November 01, 2000

 

 Deadline nears for amending 1999 tax return on cash vs accrual methods of accounting

Posted Oct. 15, 2000

On May 15, 2000 the Internal Revenue Service issued Revenue Procedure 2000-22. This procedure exempts taxpayers with average annual gross receipts of $1 million or less from requirements (1) to account for inventories, and (2) to use accrual accounting for purchases and sales of merchandise.

Put another way, it means that businesses with less than $1 million in average annual gross receipts over the previous three years can use cash accounting and, thus, be eligible to use the installment method for selling the business.

This ruling is effective for tax years ending on or after Dec 17, 1999. Therefore, qualified taxpayers wishing to change from the accrual method to the cash method of accounting for the 1999 tax year will need to file an amended 1999 return. The deadline for filing that return is Nov 13, 2000.

Certain procedures must also be followed when a taxpayer's method of accounting is changed. Veterinarians should consult their tax advisers if they wish to change their method of accounting and/or file an amended 1999 return.