Have a Tax Question? Ask a Tax Expert
Welcome and thank you for giving me the opportunity to assist you with your tax question.
Please let me know what your question is.
how to calculate 481(a) adjustment for accrued vacation, changed from 2.5 month rule, to cash:
amount accrued 12.31.11 = (20,000)
amount paid by 3.15.12 = 15,000
amount accrued 12.31.12 = (25,000)
what is the 481(a) adjustment? and what is my book-tax difference amount?
I will opt out and let another expert with more expertise than I in this area assist you. You do not need to reply to me as this will delay another expert answering your question.
One follow-up question: if now we are a cash basis, the ending accrued vacation as of 12/31/12 was ($25,000), my cumulative temporary difference should be $25,000, right? How can I reconcile if the current year book-tax difference is an unfavorable $5,000? Shouldn't my current book-tax difference be $20,000 unfavorable?
Thanks for your response. My original question about "cash basis" may not be correct. We changed our method for 2012 tax return, because we found out that our vacation policy only allows vesting when the employees are employed at the end of the year. We failed the all-event test. So we cannot deduct the amount received by the employees by the 15th of the 3rd calendar month after the end of tax year. Books and records are on accrual basis.
Thank you so much! You have been very helpful.