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Accounting Methods, Periods, and Elections

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​Every taxpayer must determine taxable income for an annual accounting period called a tax year. The calendar year is the most common tax year. Each taxpayer must use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and the accrual method. Under the cash method, you generally report income in the tax year you receive it, and deduct expenses in the tax year in which you pay the expenses. Under the accrual method, you generally report income in the tax year you earn it, regardless of when payment is received. You deduct expenses in the tax year you incur them, regardless of when payment is made. We can explain the rules for accounting periods and accounting methods and what elections are available to you that may be beneficial for your business.

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Elisa Fay

CPA

Partner-in-Charge Rödl National Tax

+1 404 525 2600

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