AICPA recommends changes in accounting for small-biz taxpayers

The American Institute of CPAs has sent a set of recommendations to the Internal Revenue Service about accounting methods for small-business taxpayers and how to determine whether a taxpayer qualifies as a small business.

The comments come in response to the IRS’s request in Rev. Proc. 2018-40. The revenue procedure noted that the Tax Cuts and Jobs Act expanded the number of small-business taxpayers eligible to use the cash method of accounting. The TCJA defines a small-business taxpayer as a taxpayer with average annual gross receipts in the prior three-year period of $25 million or less. The AICPA acknowledged that the $25 million threshold is a welcome change for many taxpayers, as previous simplifying provisions with respect to certain accounting methods were generally applicable to taxpayers with average annual gross receipts of $1 million, $5 million or $10 million or less.

The comments come in response to the IRS’s request in Rev. Proc. 2018-40. The revenue procedure noted that the Tax Cuts and Jobs Act expanded the number of small-business taxpayers eligible to use the cash method of accounting. The TCJA defines a small-business taxpayer as a taxpayer with average annual gross receipts in the prior three-year period of $25 million or less. The AICPA acknowledged that the $25 million threshold is a welcome change for many taxpayers, as previous simplifying provisions with respect to certain accounting methods were generally applicable to taxpayers with average annual gross receipts of $1 million, $5 million or $10 million or less.