Accounting methods are not just the cash method and the accrual method. The IRS defines a method of accounting as the treatment of any material item that does not permanently affect lifetime income. Under this broad definition, many changes in tax treatment are classified as changes in accounting method, and require following procedures for obtaining permission for such a change. Additionally, the IRS has extensive ability to make "adjustments" to income under I.R.C. section 481 when a taxpayer has used an incorrect accounting method, not subject to any statute of limitation.
This course will explain, with realistic example cases, what qualifies as a change in accounting method, the procedures that taxpayers must follow to obtain permission for a change in accounting method, and the rules relating to adjustments under IRC Section 481.
Publication Date: December 2021
Designed For
Tax practitioners at all levels who provide advice and return preparation on tax timing issues or the proper year of inclusion of items of income and expenses.
Topics Covered
- Definition of accounting method
- Rules for when changes in accounting method are permitted
- How to make Section 481 adjustments to account for accounting method changes
- Change in accounting method vs. error correction
- Distinguish between an error correction allowing tax return amendment vs. change in accounting method
- Definition of change in accounting method and mechanics of implementing an accounting method change
Learning Objectives
- Distinguish between an error correction allowing tax return amendment vs. change in accounting method
- Identify the definition of change in accounting method and mechanics of implementing an accounting method change
Level
Intermediate
Instructional Method
Self-Study
NASBA Field of Study
Taxes (2 hours)
Program Prerequisites
A basic understanding of accounting methods, including cash and accrual.
Advance Preparation
None
Instructor
Jennifer Kowal
Jennifer Kowal, JD, has been a tax professor and the director of the graduate tax program at Loyola Law School in Los Angeles since 2003. Loyola’s graduate tax program offers an LL.M. in Taxation for attorneys and a Master in Tax Law for non-lawyers. Professor Kowal teaches courses in advanced income taxation, income tax timing issues, corporate taxation, and tax research, among others. Prior to teaching at Loyola, Professor Kowal taught in the International Tax Program at Harvard Law School.
She also practiced law with the firms of Irell & Manella in Los Angeles and Ropes & Gray in Boston, advising clients on the taxation of various business transactions, including cross-border, partnership and corporate structures. Professor Kowal holds a BS in Accounting with distinction from the University of Kansas, and a JD from UCLA School of Law, where she was a member of the Order of the Coif.