(Archived Content)
Today the Treasury Department announced that more small businesses will be able to use the cash method of accounting. Revenue Procedure 2002-28 finalizes the previously announced guidelines to allow certain taxpayers with average annual gross receipts of $10 million or less to use the cash method if they meet certain requirements.
On March 19, 2002, President Bush called on Treasury to finalize these rules in short order when he unveiled his Plan for Small Businesses.
This is great news for small business taxpayers, stated Mark Weinberger, Treasury Assistant Secretary for Tax Policy. We are simplifying the bookkeeping requirements for small businesses. These rules will save small businesses time and money and will reduce controversy with the IRS.
Generally, under the cash method, a business reports income and deducts expenses when the related payments occur. Under an accrual method, a business generally reports income when it has a right to receive payment and deducts expenses when it has a fixed and determinable liability for them.
These rules will be most beneficial to service providers that also sell related products or provide goods incident to the performance of services.