State tax payable for Modified cash basis

[jmc]

1) Can Modified cash basis taxpayers show "State tax payable" or "Payroll taxes payable" on Form 1120(S) balance sheet and deduct related expenses on page 1?

2) Should Modified cash/Tax basis taxpayers mark "Cash" or "Other" then specify for Method of Accounting on tax returns? If they need to change it to "Other", is it considered to be a Change in Accounting Method?

[sandysea]

P/R tax payable...

is a trust fund amount, so yes, they can deduct this (including the employer's portion since it is trust fund)...but not sure about state tax payable. The state tax is determined following the year end when all the totals are tallied up...I would assume this would be a strictly cash basis transaction.

Modified cash basis is just cash basis..modified by allowing the accruals of p/r taxes and ccd payables.....no change in accounting method required unless they were accrual before

[jmc]

Thank you for your post.

I was not clear on the rationale.