Just got hit hard, while for year I have used the cash system as most of us do. I learned the accruel may help taxidermist.
Cash yeah a lot of us wait until the end of the year, sure we pay quarterly, but yet its still the cash system.
Bonified Accruel All taxes are done quarterly, profit loss etc. Bad checks, bad clients etc. Can be written off totally including your labor.
Back to cash for a moment only your expenses on the bad debt, can be written off.
Sucks right, on advantage should you be audited the person passing the bad debt. if they are a taxidermist, get hit really hard.
Yep you know who you are, you owe me $6695.00 on those fish. You know your are a thief. Hope to see you on your knees real soon.
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Do you cut your self a check? Or do you have employee's? If no you can not write off labor. With the accruel you will be paying taxes on items that have not been finished or picked up yet. The IRS agent that adudited me said that the accruel is really for big time busines.
Like you said the cash system seems to fit most. In closing I would look into this farther...get a second opinion. Or better yet call the IRS, and from my past mistakes, get it in writing! Good luck
Let me preface this by saying that I am not a taxi although I am getting ready to mount my first squirrel. I have, however, been an accountant for a while so I can maybe help in this area.
You are correct in that you are able to write off your lost labor in the accrual system as a business loss. However, Frank is right in that you will be paying taxes on work completed whether or not you get the money from the client.
Accrual takes into account the work as it is accepted rather than as it is completed. It is a reflection of the assets on hand whether they have been payed for or not. So, if you have 15 mounts complete and laying there waiting for customers to pick up, you pay taxes on them. If five of them do not pick them up, you may write off that amount but it usually is not reflected until the next year.
Also, accrual is alot more work to keep up with than a cash basis. One has to record everything as it is ordered or as it is taken in and records require alot more attention than they do on a cash basis. Typically, if you have alot of volume every year, it would be better to be on an accrual basis but it will take a part time bookkeeper to get it done for you because you will spend more time doing the books than it saves you in taxes from staying with the cash basis.