Unfortunately for corporate taxpayers undergoing Internal Revenue Service (IRS) examinations, the receipt of the revenue agent’s report (RAR) does not mean the work is over. In some cases, it is just the beginning.
In Pennsylvania, upon completion of an IRS examination, corporate taxpayers have 30 days to report to the State changes made to federal taxable income. These changes are reported on Form RCT-128, Report of Change in Corporate Net Income Tax. Along with the completed Form RCT-128, taxpayers are required to include a copy of the RAR issued by the IRS. Taxpayers are also required to file Form RCT-128 in situations where they voluntarily amend their federal income tax returns. In these situations, Form RCT-128 must be accompanied by a copy of the amended return, and be filed within 30 days of the date the amended return was filed. However, in an attempt to make the requirement more taxpayer-friendly, Governor Corbett introduced legislation in his proposed 2012-2013 budget which would extend the time period for filing Form RCT-128 from 30 to 180 days.
As expected, each state enacts its own set of rules and obligations when it comes to reporting changes to federal taxable income. Keeping current with these rules is of the utmost importance as many states impose severe penalties for failure to comply with the filing requirements.
If your business is undergoing or has recently completed an IRS examination, Schneider Downs’ team of experienced State and Local Tax (SALT) professionals can put their experience to work and help ease your compliance burden by handling the various state corporate income tax filings required due to RAR adjustments after an IRS audit.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.