20180723-aicpa-small-tp-accounting-methods.pdf

6 taxpayers able to use the cash method of accounting

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6 taxpayers able to use the cash method of accounting under the TCJA is significantly larger than those taxpayers that qualified to use the cash method under either of the revenue procedures. Therefore, a new automatic accounting method change will reduce the compliance burdens for small business taxpayers. 2) Section 263A Under section 12.01 of Rev. Proc. 2018-31, only small resellers (i.e., taxpayers that engage in the resale of inventory and have less than $10 million of average annual gross receipts) may file an automatic accounting method change to change to a non-UNICAP inventory capitalization method. Adding the UNICAP accounting method change as a new automatic accounting method change will reduce the compliance burden for small business taxpayers. 3) Section 471 Section 22.03 of Rev. Proc. 2018-31 allows taxpayers that meet the requirements of Rev. Proc. 2001-10 or Rev. Proc. 2002-28 to file an automatic accounting method change to treat inventoriable items in the same manner as non- incidental materials and supplies. Adding a new section 471 automatic accounting method change for taxpayers that meet the $25 million gross receipts test, to change from any method of accounting for inventories to treating such amounts as either non- incidental materials or supplies or conforming to financial statement treatment (or the accounting procedures per the books and records if the taxpayer has no applicable financial statement), will reduce the compliance burden for small business taxpayers. 4) Section 460 Currently, all section 460 changes are non-automatic. Adding a new section 460 automatic accounting method change (on a cut-off basis) for taxpayers that meet the $25 million gross receipts test to no longer use the PCM will reduce the compliance burden for small business taxpayers. Section 446(e) and the regulations thereunder require a taxpayer to secure the consent of the Secretary of the Treasury before changing its method of accounting. Generally, a taxpayer must file a Form 3115 to obtain the IRS’s consent. Revenue Proc. 2015 -13 provides the procedural rules for making accounting method changes, both automatic and non-automatic. Automatic accounting method changes are typically less administratively burdensome to implement as compared to non-automatic accounting method changes and, unlike non- automatic accounting method changes, do not require a filing fee. The eligibility rules under section 5.01(1) of Rev. Proc. 2015-13 list several conditions that generally preclude taxpayers from making an automatic accounting method change (including, for instance, if the year of change is the final year of the trade or business or if the taxpayer has made or requested a change for the same item during any of the five taxable years ending with the year of change). An eligibility waiver will permit taxpayers to comply with simplified provisions in the TCJA without the requirement of having to file a non-automatic accounting method change. The IRS provided a similar waiver to assist taxpayers in complying with the substantial new rules under the tangible property regulations issued in 2013 and 2014.
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  • Summer '17
  • Michael Hart
  • Taxation in the United States, small business taxpayers

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