Cash method available for more small businesses. (IRS News).Some small businesses with gross receipts up to $10 million can now use the cash method of accounting. IRS Notice 2001-76 contains details of proposed rules, and taxpayers may rely on these proposals for tax years ending on or after Dec. 31, 2001. The proposed rules should be beneficial for service businesses that also sell related products, such as a plumber who sells plumbing supplies. The new rules generally exclude manufacturers, wholesalers, retailers, miners, certain publishers and sound recorders unless they are principally a service business or perform certain kinds of custom manufacturing. These proposals do not apply to certain businesses that the tax law requires to use accrual accounting Accrual Accounting An accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions happen.Notes: The opposite of this is cash accounting, which recognizes transactions only when there is an exchange of cash. But under accrual accounting, for example, if you buy a stereo on credit, the company you buy from would still recognize the event as a transaction.. For example, certain corporations and partnerships with corporate partners generally must use an accrual method if their gross receipts are more than $5 million. Recently issued Notice 2002-14 grants automatic consent for eligible taxpayers to change to the cash method by following specified procedures. |
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