IRS ISSUES ACCOUNTING CHANGE PROCEDURES
February 7, 2022 - Douglas Myser
IRS issues accounting change procedures. Many of the tax changes in the Tax Cuts and Jobs Act have taken some time to come out and get guidance from the IRS. As they are quite numerous and at times some of the tax law changes are not given guidance until some taxpayer realizes they can't make heads or tails out of it, asks for a "Letter Ruling" from the IRS, then a clarification ensues. The IRS in Revenue procedure 2022-9, gave guidance on small businesses, companies with gross receipts less than $25 million, $26 million adjusted for inflation after Jan. 5th, 2021, that want to change their accounting methods. Taxpayers may obtain the IRS's automatic consent to change their tax accounting methods to comply with final regulations relating to simpler tax accounting methods available to smaller businesses. IRS issues accounting change procedures.
Those final regulations, issued in early 2021, implemented changes the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, that generally exempt from more complex requirements businesses with annual gross receipts of less than $25 million. These companies won't be in need of the IRS Fresh Start Program anytime soon. These simpler methods (called "small business taxpayer exemption methods" in the revenue procedure, are found in Secs. 263A (capitalization and inclusion in inventory costs of certain expenses), 448 (cash method of accounting), 460 (long term contracts), and 471 (inventories), effective for tax years, beginning after Dec. 31, 2017. The gross receipts tests is at Sec. 448.
Thursday's revenue procedure modifies Rev. Proc. 2019-43, providing guidance on automatic consent procedures under Sec. 446, It also provides procedures for taxpayers to revoke an election made under the proposed regulations. Besides automatic changes to apply a small business taxpayer exemption method under the final regulations, procedures under the revenue procedure include the automatic changes for taxpayers who no longer qualify for a small business exemption method under the final regulations, including those changing to a uniform capitalization method specifically described in the regulations.
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