Here is the info from the IRS:https://www.irs.gov/publications/p538/ar02.html#en_US_201212_publink1000270602Excluded EntitiesThe following entities cannot use the cash method, including any combination of methods that includes the cash method. (See Special rules
for farming businesses, later.)A corporation (other than an S corporation) with average annual gross receipts exceeding $5 million. See Gross receipts test, below.A partnership
with a corporation (other than an S corporation) as a partner, and with the partnership having average annual gross receipts exceeding $5 million. See Gross receipts test, below.A tax shelter. ExceptionsThe following entities are not prohibited from using the cash method of accounting.Any corporation or partnership, other than a tax shelter, that meets the gross receipts test for all tax years
after 1985.A qualified personal
service corporation (PSC). Gross receipts test. A corporation or partnership, other than a tax shelter, that meets the gross receipts test can generally use the cash method. A corporation or a partnership meets the test if, for each prior tax year beginning after 1985, its average annual gross receipts are $5 million or less. An entity's average annual gross receipts for a prior tax year is determined by:Adding the gross receipts for that tax year and the 2 preceding tax years; andDividing the total by 3.See Gross receipts test for qualifying taxpayers, for more information. Generally, a partnership applies the test at the partnership level. Gross receipts for a short tax year are annualized.