Tax Reform Tax Tip 2018-172: Here’s how tax reform changed accounting methods for small businesses

 

IRS Tax Tips November 6, 2018

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Issue Number: Tax Tip 2018-172 Here's how tax reform changed accounting methods for small businesses The Tax Cuts and Jobs Act – better known simply as tax reform – allows more small business taxpayers to use the cash method of accounting. Tax reform now defines a small business taxpayer as a taxpayer that has average annual gross receipts of $25 million or less for the three prior tax years and is not a tax shelter. Here's how last year's legislation changed the rules for small business taxpayers. The law: Expands the number of small business taxpayers eligible to use the cash method of accounting by increasing the average annual gross receipts threshold from $5 million to $25 million, indexed for inflation. Allows small business taxpayers with average annual gross receipts of $25 million or less for the three prior tax years to use the cash method of accounting. Exempts small business taxpayers from certain accounting rules for inventories, cost capitalization and long-term contracts. Allows more small business taxpayers to use the cash method of accounting for tax years beginning after Dec. 31, 2017. Revenue Procedure 2018-40 provides the procedures that a small business taxpayer may use to obtain automatic consent to change its methods of accounting to reflect these statutory changes. More information: Tax Cuts and Jobs Act: A comparison for businesses Share this tip on social media -- #IRSTaxTip: Here's how tax reform changed accounting methods for small businesses. https://go.usa.gov/xPpw8   Back to Top                     Thank you for subscribing to IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov. This message was distributed automatically from the IRS Tax Tips mailing list. Please Do Not Reply To This Message.

 

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