Proposed tax code changes will benefit practice owners
The AVMA is supporting changes to the tax code that will allow certain small businesses with gross receipts of up to $10 million to use the cash method of accounting for their income and expenses. Proposed by the Internal Revenue Service in December, the rules are expected to benefit service businesses, such as veterinary practices, that also sell related products. Although the IRS is accepting comments on the proposal, taxpayers are allowed to rely on the proposed rules as early as the 2001 tax year. Under the cash method, a business usually reports income and deducts expenses when the related payments are made. The accrual method generally allows a business to report income when it has a right to receive payment and to deduct expenses when it has a fixed and determinable liability for them. Previous IRS guidance issued in 2000 had allowed cash accounting only for businesses with up to $1 million in gross receipts. Prior to the Dec. 10 announcement, the AVMA had been working on legislation that would have raised the cap to $5 million. Veterinarians who are practice owners will benefit from the proposal (Notice 2001-76), published on page 13 of the Dec. 26 IRS Bulletin, available at http://ftp.fedworld.gov/pub/irs-irbs/irb01-52.pdf. The proposed rules do not apply to certain businesses that the tax law requires to use an accrual method, however. For example, corporations and partnerships with corporate partners generally must use an accrual method if their gross receipts are more than $5 million. The AVMA is in the process of responding to the proposed rules, and is encouraging veterinarians to write the IRS in support, as well. Comments should be submitted by March 1, 2002, either to Internal Revenue Service, P.O. Box 7604 Ben Franklin Station, Washington, DC 20044, Attn: CC:PA:T:CRU (ITA) Room 5529, or via e-mail at Notice [dot] Comments | |
