Guidance Offers Safe Harbor to Account For OID on Pools of Credit Card Receivables

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Taxpayers will be allowed to use a safe harbor method of accounting for original issue discount (OID) on a pool of credit card receivables under guidance unveiled May 3 by the Internal Revenue Service.

In Revenue Procedure 2013-26, IRS said taxpayers can use a “proportional method” under tax code Section 1272(a)(6). The agency said it made significant changes to the method it first unveiled in a proposed revenue procedure set out in Notice 2011-99 (229 DTR G-3, 11/29/11).

The changes are intended to reduce administrative burdens and controversy for taxpayers and IRS in computing OID accruals on a pool of credit card receivables, the agency said.

As outlined in the May 3 guidance, the proportional method deals with allocation to an accrual period. Taxpayers will be allowed to allocate an amount of unaccrued OID under the method.

Text of Rev. Proc. 2013-26 is in TaxCore.

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