As A Cash Basis Taxpayer, Income Is Recognized When Collected And Expenses, When Paid.

As An Accrual Basis Taxpayer, Income Is Recognized When Earned And Expenses, When Incurred.

The Decision Of Accounting Basis Is Important As It Will Affect The Business Tax Return Throughout The Life Of The Business.

In Addition, Certain Businesses Because Of Revenue Size Or Inventories Must Prepare Their Returns Based Upon The Accrual Method.

Other Decisions Often Affecting First Year Business Returns Include Depreciation Method, Home Office Deduction, Auto Expenses, Non-Employee Compensation, And Self-Employment Tax. These Items May Require Research Or The Assistance Of A Professional.