Hiring a tax adviser for an accounting method change

Tell the adviser which accounting treatment the business uses, what management wants to change and the reason. Supply prior returns and the records supporting the current approach. Ask the professional to determine the appropriate procedure for the actual facts. A software setting change is not a substitute for evaluating a tax accounting method change.

The IRS describes Form 3115 as a request to change an overall accounting method or the treatment of an item. Its current materials point to applicable guidance. Have the adviser confirm current eligibility, procedure and timing for the proposed year rather than accepting a generic form-preparation quote as the full assignment.

Ask the initial stage to identify the current and proposed methods, relevant facts, available procedural route, information gaps and required next actions. Include an explanation of any unresolved question. A conclusion that the proposed change needs a different approach can be a valid result of the assessment.

IRS written-advice guidance emphasizes reasonable assumptions and relevant facts. Apply that to the records supplied by management: label incomplete periods, prior changes and uncertain treatment. Ask the adviser which representations need confirmation before it can recommend a route or prepare an application.

Determine who will reconstruct the financial inputs and prepare any adjustment calculations the adviser identifies. Ask for the period and population covered, reconciliation to company records and review responsibility. A professional may quote preparation assuming a completed calculation that the bookkeeping team has never agreed to produce.

Request a deliverable that explains the calculation and its assumptions, not only the amount carried to a form. Specify how missing records are handled and when additional research requires approval. If a specialist must evaluate a particular item, include that role and fee in the plan before the application stage begins.

Ask the adviser to identify related federal, state or other consequences that fall outside the engagement. Obtain qualified advice for those areas. A conclusion about one procedure should not be presented as a complete answer for every jurisdiction or return affected by the business's accounting records.

Name who approves the proposed change, reviews the application and authorizes submission. Agree how the preparer responsible for the annual return will incorporate the accepted approach. Keep management's decision, application status and any relevant conditions visible to the person maintaining the books.

Specify whether the engagement includes implementation instructions, opening schedules and follow-up questions. Tax and financial-reporting records can require different treatment. Ask the professionals to explain the relationship instead of assuming an application automatically changes every ledger or reporting basis.

Ask who monitors correspondence and what response work is included. Different procedures may involve different forms of acknowledgment or determination; have the adviser explain what completion means for your matter. Avoid a contract promising a favorable authority outcome in place of a defined professional process.

Identify any government user fee separately from professional charges and have the adviser verify whether it applies to the procedure selected for the actual facts.

Retain the recommendation, calculations, submitted documents and final status with the affected returns. Assign responsibility for conditions or future reporting the adviser identifies. The project should leave the company able to explain the selected method and maintain the evidence supporting it, without repeating the original investigation next year.