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SRA International, Inc.
IRS Challenge of Accounting Practices
Date: 08/06/2002 (Date of Financial Statement)
Misconduct Type: Tax
Enforcement Agency: Treasury – IRS
Contracting Party: None
Court Type: Administrative
Synopsis: SRA International settled an IRS challenge of its accounting methods which caused SRA to underreport its tax liability. "In 1998, the Internal Revenue Service challenged our use of the cash method of income tax accounting. We accrued reserves in fiscal 2001 toward probable interest due on income taxes as a result of the IRS challenge ($1.0 million in the fourth quarter of fiscal 2001 and $2.4 million for the full fiscal year). This accrual was reflected as other expense. We settled this matter with the IRS in the third quarter of fiscal 2002 and reversed approximately $1.8 million of the accumulated reserve, representing the amount by which the total reserve exceeded our actual federal and estimated state interest payments. This reversal was reflected as other income."