The American Institute of Certified Public Accountants (AICPA) has made several key recommendations to the Internal Revenue Service (IRS) regarding accounting method changes for which automatic consent is granted.
AICPA officials said the proposed changes would “assist the IRS and Treasury in achieving their goals of encouraging prompt voluntary compliance with proper tax accounting method principles and promoting the public interest.”
A taxpayer who changes the method of accounting must secure the consent of the IRS Commissioner before computing taxable income under the new process. Generally, a taxpayer is considered to have obtained the consent of the IRS Commissioner for certain automatic accounting method changes if it has complied with all the applicable provisions.
The AICPA recommends providing audit protection for taxpayers under exam when new guidance is issued. It lists several key recommendations, including adding commissions to the type of compensation eligible for the automatic consent procedures for deferred compensation, providing cash method taxpayers with automatic consent to change from impermissible income or expense recognition methods to permissible methods and giving automatic consent for method changes to comply with section 451(c). It also suggests providing automatic consent for an accrual method taxpayer to change from impermissible to permissible methods of applying the all-events test and economic performance for liabilities, including automatic consent for a change to properly apply the recurring item exception for eligible liabilities, and permitting taxpayers to change from an impermissible to permissible method of accounting for recognizing income from tenant improvement allowances.