The Internal Revenue Service (IRS) has introduced a new Excel-based calculator to simplify the computation of look-back interest for businesses involved in long-term construction and manufacturing contracts. This tool aims to assist taxpayers and tax professionals in fulfilling requirements for Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts.
IRS Chief Executive Officer Frank J. Bisignano said, "The IRS is focused on improving and enhancing how we serve taxpayers. We are transforming the IRS into a digital-first agency that provides the best possible experience for taxpayers, and tools like this calculator are an important step in that effort." The Percentage-of-Completion Method (PCM) Look-Back Interest Calculator supports the interest computation step of the three-step look-back method.
The calculator helps with hypothetically reallocating income, computing overpayment or underpayment, and calculating interest. However, the IRS cautions that the tool does not guarantee compliance with the law and does not replace authoritative guidance. Taxpayers must ensure calculations align with I.R.C. Section 460 and Treasury Regulations Section 1.460-6. Feedback on the calculator can be submitted via email to Stakeholder Liaison.