Discussion:Change cash basis to accrual basis
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Discussion Forum Index --> Tax Questions --> Change cash basis to accrual basis
| 6 November 2006 | |
| I have an S corp which is using cash basis. Is there any tax issue if they change from cash to accrual basis. | |
| 6 November 2006 | |
| Publication 538 | |
| November 6, 2006 | |
| Tax issue? Well, of course. Work thru the 3115 joy joy and see what you get. | |
| 6 November 2006 | |
| In general, you cannot change accounting methods without permission from the IRS. | |
| 6 November 2006 | |
| In general, switching from cash to accrual will receive automatic approval. | |
Baltimarrow (talk|edits) said: | 5 January 2009 |
| Are there any frequency restrictions? I am talking about a S Corp which was accrual, switched to cash, and now is considering switching back to the accrual method. Is there anything keeping a company from switching 'to frequently'? | |
Southparkcpa (talk|edits) said: | 5 January 2009 |
| I have done this many times (none recently, 2002 most recent I think). Piece of cake, you do NOT need permission, I believe there is a Rev Proc for automatic acceptance. The IRS HATES cash basis.
Look at the pub, should be straight forward and 3115 "aint so bad". Could take a few hours though. | |
DouglasHolbrook (talk|edits) said: | 5 January 2009 |
| Cvan, it should tell you something when the IRS wants you to use the accrual method. It usually results in paying more tax sooner. Also the record keeping is much more difficult. | |
| 5 January 2009 | |
| I don't think this would be the time to switch to accrual unless required to do so. Why report income one may never collect, then have to go through the bad debt process (whichever one you choose)?
Of course, they might have some liabilities they do want to offset the income with. | |
| 5 January 2009 | |
| I agree with Southpark. Been there, done that. It was not too hard to figure out.
Whether or not it is wise to make the switch is a totally different question. | |
Taxalmancer (talk|edits) said: | 6 January 2009 |
| Cvan - is there any doubt as to the propriety of the cash method? I have met with new clients using the cash method and was not confident that method would hold up under audit. The switch to accrual was made and it made the client audit proof for prior years with respect to the cash method.
If you know that the cash method is proper I can't think of too many reasons why you'd want to switch to the accrual method. | |
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