• Tax Accounting Methods

Accountants, judgment, and real world impact.

Regulation by regulation, ruling by ruling, case by case – each year brings increasing complexity to the task of determining the timing of recognizing income and deductions, and identifying the optimal treatment for a company’s specific industry and size. The choice of accounting method for numerous items throughout the tax return can often have immediate and significant impact on a company’s cash flow, profitability, and risk exposure.
 
  • Cash flow. Accounting method changes can generate quasi-permanent cash tax benefits by deferral of income taxes.
  • Coordination with Other Provisions. Accounting methods planning can be used to increase benefits and/or decrease liabilities associated with other provisions, such as the interest expense limitation under section 163(j) and the Foreign-Derived Intangible Income deduction.
  • Interest rates. Rates are rising which makes accounting method changes more valuable.
  • IRS consent. Receive IRS approval and eliminate uncertainty.
  • Reportability. Generally does not require additional disclosure.
  • Foreign Tax Planning. Analyzing a foreign company’s accounting methods can impact earnings and profits depending on the tax posture.
  • Mitigate Uncertain Tax Positions.  Companies can correct erroneous methods and secure back-year audit protection.
  • Non-intrusive. Does not require restructuring or other exotic steps. 

BDO offers more than 100 years of tax experience, and the resources of one of the nation’s preeminent accounting networks. Our Tax Accounting Methods group is a highly technical practice within BDO that seeks to help clients to identify and implement the most favorable tax methods of accounting.
 
We are able to proactively identify opportunities, perform a meticulous assessment to optimize all method choices, liaise with the Internal Revenue Service if necessary, and serve as a resource for understanding new developments, such as the recent developments in revenue recognition and changes made as a result of the Tax Cuts and Jobs Act. We also play a critical role in assisting taxpayers with restructuring/M&A transactions, from assisting with the due diligence process to analyzing transaction costs for deductibility versus capitalization. Further, the group has extensive experience with preparing and reviewing computations and technical memoranda related to section 199, which, despite its repeal for years beginning after December 31, 2017, continues to remain an active area of opportunity for taxpayers for any open tax years prior to 2018.
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