Category:Cash Basis

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Related reading: Rev. Proc. 2002-28

Helpful excerpts from older discussions:

  • Jdugancpa: "The "general rule" is that cash method may not be used by: C corps, partnership with C corp partners, or tax shelters. Exceptions to general rule (i.e., these may use cash method): Farming businesses, qualified personal service corps, "small businesses" (that is, businesses with gross receipts under $5,000,000. Additionally, a second "general rule" is that taxpayers with revenues from the sale of merchandise (i.e., those with inventories) must use accrual. But see the exceptions for t/p with gross revenues under $10,000,000 and t/p with gross revenues under $1,000,000."
  • Douglasholbrook: "448 requires accrual for essentially only C corps with > $5MM of average receipts. [If a] client is an S corp, 448 doesn't apply and no accrual is required. The only other time when the accrual method is required is if there is inventory, which doesn't apply to his service-based client.
2002-28 was enacted to give small businesses relief from the accrual method, mainly for businesses with < $10MM in average receipts. Since this taxpayer is not required to use the accrual method, no relief is needed."
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