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Small Businesses Get Automatic Consent for Accounting Method Change

The IRS will now automatically provide consent to small business taxpayer’s application to change to the cash method of accounting.

What do the automatic consent changes include?

  • a change to the cash method of accounting
  • an end to UNICAP for certain costs – this includes self-constructed assets
  • certain changes to inventory items
  • a change from the percentage-of-completion method for long-term construction contracts
  • an end to UNICAP for home construction contracts

Who is considered a small business taxpayer?

Small business taxpayers are generally taxpayers with average annual gross earnings of $25 million or less in the prior three-year period.

When is this change effective?

The change generally applies to tax year beginning after 12/31/17. An exception is available for a fiscal year filer whose 2017 return may include exempt long-term contracts entered into after 12/31/17.

August 29, 2018