Issue Number: IR-2026-70Inside This Issue
IRS releases new look-back interest calculator for long-term contracts IR-2026-70, May 29, 2026 WASHINGTON — The Internal Revenue Service today announced the release of a new calculator to help businesses working on large, multi-year construction or manufacturing projects more easily figure interest related to those contracts. “The IRS is focused on improving and enhancing how we serve taxpayers,” said IRS Chief Executive Officer Frank J. Bisignano. “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 Excel-based Percentage-of-Completion Method (PCM) Look-Back Interest Calculator supports calculations required for Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. Tax professionals including certified public accountants, enrolled agents, and other tax preparers working with long-term construction and manufacturing contracts may find the calculator useful when computing look-back interest. Practitioners should review the calculator output carefully, consider each taxpayer’s specific circumstances, and ensure compliance. The look-back interest is determined using a three-step process:
- Hypothetically reallocating income to prior years based on actual revenues and costs
Computing the hypothetical overpayment or underpayment of tax, and Calculating interest on the underpayment or overpayment of tax. The calculator is designed to assist with the interest computation step by providing a structured framework to perform the computations. However, the IRS emphasizes that using the calculator does not guarantee compliance with the law and does not replace authoritative guidance, as the tool does not address all fact patterns or complexities associated with look-back interest calculations. Taxpayers should therefore ensure the calculations agree with applicable authorities, including I.R.C. Section 460 and Treasury Regulations Section 1.460-6. Taxpayers and practitioners may submit feedback about the calculator, by emailing Stakeholder Liaison and including "Look-Back Interest Workbook Feedback" in the subject line. More information including detailed instructions for completing Form 8697 is available on IRS.gov.
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