Sometimes, the IRS gets overzealous (imagine that). And when they do, it has been communicated to me by an anonymous source that these are the areas they scrutinize:
- Revenue recognition (proper methods being followed)
- Valuation of assets
- Capitalized vs. Noncapitalized Expenses
- Accounting for acquisitions
- Other performance benchmarks that don’t follow GAAP (Generally Accepted Accounting Principles).
These areas are traditionally complex to compute and to communicate. The stakes for reporting these correctly can often be quite high because tax liability can swing greatly in one direction or the other depending on how the rules and requirements have been interpreted.