The Internal Revenue Service has released drafts of the updated income tax forms for corporations and partnerships, and is asking for comments before it finalizes the changes for tax year 2008 and beyond.
The IRS said the changes will help it focus its compliance efforts better, but the agency also wants to find out how the changes would affect the burden on taxpayers. The main change to Form 1120 corporate returns involves ownership. The IRS wants businesses to identify entities that own 10 percent or more of the corporation and individuals who own 50 percent or more.
Corporations would also need to identify any foreign or domestic company in which they own 10 percent or more of the total stock voting power, or any foreign or domestic partnership in which they have an interest of 10 percent or more. The IRS has added a new Schedule B for corporations that file a Schedule M-3. It asks questions about ownership, allocations, transfers of interest, cost-sharing arrangements and changes in methods of accounting.
For Form 1065, many of the changes also involve ownership issues for the partnerships. A new Schedule B for partnerships that file a Schedule M-3 requires them to divulge any entities that have a direct or indirect ownership interest of 10 percent or more in the partnership. They also have to list any entities in which the partnership owns 10 percent or more. In addition, partnerships have to reveal information about like-kind exchanges and canceled debt.
A new Schedule C for partnerships that file an M-3 requires them to provide information about related-party transactions. They also have to identify the identities of any individuals or entities that own 50 percent or more of the partnership. There have also been revisions to the K-1 that require partnerships to identify contributions and distributions of built-in gain or loss property.
