The 2017 tax reform legislation enacted a number of provisions that provide federal income tax planning opportunities through accounting method changes. There are a number of other common accounting method change opportunities that taxpayers may not have examined or may have determined were not material in the past, but now may be interested in pursuing to generate additional tax savings. This Tax Insight provides an overview of these opportunities. In many cases, taxpayers may make these method changes automatically without prior consent of the IRS, assuming the prerequisites for making the particular accounting method change are met.
Taxpayers may achieve significant tax savings through a change in method of accounting. Taxpayers should evaluate their current accounting methods to determine (1) what method changes may be made to optimize the benefits or mitigate the impact of tax reform, (2) what other method changes are available to reduce tax liability, and (3) whether the changes may be made automatically and filed with the federal income tax return for the year of change, or must be made on a non-automatic basis and filed no later than the last day of the tax year of change. Taxpayers also may consider what other accounting method planning opportunities may be available that do not require a Form 3115, such as factual changes.