J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

CHAPTER 2

Tax Year and Accounting Methods

Alert

At the time this book was printed, Congress had not extended numerous breaks for 2012 that had expired at the end of 2011. Check the online supplement in February 2013 at www.jklasser.com or www.barbaraweltman.com to see whether these breaks apply for 2012 returns.

Once you select your form of business organization, you must decide how you will report your income. There are 2 key decisions you must make: What is the time frame for calculating your income and deductions (called the tax year or accounting period), and what are the rules that you will follow to calculate your income and deductions (called the accounting method). In some cases, as you will see, your form of business organization restricts you to an accounting period or accounting method. In other cases, however, you can choose which method is best for your business.

In this chapter you will learn about:

• Accounting periods
• Accounting methods
• Uniform capitalization rules

For a further discussion on tax years and accounting methods, see IRS Publication 538, Accounting Periods and Methods. Inventory rules are discussed in Chapter 4.