Study shows corporate uncertain tax positions increased despite inadequate disclosures to the IRS

WASHINGTON, Sept. 19, 2013 /PRNewswire/ -- An annual study released today by The Ferraro Law Firm of SEC disclosures showed that collectively the Fortune 500 companies believe that they have underpaid their corporate income tax by $191.7 billion, an increase of 2.2% from the group's collective tax reserves last year.  According to the study, 2012 saw a slight decrease (-.51%) in the profits of the Fortune 500, and Scott Knott, a Tax Partner at The Ferraro Law Firm, said, "if uncertain tax position reserves are trending up at the same time profits are going down, you have to ask if there is a movement to build up reserves for tax underpayments."  The Ferraro Law Firm compiles the annual "Ferraro 500" list, which is a reorganization of the Fortune 500 by the size of the companies' Unrecognized Tax Benefit reserve ("Tax Reserve") for uncertain tax positions.  The Tax Reserves of the top five companies on this year's list are Exxon Mobil, which set aside $7.663 billion to cover potential taxes; Microsoft, $7.202 billion; J.P. Morgan Chase & Co., $7.158 billion; General Electric, $6.579 billion; and Pfizer, with $6.315 billion.  Pfizer bucked the trend of increasing reserves for uncertain tax positions, disclosing that it reduced its Tax Reserve by almost a billion dollars last year.

Gregory Lynam, also a Tax Partner at The Ferraro Law Firm, said, "It also appears many of the companies on the Ferraro 500 are then improperly hiding information behind those reserves from the IRS."  As of 2010, corporate taxpayers have been required to file a "Schedule UTP" with their annual tax return that lists and discloses the issues that gave rise to their uncertain tax positions.  However, the IRS has discovered that thirty-one percent of last year's Schedule UTP filers submitted incomplete concise descriptions of their uncertain tax positions, said IRS official Thomas Brandt on a July 17, 2013, webcast sponsored by McGladrey LLP.  Mr. Lynam also said "the IRS data shows that corporate taxpayers believe that filing an incomplete Schedule UTP will go unnoticed by IRS Exam personnel, making tax whistleblowers that much more important to successful enforcement actions."

Through detailed submissions to the IRS Whistleblower Office, The Ferraro Law Firm's tax lawyers have brought to the U.S. government's attention taxpayers who have collectively underpaid their taxes by more than $100 billion.  The IRS established the Whistleblower Office in 2007 to collect information about tax cheats and must, by law, pay a reward of up to 30 percent of the amount collected to the tax whistleblower.  In October 2012 one of the firm's clients, an anonymous corporate insider, received a $38 million award from the IRS for disclosing details about a Fortune 500 company's tax underpayments, many of which were uncertain tax positions.

For more information on The Ferraro Law Firm's tax group and tax whistleblower submissions, call 1-800-275-3332 or visit www.tax-whistleblower.com.  The full study can be found at http://www.tax-whistleblower.com/ferraro500/

SOURCE The Ferraro Law Firm