3115 - accrual basis to cash basis

[Hoosier]

Got a client who is an engineer and files an 1120S. His revenues are around $100k per year. His prior accountant set him up on accrual basis. I would like to change him over to cash basis.

I'm working on a 3115 to make the change. It looks like I can include this form with his 2016 1120S e-file to make an automatic change. Looks like I only need to fill out Part 1 and select DCN 32.

Is there any reason IRS would not approve this change of method? Is it acceptable to make the election in 2017 for tax year 2016 or should the change be made prior to the year in question?

[TAXNJ]

(Ref. TTB 8-23). Have you looked at: Revenue Procedure 2016-29 provides detailed information about automatic changes in accounting methods.

[kathyc2]

I would like to change him over to cash basis.

Maybe it's just awkward wording in your post, but this is a decision for the client to make, not the preparer.

[Roland Slugg]

It would appear that you have not read the instructions for F-3115, because everything you asked and all the assumptions you made ... some of which are incorrect ... are very clearly explained in those instructions.

A overall change in accounting method is definitely not a decision to be taken lightly or made frivolously, and absolutely not w/o the taxpayer's understanding and approval. Furthermore, a change to the overall cash method may violate a requirement in the corporation's charter or by-laws that specifies the use of the accrual method. The previous accountant and the shareholder may have had very good reasons to select the accrual method, and that choice should not be overridden just because you happen to prefer the cash method. (I realize you didn't say that was your motivation, but if it is, I suggest you set it aside.)

Maybe it's just awkward wording in your post ...

There is other awkward wording in the OP, mixing up the client, the engineer, and the corporation several times.

[claud46]

You haven't stated the WHY this S-Corp SHOULD be "Cash-Basis"
Not ALL business activities are ALLOWED to be Cash Basis

It should never be chosen on just One Years' A/R and A/P, if that is your motivation

AND yes, this is NOT your choice to make!

There are MANY, MANY "business" reasons for choosing what Accounting Methods will be USED by the Corp
Only ONE of them is Tax!!

Everyone preparing a tax return, for a fee, for the public MUST be required to PASS the IRS EA Exam!
You don't have to then be licensed as an EA, but MUST had demonstrated you knowledge to the IRS
to be ALLOWED to prepare tax returns. If you wanted to cut peoples hair you would have to be LICENSED

[Roland Slugg]

Hey, claud46, I don't know about others on this Board, but I am sick to death of your content-free posts ragging on tax preparers who have not taken and passed the IRS's EA exam and comparing them to people who cut hair. Make that HAIR. You add nothing to this Board, help no one, complain constantly and repeat yourself ad nauseam ... to name a few of your obnoxious traits. Your posts are full of typos and grammatical mistakes, suggesting that you don't bother to proofread them ... or perhaps you just don't know basic English grammar and spelling.

Oh, FYI, I have never taken or passed the IRS's EA exam. Do you think I should be prohibited from preparing tax returns for others for a fee?

[TaxGuyBill]

+1

....................

[claud46]

yes I do, and so does the IRS

The exam statement is posted to a post where even others comment as to "Should THIS person Really be allowed to prepare someone else tax returns?

This person posted about CHANGING his clients method of accounting.
It was HE/SHE thinks is should be cash basis, not that the client/taxpayer thinks that way.
But that takes Knowledge of Law for this company AND Accounting Methods!

Provided NO details as to WHY, yet asks only is this what I do on the IMPORTANT 3115

And thank you for outing yourself on a message board that
1) is comprised mainly of EA's & CPA's
2) That TTB says membership IS for Professionals
3) In your PRIDE in not being one

[taxmom34]

I agree with Mr. Slugg, well said Roland.

[TaxGuyBill]

There are 695,464 PTIN holders. Of that, only 52,728 are Enrolled Agents, and only 207,898 are CPAs.

The IRS has authorized 354,491 non-certified people (51% of total PTIN holders) to be tax professionals.

https://www.irs.gov/tax-professionals/return-preparer-office-federal-tax-return-preparer-statistics