After fuming about this issue for a couple of days, I decided to help gather my fellow CPAs together and see what we could do to stop the IRS in their tracks. It seems the IRS has decided to come after some wineries for using LIFO to value their inventory.
Last week , with the help of the Napa Valley Vintners Association, we brought Washington Insider, Dean Zerbe, to St. Helena to share his insights into the workings of Congress. Dean was the top tax counsel for Senator Charles Grassley, of Iowa. One of the things Dean discussed was Congress’s consideration of a bill to eliminate the use of LIFO inventory for tax purposes. This law change would have huge negative tax consequences for wineries using LIFO accounting.
So here’s where my blood began to boil.
You mean to tell me that not only is the IRS going to impose costly, time-consuming audits on wineries using LIFO but this is going to happen at the same time Congress is voting to eliminate the calculation entirely? So first we are going to have to help our customers prove the correctness of their LIFO calculations and then we are going to have to help them figure out how to recognize additional income from eliminating the adjustment? These audits, at a time of legislative uncertainty are a costly, unnecessary burden for our customers, at a time when they have enough economic challenges to handle, and we just won’t accept that without a fight.
We’ll keep you posted on the results of our meetings, but in the meantime, you need to start writing your Congressman about the impact of the elimination of LIFO accounting on your business.