The US Internal Revenue Service has launched a new Excel-based Percentage-of-Completion Method (PCM) Look-Back Interest Calculator to help businesses and tax professionals calculate interest related to completed long-term construction and manufacturing contracts, supporting Form 8697 compliance while streamlining the look-back interest computation process.
The US Internal Revenue Service announced, on 29 May 2026, 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 Excel-based Percentage-of-Completion Method (PCM) Look-Back Interest Calculator XLSX supports calculations required for Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts PDF.
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 emphasises 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.
