Accounting methods that increase income may produce tax benefits

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January 2021


Taxpayers typically want to use accounting methods that lower their taxable income to generate cash tax savings. However, in certain circumstances, taxpayers may benefit from accounting method planning that increases taxable income, for example, to recognize income in a lower-rate tax year (especially when anticipating a possible rate increase), reduce liability for BEAT or offset expiring attributes. This Insight describes some of the common elections, factual changes and accounting method changes to increase taxable income.

The takeaway

Taxpayers may benefit from increasing taxable income in a tax year. Accounting method planning may provide opportunities to increase taxable income by accelerating income or deferring deductions through elections and changes in facts, as well as through accounting method changes. Taxpayers should review their financial and tax accounting records to determine if they are eligible to implement these approaches and to identify additional method-related opportunities.

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Christine Turgeon

Partner, Federal Tax Services Leader, PwC US

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