedule M-3, filed by large and midsized corporations, and which should be rolled out for the 2006 tax year.
The new schedule requires much more detail than the present Schedule M-1, which it will replace for large corporations. The agency hopes that the change will result in greater transparency in regard to differences between taxable income and financial accounting income -- the difference to users is that taxpayers will be required to provide far more information that the government can use to determine in whether or not to pursue an audit.
Affected corporations and partnerships are those with assets of $10 million or more that file Form 1120, 1120-PC, 1120-L, 1120S, or 1065. Certain other partnerships filing Form 1065 are also required to use the Schedule M-3. The IRS also released an updated draft of the new Form 8916 that must be filed by certain insurance-related corporations to reconcile taxable income.
Changes within the forms include how to account for cost of goods sold, how partnerships are identified and ask for clearer reconciliation from certain corporate groups that include insurance companies.
The draft Schedules M-3, Form 8916 and instructions can be found at on the IRS Web site, at www.irs.gov/businesses/corporations/article/0,,id=119992,00.html. The site also offers taxpayers a subscription to the Schedule M-3 email news service so they can automatically receive future information about changes.
Comments on the drafts should be submitted by June 1 to Judy McNamara, at SchM3@irs.gov.
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