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Timing is everything: Revisiting accounting methods in a changing tax landscape

November 9, 2021 / 4 min read

With year-end in sight, it’s time for taxpayers to review their current year tax strategy, plan for future tax year projections, and make sure their accounting methods and elections are in line with their tax goals and year-end projections. 

With year-end in sight, it’s time for taxpayers to review their current-year tax strategy and plan for future tax year projections. Reviewing a taxpayer’s accounting methods can be a powerful planning tool and can lead to significant tax savings, but timing is a critical part of a successful tax accounting methods plan. Now is the time for taxpayers to review their tax accounting methods and make sure their methods and elections are in line with their tax goals and year-end projections.

The importance of strategic accounting methods

Accounting methods determine the timing of when income and deductions are recognized. Specifically, accounting methods will dictate the year in which revenue, accruals, and depreciation are recognized. Many taxpayers have the flexibility to choose the accounting methods that are right for their business. With the possibility of rising tax rates on the horizon, a taxpayer’s review of their accounting methods is important for getting the most out of their tax planning.

Changes in tax accounting methods generally require filing Form 3115 with the IRS. If taxpayers want to realize the benefits on their 2021 tax returns, many of the most impactful changes must be filed by tax year-end. As such, taxpayers should review tax-planning strategies now. Any accounting method change plan should consider all relevant factors such as cash flow, changes in tax policy, potential increasing tax rates, and international tax implications, among others.

Key time frames for reviewing accounting methods

Accounting methods should be addressed at four key points throughout the year to maximize planning:

There are various ways that accounting methods planning can help taxpayers prepare for a changing tax landscape and get the most out of tax planning. The appropriate accounting methods strategy for taxpayers will depend on the specific facts and circumstances of their business. Timing is critical and, with the end of the year approaching, now is the time for taxpayers to consider accounting methods planning and determine if their current tax strategy is providing the most benefit for their business.

How we can help with tax accounting methods

Our team of specialists will work with taxpayers to identify planning opportunities regarding their business’s tax accounting methods. Specifically, we’ll help taxpayers:

If you’d like to work with one of our tax accounting methods specialists, please give us a call.

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