The cash method of accounting likely is nearing an end for top producers, making way for the accrual method, The Farm CPA Paul Neiffer says.
"I think if Congress is serious and the president is serious about getting the top corporate tax rate—and supposedly we have the highest corporate rate in the whole world—if they’re serious about getting the top rate down to 28% or possibly 25%, farmers will lose the cash method of accounting," Neiffer said during the 2014 Top Producer Seminar. "I don’t think there’s any other way that they can raise enough revenues along with other provisions. So if the farmers don’t want that to happen, they going to need to talk with their congressman, talk with their senator."
What remains to be seen is how the final rules would read. While the House version says sole proprietors could have unlimited revenues and keep the cash method, Neiffer explains, the Senate version says producers going over $10 million on a three-year average of revenues would have to switch to the accrual method.
"People say, ‘Well, I’ll just go out and create another entity, maybe with my kids or maybe with my parents,’" Neiffer cautions. "There’s what’s called aggregation rules, which means if you’re related either brother-sister, parents-grandparents, you have to add all those companies together and if they collectively go over $10 million, all of them have to switch to the accrual method."
Click the play button below for Neiffer’s complete analysis of accounting methods and tax-code changes from the 2014 Top Producer Seminar:
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