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Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1607
Experience:  Certified Public Accountant
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I have a pediatric health S Corp client that I have been

Customer Question

I have a pediatric health S Corp client that I have been reporting until 2015 using the cash basis of accounting. When I add 2015+2014+2013 gross receipts and take an average of those 3 years, they will have gross receipts greater than 10 million. Do I have to convert the S Corp from cash basis to accrual basis for 2016 tax reporting even though its a health care type company? Also, would the answer change because of the fact that there are multiple locations that are set up as LLCs that are all consolidated under one tax id for tax purposes?
Submitted: 1 month ago.
Category: Tax
Expert:  Mark Taylor replied 1 month ago.

Hi, my name is Mark. I will be happy to help you with your questions. Please give me a moment to prepare your response.

Expert:  Mark Taylor replied 1 month ago.

One of the exceptions to the 10 million threshold is if the corporation is considered a qualified personal service corporation. You mentioned that this is a health care company.

To be a "personal service corporation" you must pass two tests:

1. Substantially all of the stock must be owned by employees, and

2. 95% of employees time must be spent on performing personal services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts or consulting.

Customer: replied 1 month ago.
Well its an Subchapter S corporation not a C corporation. Does that matter?
Expert:  Mark Taylor replied 1 month ago.

You can still be a S-Corporation.

Expert:  Mark Taylor replied 1 month ago.

If is was a C-Corporation the net income would be taxed at a rate of 35%.

Customer: replied 1 month ago.
Is there anything you can send me or show me where it states the exception. Thanks
Expert:  Mark Taylor replied 1 month ago.

It is addressed in https://www.law.cornell.edu/uscode/text/26/448 (IRC 448 (b)(2))

Expert:  Mark Taylor replied 1 month ago.

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