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DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 784
Experience:  Years of Experience in Business & Personal Taxes
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I am converting from Cash to Accrual a C Corporation in the

Customer Question

JA: Hello. What seems to be the problem?
Customer: I am converting from Cash to Accrual a C Corporation in the Construction Business due to the sales more thant a $1,000,000
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: I am concern that I will get audited, since the change will reduce the income tax
JA: Is there anything else the Accountant should be aware of?
Customer: Like what?
JA: OK. Got it. I'm sending you to a secure page on JustAnswer so you can place the $5 fully-refundable deposit now. While you're filling out that form, I'll tell the Accountant about your situation and then connect you two.
Submitted: 4 months ago.
Category: Tax
Expert:  DanielleCPA replied 4 months ago.

Welcome and thanks for your question! I am CPA and am here to help you with your tax concerns.

Expert:  DanielleCPA replied 4 months ago.

If you are required to change your accounting method, it is possible that your risk of audit will be slightly increased because of the change. I personally have never seen a client audited for a change in accounting method, especially for an automatic change (change from cash to accrual method is an automatic change).

Expert:  DanielleCPA replied 4 months ago.

However, I would not worry about this if I were you. It is still very unlikely, although still possible, that you will be audited because of the change in the accounting method. Even if you are audited, you have nothing to worry about as long as long as you are doing things right. Being audited is always a hassle, but isn't necessarily a cause for concern.

Expert:  DanielleCPA replied 4 months ago.

Does this answer your question?

Customer: replied 4 months ago.
My concern is that I will postpone for next year $418k in income due to the change and that may trigger the audit.
Customer: replied 4 months ago.
I thing there is a de minimize amount of $50k but due to the sales I got to change to accrual
Customer: replied 4 months ago.
The IRS dcn is 34 on the 3115
Expert:  DanielleCPA replied 4 months ago.

You are required to make the change regardless of the immediate tax effects. I understand that in your case they are favorable to you, which I understand is the cause of your concern. On Form 3115, you will disclose these immediate effects in Schedule A, Part I. Although filing form 3115 may slightly increase your chances for an audit, it is still extremely unlikely that you will audited. As long as you are applying the change correctly, you do not have a cause for concern even if you are audited.

Expert:  DanielleCPA replied 4 months ago.

Hello, I just wanted to check in to see if you had any further questions. If I can be of further assistance, please let me know. If this answered your question, I ask that you please rate the answer as that is the only way us experts get credits for helping you out.

Customer: replied 4 months ago.
Off course thanks for your help.
Expert:  DanielleCPA replied 4 months ago.

You're welcome! I'm glad to be of help to you.