What's new:

 

LIFO implications of new IRS preparer penalty rule & FIN 48

The vast majority of LIFO calculation documentation we review reflects what we call “LIFO method deficiencies”. Fixing these LIFO problems has not been a big priority for companies and their CPAs in the past because, especially for smaller companies, the chance of IRS audit adjustments was not substantial. The LIFO IRS Regs. compliance standard has been drastically raised with these new rules.

 

We are encouraging our CPA firm clients to have us review the LIFO documentation for any clients for which we do not make the LIFO calculations or for which our LIFO-PRO software was not used so we can determine whether “LIFO method deficiencies” exist. There is usually no fee for this type of review.

 

New LIFO-PRO website features:

 

LIFO calculator on LIFO-PRO website - This is a new tool on our website starting in late November 2007. A couple of auto dealer LIFO service providers have LIFO calculators on their websites but they only show a first year LIFO calculation and require users to provide registration information. Our new web page shows the LIFO inventory balances for up to 5 years and requires no user entry of registration information. The URL for this new page is: http://lifopro.com/LIFOWebCalculator.aspx

 

We think this will be a useful tool for CPAs to show the LIFO reserves that would result from projected FIFO inventory balances and inflation indexes.

 

The fact that our LIFO calculator shows LIFO reserve balances for several years helps to dispel a common LIFO misconception which is that increases in LIFO reserve balances require increases in FIFO inventory balances.

 

Other new website pages - http://lifopro.com/GoodLIFOIndustries.html Shows industries that are good LIFO candidates including historical PPI & CPI inflation rates.

 

IRS proposes changes in the change in accounting method process

The IRS in IRS Notice 2007-88 has indicated that it is proposing changes in the process for changes in accounting methods. The IRS intends to make more method changes eligible for automatic approval but would move up the filing deadline for non-automatic approval changes from the present end of year of change deadline to 3 months prior to year end of the year of change. The IRS is requesting comments from the public regarding these changes. Written submissions must be received by January 18, 2008 to be considered. The URL to view this Notice is: http://www.irs.gov/pub/irs-drop/n-07-88.pdf

 

If you believe there are tax accounting method changes that now require advance approval for change, but that you think should be automatic approval changes, you should either submit this suggestion to the IRS (the notice describes these procedures) or tell us your suggestion and we will pass this on the the IRS with our submission.