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Handbook of Budgeting, 6th Edition by William R. Lalli

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CHAPTER THIRTY-FOUR

Budgeting for Corporate Taxes

Scott M. Cheslowitz

Stewart Berger

INTRODUCTION

When budgeting for corporate taxes, should it be done annually, semiannually, monthly, or on a transaction by transaction basis? Like any transaction, you should know what your costs are, in order to determine if the transaction makes financial sense. Budgeting for corporate taxes can be quite complicated and quite demanding. The materiality of a transaction or a group of transactions generally plays a role in what transactions get the attention of the tax department. Today Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48) for financial accounting purposes and Schedule UTP for corporate income tax purposes may need to be considered when determining if you have an uncertain tax position (UTP). FIN 48 considers all jurisdictions, from the federal right down to state and local taxes. Schedule UTP, however, seeks disclosure relative to federal UTPs. An accountant must consider the standard of more likely than not in determining a UTP or risk potential preparer penalties in the process, which is a form of self-monitoring. These UTPs may arise at the state level, where nexus is involved, or at the federal level, where transfer pricing issues are involved, to give just a few examples. Again, the Internal Revenue Service (IRS) Schedule UTP only involves federal level uncertain tax positions. Not only do the readers of financial statements want to know, or even the ...

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