The Internal Revenue Service is offering some new guidance for completing the new Schedule UTP, answering some of the questions that have most vexed companies as they prepare their tax returns.

Schedule UTP is the new filing requirement for corporate taxpayers compelling disclosure of where companies may have some shaky positions in their tax returns. The IRS developed the new schedule to make it easier for examiners and auditors to cut through voluminous tax returns and find the issues most worth challenging. The filing requirement is effective for the 2010 tax year, so corporate taxpayers that have extended their returns through Sept. 15 are preparing their first disclosures now under the new requirement.

The IRS published an initial list of “frequently asked questions” in March and updated it this week with eight new questions and answers. The guidance answers some of the questions and concerns that taxpayers have most frequently raised over the past several months as they prepared for the new filing requirement, says PwC in an alert to its clients.

One question, for example, clarifies what the IRS means by “reserve” when it says companies must disclose a particular position on the new schedule if they've taken a reserve for it in financial statements. PwC says the IRS answer is generally consistent with what preparers already know a reserve to be for purposes of disclosing uncertain tax positions in financial statements.

The guidance also clarifies what companies should do with uncertain positions linked to net operating losses or credit carryforwards. The IRS says a company should disclose the uncertain tax position in the year it occurs, but does not need to disclose it again in a future year when it exercises the net operating loss or credit carryforward.

The IRS also tackled a broad question about how companies should report uncertain positions when two companies merge. The answer, says the IRS, focuses largely on which company is considered the surviving corporation and when the reserve related to a particular position is recorded. PwC says the IRS is likely to face more questions and will need to provide more guidance on how to handle UTP reporting when it is woven into complex business combinations involving consolidated tax return filings.