Accounting Method Choice Critical But Complex for New Businesses

It’s a simple thing to do. All that is needed is a simple check in the box under cash or accrual on a new business’s first tax return. But the choice of accounting method for a new business is a complex decision that can have tremendous tax consequences, as well as an impact on the success or failure of that business. In a recent issue of TAXES-The Tax Magazine, accounting professor James P. Angelini outlines the decision-making process that goes into choosing the accounting method for tax purposes. He describes the times when the IRS says there is no choice, as well as what considerations must be made when the choice is available between cash and accrual. He clearly presents the variables used to decide on accounting methods and what the tax consequences will be of those decisions. Using these tools can help practitioners avoid heat-of-the moment mistakes in the rush to file that first tax return for a new business.

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This story is from the CCH’s monthly Focus on Tax newsletter, which provides advise and guidance on federal and state tax issues for tax and accounting professionals.

Read this article from CCH’s Journal of Taxation of Financial Products.

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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