TAX PLANNING
The US tax system has a number of specific features. Namely, at the beginning of the company's work, it is important to decide which accounting method you will use. There are two methods: cash-basis accounting method and accrual accounting method. What are their differences and what are the advantages and disadvantages?
The difference between the cash-basis accounting method and the accrual accounting method is temporary. That is, it depends on the time when you recognize a particular income or expense. For example, using the cash method, you recognize income and expense at the moment, when money is credited to a bank account or debited. Bank statements are mainly used for accounting. If you take into account income or expense at the time of receipt or invoicing, then - this is the accrual accounting method. That is, you can make a sale, but the money is not credited to the account immediately, or you have received an invoice, accepted it for accounting, but the payment is made in stages.
ACCRUAL METHOD
PROS:
1. You have a more accurate picture of the real state of affairs in the company.
2. It is easier to get long-term business financing.
CONS:
1. This is more paperwork, since you will need to take into account not only account statements, but also invoices.
2. It may also turn out that you have not received the actual income yet, but you have taken it into account, and then, you will have to pay tax. But you can ask for a refund in the next tax period.
CASH METHOD
PROS:
1. Ease of use.
2. You always see how much money you have in your account.
3. It is suitable for businesses with small turnovers.
CONS:
1 This is not a completely accurate method of accounting, since the business may look profitable if you have not yet paid part of your bills.
TAX PLANNING PROCESS
1 step
Conducting an initial consultation
2 step
Data processing
3 step
Definition of a tax optimization strategy
Well done!
IMPORTANT TO REMEMBER
A simple transition from one accounting method to another is possible only in the first 2 years of reporting. Starting from the third year, if you decide to change the accounting method, the accountant must submit several complex forms to the tax office, and wait for a response for more than 60 days. The tax service has the right to refuse to change the accounting method if it considers the reasons for the change unconvincing or insufficient. If you have not yet decided which accounting method your company will use, or have already realized that you have chosen the wrong one and want to change it, then the specialists of our company will help you with a solution to a request of any complexity.
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