Top LIFO Tips & Tax Savings Strategies for 2022

This blog explores the top ten LIFO tips & tax savings strategies for 2022, broken down by opportunities for companies + CPA firms. Feel free to schedule a free call or online meeting with us to take a deeper dive as to how these can benefit you + receive a complimentary analysis from the LIFO experts!

For Companies

1.  New motor vehicle dealers (Auto, Ag/Farm machinery & equipment, RV, heavy-duty truck & boat): Explore obtaining tax relief caused by inventory liquidations between 2020 – 2021. The vast majority of new vehicle dealers suffered substantial LIFO recapture as a result of significant inventory liquidations caused by supply chain disruptions. On December 22nd, the Senate passed the Supply Chain Disruptions Relief Act which will allow dealers to obtain relief for LIFO recapture recognized by certain new vehicle dealerships dealers between 2020 & 2021. Assuming it is passed by the House & is signed by the President, dealers & CPA firms should be proactive about exploring any potential relief available from this bill. Check out our blog to learn more, obtain a free analysis to estimate the potential relief available for your dealership or to sign up to receive notifications on updates regarding the progress of this bill!

2.  Companies not on LIFO: Elect LIFO for the 2022 year-end. Inflation has persisted in 2022 & will be above average or close to record highs in many industries! Since the highest inflation seen in the last four to five decades has been recorded over the last two years, 2022 will likely be the last opportunity in the foreseeable future to obtain many years’ worth of LIFO tax benefits in the election year alone. Check out our resources below to learn more!

3. Companies on LIFO: Switching to the IPIC method and/or expanding election scope. The IPIC method is a popular means of calculating LIFO inflation for a vast array of reasons. When compared to its alternatives, the IPIC method often creates materially higher LIFO tax benefits, reduces potential IRS scrutiny upon audit & simplifies LIFO. Furthermore, since the IPIC method is an IRS safe harbor method & changes to the IPIC method from all non-IPIC methods affords taxpayers audit protection from all LIFO errors made prior to the switch to the IPIC method. Furthermore, changing from a non-IPIC method to the IPIC method is made under automatic change procedures, is applied on a cutoff basis or prospectively without retroactive adjustments & can be made as late as your tax return filing deadline. Check out our IPIC resources below!

4. Use our free resources & complimentary offerings to help explore electing LIFO, switching the IPIC method, expanding your election scope or estimating potential tax relief from qualified inventory liquidations. LIFOPro provides free resources & offerings to make exploring all of the above strategies a cinch! We offer free LIFO election benefit analysis for companies not on LIFO & free reviews and pro forma calculation comparisons for companies already on LIFO. We also offer free LIFO training to companies to ensure you’re aware of all the LIFO essentials. And assuming the Supply Chain Disruptions Act becomes a law, LIFOPro will provide free pro forma analysis to quickly estimate the potential relief available from qualified inventory liquidations. Request a free LIFO election benefit analysis or review online or schedule a free call/online meeting using any of the links below!

5. Use LIFOPro’s outsourcing solutions or licensing the LIFOPro software for all your company’s LIFO needs. LIFOPro’s turnkey outsourcing solutions makes being on LIFO as simple as possible. The LIFOPro software allows companies to minimize the time spent on LIFO in-house, ensures calculation accuracy & eliminates audit risk. We have the highest client retention rates in the accounting industry because we offer the highest-quality services & solutions at the most reasonable costs. Our clients have the lowest LIFO termination rates in the accounting industry because companies partnering with us avoid all the hassles of LIFO while maintaining tax benefits that are far greater than the costs. We provide a complete range of LIFO-related offerings, including IRS Form 970 preparation for first-time LIFO elections & Form 3115 preparation for changes in accounting method (which will be required to be filed by dealers seeking tax relief through the Supply Chain Disruptions Act). Learn more about our offerings at our website or by scheduling a free call/online meeting using the links below!

For CPA Firms

6.  New motor vehicle dealers (Auto, Ag/Farm machinery & equipment, RV, heavy-duty truck & boat): Explore obtaining tax relief caused by inventory liquidations between 2020 – 2021. The vast majority of new vehicle dealers suffered substantial LIFO recapture as a result of significant inventory liquidations caused by supply chain disruptions. On December 22nd, the Senate passed the Supply Chain Disruptions Relief Act which will allow dealers to obtain relief for LIFO recapture recognized by certain new vehicle dealerships dealers between 2020 & 2021. Assuming it is passed by the House & is signed by the President, dealers & CPA firms should be proactive about exploring any potential relief available from this bill. Check out our blog to learn more, obtain a free analysis to estimate the potential relief available for your dealership clients or to sign up to receive notifications on updates regarding the progress of this bill!

7.  Clients not on LIFO: Elect LIFO for the 2022 year-end. Inflation has persisted in 2022 & will be above average or close to record highs in many industries! Since the highest inflation seen in the last four to five decades has been recorded over the last two years, 2022 will likely be the last opportunity in the foreseeable future to obtain many years worth of LIFO tax benefits in the election year alone. CPA firms are the biggest advocates of LIFO for their clients & most companies will never consider electing without receiving a recommendation from you to do so. Ensure your firm is proactively advocating for the most valuable inventory related tax savings tool in LIFO rather than passively reacting to it. Firms failing to do so risk appearing unable or unwilling to perform adequate due diligence for their clients! Check out our resources below to learn more!

8. Clients on LIFO: Switching to the IPIC method and/or expanding election scope. The IPIC method is a popular means of calculating LIFO inflation for a vast array of reasons. When compared to its alternatives, the IPIC method often creates materially higher LIFO tax benefits, reduces potential IRS scrutiny upon audit & simplifies LIFO. Furthermore, since the IPIC method is an IRS safe harbor method, changes to the IPIC method from all non-IPIC methods affords taxpayers audit protection from all LIFO errors made prior to the switch to the IPIC method. Furthermore, changing from a non-IPIC method to the IPIC method is made under automatic change procedures, is applied on a cutoff basis or prospectively without retroactive adjustments & can be made as late as your client’s tax return filing deadline. Check out our IPIC resources below!

9. Use our free resources & complimentary offerings to help your firm & clients explore electing LIFO, using the IPIC method, expanding their election scope or estimating potential tax relief from qualified inventory liquidations. LIFOPro provides free resources & offerings to make exploring all of the above strategies a cinch! We offer free LIFO election benefit analysis for clients not on LIFO & free reviews and pro forma calculation comparisons for clients already on LIFO. We also provide CPA firms with all the resources and tools needed to help their clients explore LIFO elections and methods alternatives while doing so in the most efficient and effective manner. We offer free LIFO training to both CPA firms and their clients. And assuming the Supply Chain Disruptions Act becomes a law, LIFOPro will provide free pro forma analysis to quickly estimate the potential relief available from qualified inventory liquidations. Request a free LIFO election benefit analysis or review online or schedule a free call/online meeting using any of the links below!

10. Have your clients utilize LIFOPro’s offerings to minimize your firm’s time, effort & resources spent on LIFO. When companies engage with LIFOPro, they’re not only partnering with a 3rd party service provider. They’re also partnering with the leading LIFO subject matter experts. Because of this, CPA firms avoid having to develop in-house expertise to support and understand their client’s LIFO calculations. Furthermore, CPA firms minimize the time auditing/reviewing LIFO and incorporating LIFO into their client’s financial statements and tax returns. We even offer referral fees to CPA firms to ensure they’re adequately compensated for any time they invest on LIFO for their clients! LIFOPro will structure our engagements to meet your client’s and firm’s exact wants & needs, including communication, document delivery & billing. We provide a complete range of LIFO-related offerings, including IRS Form 970 preparation for first-time LIFO elections & Form 3115 preparation for changes in accounting method (which will be required to be filed by dealers seeking tax relief through the Supply Chain Disruptions Act). Learn more about our offerings at our website or by scheduling a free call/online meeting using the links below!