How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Christopher Phelps Your Own Question
Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
84937
Type Your Tax Question Here...
Christopher Phelps is online now
A new question is answered every 9 seconds

LLC accounting

Customer Question

is an LLC required by tax law to use the cash accounting method, or can it use the accrual method
Submitted: 11 years ago.
Category: Tax
Expert:  Christopher Phelps replied 11 years ago.

You may elect the cash or accrual method of acoc**ting for bookkeping purposes, whichever you deem appropriate.  You make the election by adopting the method of accounting in keeping your books and reporting in that manner on your first tax/information return.


Just remember, once you adopt a method of accounting you may not change it without the consent of the IRS.  

 
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience: CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
Christopher Phelps and 3 other Tax Specialists are ready to help you
Customer: replied 11 years ago.
Reply to Christopher Phelps's Post: Christopher,
which is form is used to request to change from cash to accrual from the IRS. The biggest probelm we have is as follows, I will pay another $20 for the answer....
we have a vacation rental business, it is currently on a cash basis, LLC, when a customer makes a reservation they sign a contract and pay 50% on that day. teh reservation may not be for months in the future. i beleive we would be better in the long run for reporting and cash flow projections to record the entire sale at the day the contract was signed and show teh balance as a receivable. we would pay the GE/TAT taxes in full the month teh contract was signed..do you agree with this, or is the sale not official until the guest actually stay in the place?
Customer: replied 11 years ago.
which is form is used to request to change from cash to accrual from the IRS. The biggest probelm we have is as follows, I will pay another $20 for the answer....
we have a vacation rental business, it is currently on a cash basis, LLC, when a customer makes a reservation they sign a contract and pay 50% on that day. teh reservation may not be for months in the future. i beleive we would be better in the long run for reporting and cash flow projections to record the entire sale at the day the contract was signed and show teh balance as a receivable. we would pay the GE/TAT taxes in full the month teh contract was signed..do you agree with this, or is the sale not official until the guest actually stay in the place?
Expert:  Christopher Phelps replied 11 years ago.

Use form 3115, Application for Change in Accounting Method, to request a change to the accrual basis overall method of accounting.  The change should be accomplished via the Automatic Change Request procedures and will be effective for the tax year in which the request (i.e. Form 3115) is filed.


When an accounting method is changed, §481(a) provides that you must make an adjustment to take into account all adjustments necessary to prevent items from being duplicated or omitted.   Duplicated or omitted items of income and expense are referred to as "adjustments" and include accounts receivable, accounts payable, inventories, and other items.  Whether the change involves a single material item or a change in the taxpayer's overall method of computing income, the adjustment includes all affected items as of the beginning of the year of change.  Depending on the nature of your Company's specific accounting issues, the net amount of the adjustment may be either positive (i.e., increase taxable income) or negative (i.e., decrease taxable income). 


In this case where you are changing the overall method of accounting, the net §481(a) adjustment is computed by taking into account all adjustments that affect income and expense accounts. Care should be taken to eliminate items such as installment payments due on equipment purchases, loans to employees, and, in certain cases, advance payments, which do not affect the computation of taxable income.


Generally, the Sec. 481 adjustment, whether positive or negative, will be required to be takeninto account over a four year period.  The IRS does have the discretion to change that requirement and may do so on its own initiative or at your request.


I recommend you consider employing a CPA or other qualified professional to accomplish this task.  There are many technical issues and the accounting to calculate the 481 adjustment can be complex.  If you do decide to complete it yourself, please carefully read the instructions to the form.

 

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Previous | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    577
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    577
    10 years experience
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    1245
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3882
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg Robin D.'s Avatar

    Robin D.

    Senior Tax Advisor 4

    Satisfied Customers:

    11072
    15years with H & R Block. Divisional leader, Instructor
  • http://ww2.justanswer.com/uploads/YI/yirtual/2015-3-12_43754_egan.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    8621
    Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2884
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/FA/fastfile/2011-12-15_23139_Klein2011small.64x64.jpg R. Klein, EA's Avatar

    R. Klein, EA

    Enrolled Agent

    Satisfied Customers:

    1837
    Over 20 Years experience