Tax Help Archives  
Pub. 538, Accounting Periods and Methods 2004 Tax Year

Introductory Material

This is archived information that pertains only to the 2004 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Introduction

Each taxpayer (business or individual) must figure taxable income on an annual accounting period called a tax year. The calendar year is the most common tax year. Other tax years are a fiscal year and a short tax year.

Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it, regardless of when payment is received, and deduct expenses in the tax year you incur them, regardless of when payment is made.

This publication explains some of the rules for accounting periods and accounting methods. In many cases, however, you may have to refer to the cited sources for a fuller explanation of the topic. Section references are to the Internal Revenue Code and regulation references are to the Income Tax Regulations.

This publication is not intended as a guide to general business and tax accounting rules.

Comments and suggestions.   We welcome your comments about this publication and your suggestions for future editions.

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Useful Items - You may want to see:

Publication

  • 537 Installment Sales

  • 541 Partnerships

  • 542 Corporations

Form (and Instructions)

  • 1128
    Application To Adopt, Change, or Retain a Tax Year

  • 3115
    Application for Change in Accounting Method

See How To Get Tax Help near the end of this publication for information about getting these publications and forms.

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