Tax Accounting Methods and their related Method Changes are always Key Issues for the IRS. Proper tax accounting methods and continuing IRS changes to their method change procedures are at the front and center of all IRS audits. Tax accounting methods and changes have certainly had heightened awareness and importance to tax practitioners over the past few years. The IRS continues to focus its audit eyes on whether taxpayers are employing the proper tax accounting methods and has adopted the required tax accounting methods where dictated. Beyond required method changes, tax practitioners should also adapt client tax methods to the ones that provide the best possible deferrals.
All industries have to comply with tax method change basics, i.e. the rules and procedures. Construction is an industry that has very specialized tax method alternatives that are confusing and prone to mistakes in their employment. 2018 a big watershed year due to the $25M and under new tax law. Contractors under that threshold can employ cash or the CCM.
The keys are how to analyze what method(s) would be best and how to make that transition from the current regular and long-term accounting methods employed. Understanding method changes takes knowledge of what is allowed and permitted compared to what is not, methodology to accomplish such, in addition to knowing those tax methods that provide the greatest potential tax deferrals.
Identify what changes and when method changes require advance consent (non-automatic) vs. automatic IRS Form 3115 filings,
Obtain the latest update on the latest IRS procedures on method changes,
Learn how to determine the best possible methods to consider for contractor types,
Decipher the latest rules on how to make the new $25M and under tax law change to either cash or non-PCM (CCM or other).