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Accounting Method Change Saves Tax

Health care service company, under $50MM in revenue

  • Accounting method change
  • Sell-side analysis
Solution & Benefits

As a part of the proposal process, to estimate a fee, we requested copies of their tax returns. When we looked at the returns for this company, our team asked several questions: What does this company do? Do they have inventory? What accounting method do they use? Why are they using this method?

Our team concluded, based on the information in the return as well as through conversations with the company, they qualified to use the cash method, rather than the accrual method they were currently using. By using the accrual basis, they were accelerating their payment of tax. When we alerted the company to this, no one we were bidding against had drawn this same conclusion, including their service provider. As a result, they chose us to handle their work.

We took them through the private letter ruling process to successfully have their accounting method changed. Through this process our team was able to establish themselves as trusted advisors.

As the accounting method change process completed, they decided it was time to look at potentially selling the company. Our team was included in the discussions with the bankers and management to work through the deal. We performed a sell-side analysis, enabling the company to maximize the purchase price.

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