Message Font: Serif | Sans-Serif
No. of Recommendations: 1
Yes, inventories are involved but the annual receipts are under 1MM.

Ok, that clears that up. You would be able to report on the cash basis if that method was originally adopted on your first return.

So the question becomes what method was adopted. You seem to think that by checking the cash box, you adopted the cash method, even though the figures were all computed on the accrual basis. I disagree. The adoption of an accounting method is determined by examining both the books of account and the tax return. Regulation 1.446-1(d)(1) says.....
The method first used in accounting for business income and deductions in connection with each trade or business, as evidenced in the taxpayer's income tax return in which such income or deductions are first reported, must be consistently followed thereafter.

I don't know how you keep your books, but reporting the figures on the accrual basis on your first return determines your method, IMHO.

Once established, you may not change, even from an erroneous method, by filing an ammended return. You must get permission.

19.4. Rev Rul 90-38 , 1990-1 CB 57 .
Unless the Commissioner consents, a taxpayer may not change from an erroneous method of accounting retroactively by amending prior returns, even if the period for amending the return for the first year in which the erroneous method was used has not expired.

You said....

I'm not trying to give you a hard time and it obvious I want to justify being a cash basis taxpayer, but so far I have only heard an opinion not the tax code being referenced.

Well, this is a 'free' online forum, so what you are likely to get is opinions. However, I have endeavored to give you the authorities. Do with it what you will.


Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.