Comments on: Form 3115 for a Cash to Accrual Method Accounting Change

By: Steve

Steve — Wed, 04 Apr 2018 17:40:56 +0000

In reply to Cheryl.

You want to look here: https://www.irs.gov/irb/2017-18_IRB

But also this comment: This is probably something you want to outsource to your CPA who does these 3115 forms all the time.

By: Steve

Steve — Tue, 27 Mar 2018 22:33:04 +0000

In reply to William Thomas. I would think you make your accounting method change for the next tax return you file.

By: William Thomas

William Thomas — Fri, 23 Mar 2018 23:21:30 +0000

My S-Corp has been filing on a cash basis for 15 years but Probably should have been accrual. This was not much of an issue because our sales were not much but for the past 5 years our total receipts have generally been above $1 million. We design and build specialty capital equipment. If we request to refile for 2015 and 2016, the IRS would owe us money. If we include 2014, it would be a wash. Is it worth trying to refile our 1022S and my 1040 for those years? We still need to request a change for 2017.

By: Cheryl

Cheryl — Thu, 01 Mar 2018 19:48:22 +0000

I’m in the process of filling out the Form 3115 to file with our tax return for 2017. Just can’t figure out which DCN code to use? It’s not our first year in business so I’m thinking it’s code 122. Any insights if this is correct or where to find the correct one?

By: Steve

Steve — Fri, 02 Feb 2018 18:29:38 +0000

In reply to Lydia. You probably can, yes. But it's not really a DIY project. I'd find a local tax accountant to help you check your math and then prepare the 3115 and the associated tax return.

By: Lydia

Lydia — Thu, 01 Feb 2018 21:20:51 +0000

I am a sole-proprietor small travel business. For 2016 filing, I was advised by a CPA to to cash accounting which was ok and did not amount to much in taxes as I was a new company. For 2017, however, I have taken in a large amount and paid as many of the trip bills as could be paid before the end of 2017. However, I have just come to realize that I am paying taxes on money received that is NOT income for me, but merely money “on hold” until it comes due to be paid out in 2018. From what I read above, I should change to accrual method. While others have asked, I must ask again. Can I change the method for the 2017 return so I don’t have to pay taxes on all of this money received, simply by completing the form 3115 and submitting it along with the return? OR, is it too late to fix this for 2017?

By: Steve

Steve — Wed, 24 Jan 2018 16:42:39 +0000

In reply to Laurie.

If you’re a cash basis taxpayer, the cash you received in 2017 gets taxed in 2017.

Note: Your customer if a cash basis tax payer probably got to deduct payment as expense in 2017…

By: Laurie

Laurie — Wed, 24 Jan 2018 15:59:34 +0000

Am cash basis sole proprietor who received a sizable deposit at end of 2017 for work to be done in Spring 2018. Is the deposit taxable income in 2017 or 2018? All expenses related to the deposit will not be incurred until 2018.

By: Steve

Steve — Fri, 01 Dec 2017 23:34:31 +0000

In reply to John.

I think C corp should probably be using accrual and for some time. The best answer I’m going to be comfortable giving you at a blog is, you want someone who’s really comfortable with rules for making accounting method changes to help you make this change in a way that dials down costs and risks.

Sorry I can’t do better than that here…

By: John

John — Fri, 01 Dec 2017 23:26:28 +0000

Steve,
A C corporation with annual gross receipts over $5 million dollars for tax years 2011 through 2016 has filed their tax returns on a cash basis. The $5 million dollar average gross receipts may have been exceeded prior to the 2011 tax year. I need to request the prior year returns from the corporation. The returns should have been filed on an accrual basis. Should Form 3115 be filed for the 2017 return? Should the 2016 or prior returns be amended?