cash basis or accrual

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Subject Author Date cash basis or accrual MARTIN 09-25-2007  Re: cash basis or accrual Benjamin Yazersky CPA 09-27-2007  Re: cash basis or accrual Harlan Lunsford 09-28-2007  Re: cash basis or accrual Mark Bole 09-27-2007  Re: cash basis or accrual Drew Edmundson 09-28-2007
Posted by MARTIN on September 25, 2007, 11:40 pm Please log in for more thread options I own a small automobile finance company and have to file tax returns for the current year. Someone told me I can use the cash basis in reporting the income and someone else stated I must be on the accrual basis, which is correct. We loan money out at 15.99 % over a three year period, sometimes we have a large amount of late payments that come in. Should I be accruing the income or should I be a cash basis taxpayer Please help << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Benjamin Yazersky CPA on September 27, 2007, 2:37 am Please log in for more thread options > I own a small automobile finance company and have to file > tax returns for the current year. > > Someone told me I can use the cash basis in reporting the > income and someone else stated I must be on the accrual > basis, which is correct. > > We loan money out at 15.99 % over a three year period, > sometimes we have a large amount of late payments that come > in. Should I be accruing the income or should I be a cash > basis taxpayer > > Please help you should be able to be on the cash basis ___________________________________ <<< Benjamin Yazersky, CPA [NJ & NY] >>> -----> real address on hobokeni or hobokenx <----- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Harlan Lunsford on September 28, 2007, 3:59 pm Please log in for more thread options Benjamin Yazersky CPA wrote: >> I own a small automobile finance company and have to file >> tax returns for the current year. >> >> Someone told me I can use the cash basis in reporting the >> income and someone else stated I must be on the accrual >> basis, which is correct. >> >> We loan money out at 15.99 % over a three year period, >> sometimes we have a large amount of late payments that come >> in. Should I be accruing the income or should I be a cash >> basis taxpayer >> >> Please help > you should be able to be on the cash basis Then how should income be correctly determined without accruing interest earned? ChEAr$, Harlan Lunsford, EA n LA << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Mark Bole on September 27, 2007, 2:37 am Please log in for more thread options MARTIN wrote: > I own a small automobile finance company and have to file > tax returns for the current year. > > Someone told me I can use the cash basis in reporting the > income and someone else stated I must be on the accrual > basis, which is correct. > > We loan money out at 15.99 % over a three year period, > sometimes we have a large amount of late payments that come > in. Should I be accruing the income or should I be a cash > basis taxpayer If you are a sole proprietor, you can choose your accounting method on the first Schedule C you file. To change it later requires jumping through a lot of hoops using IRS Form 3115. Whether one accounting method is better or worse for you depends, it's a good question for your accountant. -Mark Bole << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Drew Edmundson on September 28, 2007, 3:59 pm Please log in for more thread options > I own a small automobile finance company and have to file > tax returns for the current year. > > Someone told me I can use the cash basis in reporting the > income and someone else stated I must be on the accrual > basis, which is correct. > > We loan money out at 15.99 % over a three year period, > sometimes we have a large amount of late payments that come > in. Should I be accruing the income or should I be a cash > basis taxpayer Interest income has special rules. There are the OID rules under Sections 1271 to 1275 which effectively require you to accrue interest income if qualified stated interest is not paid at least annually. There are also the below market interest rate rules under Section 7872 and the other interest rules under 1276 to 1288. However your overall method of accounting may still be cash (assuming you otherwise qualify) but you still have to comply with the special "accrual like" interest rules. -- Drew Edmundson, CPA Cary, NC << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted Accrual Balance Sheet Mixed With Cash Basis Income Statement September 26, 2009, 2:39 am DNI computation and Cash basis December 24, 2009, 12:58 pm Cash in lieu of stock basis? 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