Look-back method for long-term contracts explained

Article Abstract:

The IRS has issued Proposed Regulations concerning the Section 460(b)(2) look back method as it applies to long-term contract income accounted for under the percentage of completion (POC) method. Proposed Regulation 1.460-6(c) demonstrates how to apply the look-back method for reporting contract income and how to calculate interest in three steps. The computation of interest involves recalculating the taxable income for each year under the POC method, determining the difference between the tax liability on the recalculated tax on each year's reported income, and calculating the interest on the difference. Taxpayers may choose to use the 'delayed reapplication method' under Proposed Regulation 1.460-6(e) to reduce the number of reapplications, in which case the look-back method is reapplied only under certain conditions.

Accounting and auditing, Accounting, Contracts

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IRS provides annual update of procedures for obtaining a letter ruling

Article Abstract:

The Internal Revenue Service (IRS) has updated its requirements for submitting a request for determination or ruling. Requests for a ruling must be accompanied by a penalty of perjury statement, a use fee, documentation providing the names, addresses, and telephone numbers of interested parties, and a statement of the business reason for the request. Requests must contain: a statement of the taxpayer's knowledge concerning whether the issue was previously presented on returns; a statement of the taxpayer's judgement that the issue for ruling is not adequately addressed by law; and a deletions statement.

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