IRS Provides Safe Harbor for Routine Service Contracts

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July 30 — The IRS is offering a safe harbor for accrual method taxpayers to ratably expense the cost of regular and routine services, such as janitorial or landscape maintenance.

The safe harbor treats economic performance as occurring ratably on contracts for services performed on a regular basis. Contracts for one-time services, like an environmental study, aren't considered ratable service contracts, the Internal Revenue Service said in Revenue Procedure 2015-39, issued July 30.

“Taxpayers can accelerate an otherwise deferred deduction,” Robert Conner, the national tax assistant director at BKD LLP in Springfield, Mo., told Bloomberg BNA July 30. “It's a win for taxpayers.”