Tax Notes

The IRS in December proposed a revenue procedure ( ) that would permit some businesses that use the accrual method of accounting to delay, by one year, the reporting of advanced payments for services. Currently they must report the advanced income in the tax year they receive it. Examples of entities that would benefit from the proposed change include television sales and repair shops and video arcade operators. Under revenue procedure 71-21 companies now can defer reporting income for certain services provided over a multiyear period. But the procedure does not permit deferral of income for many other service companies or for businesses providing combinations of services and nonservices rendered over a period of more than one year. If made final, the proposed change would modify and supersede the existing revenue procedure and include many of the currently excluded items. The IRS requests comments by March 24. In addition, the Treasury Department and the IRS plan to propose regulations that will modify section 1.61-8(b) of the income tax regulations to conform with the proposed revenue procedure.

The Treasury Department issued temporary and proposed regulations ( ) in November that would require corporations to notify shareholders and the IRS if they relocate their headquarters offshore or a foreign company acquires them. The contemplated change comes in the wake of a May 2002 Treasury Department report that found a significant increase in the number of corporate “inversion transactions,” in which U.S.-based multinational entities altered their structure so that a new foreign entity, typically located in a country with low or no taxes, replaced the U.S. company as the parent. According to the Treasury Department, such transactions not only enable companies to avoid taxes by making nominal structural modifications, they also produce taxable gains for investors who often fail to report them. But by making the reporting of such deals on form 1099 a requirement, the proposed rule would alert the IRS and also remind shareholders of the tax consequences they produce. Comments are due March 4.

The AICPA in November released an exposure draft ( ) of Interpretation no. 1-2, Tax Planning, of Standards for Tax Services no. 1, Tax Return Positions. By analyzing examples of situations tax practitioners typically encounter, the proposed interpretation offers guidance for reducing clients’ tax liability without resorting to the sometimes inappropriate use of tax shelters. Comments are due April 30.


6 key areas of change for accountants and auditors

New accounting standards on revenue recognition, leases, and credit losses present implementation challenges. This independently-written report identifies the hurdles that accounting professionals face and provides tips for overcoming the challenges.


How tax reform will impact individual taxpayers

Amy Wang, a CPA who is a senior technical manager for tax advocacy at the AICPA, answers to some of the most common questions on how the new tax reform law will impact individual taxpayers.