Tax reform provides an opportunity for simplification and tax relief for "small" businesses. Under the Act, a small business is defined as a taxpayer with average gross receipts during the previous three tax years of $25,000,000 or less. The $25,000,000 limit will be indexed for years after 2018. So what are qualifying taxpayers eligible for?
Under the new rules, the $10,000,000 threshold above is raised to $25,000,000, thus possibly allowing more small contractors to defer income until the completion of the contract by utilizing the completed contract method of accounting.
Generally these new rules are favorable to taxpayers allowing for simplification and deferral of taxable income. However, adoption of any of these changes is a change in method of accounting for tax purposes and requires a Form 3115 to be filed with your tax return in the year of change. For more information on this topic contact us in one of our many locations.