It used to be once a Corporation got to $5 Million of average gross receipts over three years, it was required to use the accrual basis of accounting. The cash basis method allows for easier deferral of income by asking customers not to pay you until a future year. Many small businesses and professionals use this method to time their net income to maximize their tax position.

The new tax law spikes the limit to $25 Million. Now many larger small businesses can better time their net income. Any business other than a tax shelter qualifies and, as a reminder, adjustments to cost of goods sold for inventory must still be made. For contractors, the percentage-of-completion method now uses the same $25 Million threshold.

You will need to seek (automatic acceptance) permission from the Internal Revenue Service by filing Form 3115. There has been a lot written since the new Tax law came out about the benefits of changing to the cash basis or accrual basis with the expensing of prepaid expenses. Its important that you seek the advice of your tax professional to properly pursue such a change.

Do you need your tax returns evaluated for the new tax year? Czarnowski & Beer is currently offering a complimentary, no-obligation tax return evaluation. To take advantage of this limited time offer, visit our tax return offer page or contact us at or call (212) 397-2970 and we will be happy to help you and answer your questions.

Please note, this offer is subject to change or expire without notice any time after October 15, 2018. Please confirm with Czarnowski & Beer if you are reading this blog post after this date. Thank you.