Top 10 automatic accounting method changes

July 2011


Business that use inefficient or improper accounting methods for federal income tax purposes fail to optimize their cash flow. Appropriate accounting method changes that accelerate deductions or defer revenue can allow taxpayers to reduce their current tax liability or increase a net operating loss (NOL) that might be carried back to prior tax years.

There are a number of common accounting method change opportunities that taxpayers previously may not have examined or may have determined were not material in the past, but now may be interested in pursuing to generate additional cash flow. This WNTS Insight addresses several accounting method changes that may enhance a taxpayer's cash flow, as well as certain accounting method changes that may provide a taxpayer audit protection from IRS examination of an issue.

Each of the accounting method changes described in this WNTS Insight can be made automatically without prior consent of the IRS, assuming the prerequisites for making the particular accounting method are met. Any automatic Form 3115, Application for Change in Accounting Method, must be filed no later than the due date of the taxpayer's timely filed federal income tax return (including extensions).

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