Cash method available for more small businesses – IRS News – Brief Article
Stuart R. Josephs
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. 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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