How can CPA firms easily identify clients that could be good LIFO candidates?
- Top LIFO Candidates List Excel File
- Two separate Excel sheets containing a list of the best industries, commodities & items to recommend LIFO elections for your clients
- Top LIFO candidates by Industry – List of 34 Industry-based candidates. Includes year to date inflation rates as well as historical average annual inflation rates & frequency. Good 2021 LIFO candidates are indicated by having a “Yes” value in the Column E 2021 LIFO Election Candidate Field
- Top LIFO candidates by Commodity – List of 200 commodity & item-based candidates. Includes same inflation data as industry list, except for that all commodities/items included in this list are good 2021 LIFO candidates
- Two separate Excel sheets containing a list of the best industries, commodities & items to recommend LIFO elections for your clients
- How to use the Top LIFO Candidates by Industry List
- Generate a unique list of clients with inventories that aren’t on LIFO & include the following fields:
- Company name
- IRS Form 1120 Principal Business Activity Code (These are the codes entered on Schedule K, Line 2a of Form 1120 & Page 1, Item B of Form 1120S)
- Prior year end inventory balance (optional)
- Tax rate (optional)
- In the Client IRS PBA Code Excel file, add & label the following columns: a. 3-digit NAICS Code b. 2021 LIFO Election Candidate c. YTD Inflation Rate
- 3-digit NAICS cod
- 2021 LIFO Election Candidate
- Year to date (YTD) Inflation Rate
- Estimated CY Tax Savings from LIFO
- In the Client List Excel file, use the following formula to populate the 3-digit NAICS code from the client’s IRS PBA Code: =left(IRS PBA Code cell,3)
- In the 2021 LIFO Election Candidate field of the client list Excel file, use a vlookup formula to map this sheet’s CY LIFO Election Candidate’s Column E values (use client list Excel sheet’s 3-Digit NAICS codes as the lookup value & this sheet’s 3-digit NAICS codes & CY LIFO Election Candidate values as the table array)
- In the YTD Inflation Rate field of the client list Excel file, use a vlookup formula to map this sheet’s YTD Inflation Rate Column F values (use client list Excel sheet’s 3-Digit NAICS codes as the lookup value & this sheet’s 3-digit NAICS codes & YTD Inflation Rate values as the table array)
- In the client list Excel sheet, filter the CY LIFO Election Candidate field for “Yes” values
- In the client list Excel sheet, use the following formula to calculate Estimated CY tax savings from LIFO: (prior year end inventory balance * YTD inflation rate) * tax rate
- Generate a unique list of clients with inventories that aren’t on LIFO & include the following fields:
- How to use the top LIFO Candidates by Commodity List
- Generate a unique list of clients with inventories that aren’t on LIFO & include the following fields:
- Company name
- Prior year end inventory balance (optional)
- Tax rate (optional)
- In the Client List Excel file, add & label the following columns:
- 2021 LIFO Election Candidate
- Predominant PPI code
- Year to date (YTD) Inflation Rate
- Estimated CY Tax Savings from LIFO
- Within your client list, determine whether one of the client’s predominant inventory items is listed within Top LIFO Candidates by Commodity List & enter a “Yes” in the 2021 LIFO Election Candidate field for those that are
- Within your client list, filter 2021 LIFO Election Candidate field for “Yes” values only & enter
- In the YTD Inflation Rate field of the client list Excel file, use a vlookup formula to map this sheet’s YTD Inflation Rate Column F values (use client list Excel sheet’s 3-Digit NAICS codes as the lookup value & this sheet’s 3-digit NAICS codes & YTD Inflation Rate values as the table array)
- In the client list Excel sheet, filter the CY LIFO Election Candidate field for “Yes” values
- In the client list Excel sheet, use a vlookup to populate the YTD inflation rate values from LIFOPro’s top LIFO candidate by Commodity list into your client list Excel sheet using the PPI code column as the lookup value & the PPI code/YTD inflation rates within LIFOPro’s list by Commodity list as the table array
- In the client list Excel sheet, use the following formula to calculate Estimated CY tax savings from LIFO: (prior year end inventory balance * YTD inflation rate) * tax rate
- Generate a unique list of clients with inventories that aren’t on LIFO & include the following fields:
How to Approach Clients Regarding Tax Savings Opportunity & Complimentary LIFO Election Benefit Analysis
LIFOPro offers complimentary LIFO election benefit analysis & turnkey outsourcing solutions to provide your clients with all their LIFO needs without your firm having to develop in-house expertise to do so. Have your clients pursue a LIFO benefit analysis using one of the following approaches:
- Email or call client, provide them with estimated CY tax savings from LIFO calculated using above steps & recommend having LIFOPro perform a complimentary LIFO Election Benefit Analysis
- Present LIFO tax savings opportunity to client by one of the following methods:
- Offer to schedule a call with LIFOPro
- Provide them with LIFO Analysis Documentation Request List. See list here: LIFO Analysis Documentation Request List
- Introduce client to LIFOPro in order to schedule a call and/or allow LIFOPro to explain concepts of LIFO & request data for complimentary LIFO Election Benefit Analysis
- Contact LIFOPro to provide high-level information about client to confirm that those clients/prospects should have a LIFO Election Benefit Analysis performed
Get a LIFO Election Benefit AnalysisSample LIFO Election Benefit Analysis ReportLIFO Election Benefit Analysis Documentation Request
2021 LIFO Lookout & Top Candidates GuideLIFOPro's 2021 Top LIFO Candidate List
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