Tax Accounting Method Changes: Procedures and Potential Issues During an IRS Exam

This article originally appeared in the May 2025 issue of The Tax Adviser.

During a complex business entity exam, accounting methods may be an area of focus, as they are the foundation upon which a business taxpayer calculates taxable income. The proper procedure during an exam depends on whether a potentially identified issue is an accounting method (a timing issue) or is more properly classified as an error (a one–time mistake or item having a permanent taxable income impact).

This article provides a high-level discussion of the potential issues and procedures related to an accounting method change during an exam, either when filed by a taxpayer or when imposed as an involuntary change. Understanding the accounting method change rules applicable when a taxpayer is under exam, as compared to not under exam, can be beneficial for taxpayers when making decisions regarding their tax accounting methods. 

BDO’s Karen Messner, Liz Ohrablo, Ina Joseff, and Diana Hoshall provide details in the full article in The Tax Adviser.