cash - Linkenheimer LLP CPAs & Advisors

What’s the Best Accounting Method Route for Business Tax Purposes?

Businesses basically have two accounting methods to figure their taxable income: cash and accrual. Many businesses have a choice of which method to use for tax purposes. The cash method often provides significant tax benefits for eligible businesses, though some may be better off using the accrual method. Thus, it may be prudent for your business to evaluate its method to ensure that it’s the most advantageous approach.

Eligibility to use the cash method

“Small businesses,” as defined by the tax code, are generally eligible to use either cash or accrual accounting for tax purposes. (Some businesses may also be eligible to use various hybrid approaches.) Before the Tax Cuts and Jobs Act (TCJA) took effect, the gross receipts threshold for classification as a small business varied from $1 million to $10 million depending on how a business was structured, its industry and factors involving inventory.

The TCJA simplified the small business definition by establishing a single gross receipts threshold. It also increased the threshold to $25 million (adjusted for inflation), expanding the benefits of small business status to more companies. For 2024, a small business is one whose average annual gross receipts for the three-year period ending […]

By Linkenheimer LLP|2024-02-14T17:04:53+00:00February 14th, 2024|accounting, business, cash, tax basis|0 Comments

Approach Turnaround Acquisitions with Due Care

Economic changes wrought by the COVID-19 pandemic, along with other factors, drove historic global mergers and acquisitions (M&A) activity in 2021. Experts expect 2022 to be another busy year for dealmaking.

In many cases, M&A opportunities arise when a business adversely affected by economic circumstances decides that getting acquired by another company is the optimal — or only — way to remain viable. If you get the chance to acquire a distressed business, you might indeed be able to expand your company’s operational scope and grow its bottom line. But you’ll need to take due care before closing the deal.

Looking at the long term

Although so-called “turnaround acquisitions” can yield substantial long-term rewards, acquiring a troubled target can also pose greater risks than buying a financially sound business. The keys are choosing a company with fixable problems and having a detailed plan to address them.

Look for a business with hidden value, such as untapped market opportunities, poor leadership or excessive costs. Also consider cost-saving or revenue-building synergies with other companies that you already own. Assess whether the return on investment will likely exceed the acquisition’s immediate costs and ongoing risks.

Doing your homework

Successful turnaround acquisitions […]

By Linkenheimer LLP|2022-02-09T19:17:18+00:00February 9th, 2022|cash, M&A, tax planning|0 Comments

Large Cash Transactions with Your Business Must Be Reported to the IRS

If your business receives large amounts of cash or cash equivalents, you may be required to report these transactions to the IRS.

What are the requirements?

Each person who, in the course of operating a trade or business, receives more than $10,000 in cash in one transaction (or two or more related transactions), must file Form 8300. What is considered a “related transaction?” Any transactions conducted in a 24-hour period. Transactions can also be considered related even if they occur over a period of more than 24 hours if the recipient knows, or has reason to know, that each transaction is one of a series of connected transactions.

To complete a Form 8300, you’ll need personal information about the person making the cash payment, including a Social Security or taxpayer identification number.

Why does the government require reporting?

Although many cash transactions are legitimate, the IRS explains that “information […]

By Linkenheimer LLP|2021-08-16T18:18:26+00:00August 16th, 2021|business, cash, small business|0 Comments