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Irs Forms 2009

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Irs Forms 2009

Irs forms 2009 5. Irs forms 2009   Ministers and Church Employees Table of Contents Alternative Limit for Church Employees Changes to Includible Compensation for Most Recent Year of ServiceChanges to Includible Compensation Changes to Years of Service Self-employed ministers and church employees who participate in 403(b) plans generally follow the same rules as other 403(b) plan participants. Irs forms 2009 This means that if you are a self-employed minister or a church employee, your MAC generally is the lesser of: Your limit on annual additions, or Your limit on elective deferrals. Irs forms 2009 For most ministers and church employees, the limit on annual additions is figured without any changes. Irs forms 2009 This means that if you are a minister or church employee, your limit on annual additions generally is the lesser of: $51,000 for 2013 and $52,000 for 2014, or Your includible compensation for your most recent year of service. Irs forms 2009 Although, in general, the same limit applies, church employees can choose an alternative limit and there are changes in how church employees, foreign missionaries, and self-employed ministers figure includible compensation for the most recent year of service. Irs forms 2009 This chapter will explain the alternative limit and the changes. Irs forms 2009 Who is a church employee?   A church employee is anyone who is an employee of a church or a convention or association of churches, including an employee of a tax-exempt organization controlled by or associated with a church or a convention or association of churches. Irs forms 2009 Alternative Limit for Church Employees If you are a church employee, you can choose to use $10,000 a year as your limit on annual additions, even if your annual additions computed under the general rule is less. Irs forms 2009 Total contributions over your lifetime under this choice cannot be more than $40,000. Irs forms 2009 Changes to Includible Compensation for Most Recent Year of Service There are two types of changes in determining includible compensation for the most recent year of service. Irs forms 2009 They are: Changes in how the includible compensation of foreign missionaries and self-employed ministers is figured, and A change to the years that are counted when figuring the most recent year of service for church employees and self-employed ministers. Irs forms 2009 Changes to Includible Compensation Includible compensation is figured differently for foreign missionaries and self-employed ministers. Irs forms 2009 Foreign missionary. Irs forms 2009   If you are a foreign missionary, your includible compensation includes foreign earned income that may otherwise be excludable from your gross income under section 911. Irs forms 2009   If you are a foreign missionary, and your adjusted gross income is $17,000 or less, contributions to your 403(b) account will not be treated as exceeding the limit on annual additions if the contributions are not in excess of $3,000. Irs forms 2009   You are a foreign missionary if you are either a layperson or a duly ordained, commissioned, or licensed minister of a church and you meet both of the following requirements. Irs forms 2009 You are an employee of a church or convention or association of churches. Irs forms 2009 You are performing services for the church outside the United States. Irs forms 2009 Self-employed minister. Irs forms 2009   If you are a self-employed minister, you are treated as an employee of a tax-exempt organization that is a qualified employer. Irs forms 2009 Your includible compensation is your net earnings from your ministry minus the contributions made to the retirement plan on your behalf and the deductible portion of your self-employment tax. Irs forms 2009 Changes to Years of Service Generally, only service with the employer who maintains your 403(b) account can be counted when figuring your limit on annual additions. Irs forms 2009 Church employees. Irs forms 2009   If you are a church employee, treat all of your years of service as an employee of a church or a convention or association of churches as years of service with one employer. Irs forms 2009 Self-employed minister. Irs forms 2009   If you are a self-employed minister, your years of service include full and part years during which you were self-employed. Irs forms 2009 Prev  Up  Next   Home   More Online Publications
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The Irs Forms 2009

Irs forms 2009 2. Irs forms 2009   Accounting Methods Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Accounting MethodsCash Method Accrual Method Farm Inventory Cash Versus Accrual Method Special Methods of Accounting Combination Method Changes in Methods of Accounting Introduction You must use an accounting method that clearly shows your income and expenses. Irs forms 2009 You must also figure your taxable income and file an income tax return for an annual accounting period called a tax year. Irs forms 2009 This chapter discusses accounting methods. Irs forms 2009 For information on accounting periods, see Publication 538, Accounting Periods and Methods, and the Instructions for Form 1128, Application To Adopt, Change, or Retain a Tax Year. Irs forms 2009 Topics - This chapter discusses: Cash method Accrual method Farm inventory Special methods of accounting Changes in methods of accounting Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 535 Business Expenses Form (and Instructions) 1128 Application To Adopt, Change, or Retain a Tax Year 3115 Application for Change in Accounting Method See chapter 16 for information about getting publications and forms. Irs forms 2009 Accounting Methods An accounting method is a set of rules used to determine when and how your income and expenses are reported on your tax return. Irs forms 2009 Your accounting method includes not only your overall method of accounting, but also the accounting treatment you use for any material item. Irs forms 2009 A material item is one that affects the proper time for inclusion of income or allowance of a deduction. Irs forms 2009 An item considered material for financial statement purposes is generally also considered material for income tax purposes. Irs forms 2009 See Publication 538 for more information. Irs forms 2009 You generally choose an accounting method for your farm business when you file your first income tax return that includes a Schedule F (Form 1040), Profit or Loss From Farming. Irs forms 2009 If you later want to change your accounting method, you generally must get IRS approval. Irs forms 2009 How to obtain IRS approval is discussed later under Changes in Methods of Accounting . Irs forms 2009 Types of accounting methods. Irs forms 2009   Generally, you can use any of the following accounting methods. Irs forms 2009 Each method is discussed in detail below. Irs forms 2009 Cash method. Irs forms 2009 Accrual method. Irs forms 2009 Special methods of accounting for certain items of income and expenses. Irs forms 2009 Combination (hybrid) method using elements of two or more of the above. Irs forms 2009 Business and other items. Irs forms 2009   You can account for business and personal items using different accounting methods. Irs forms 2009 For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. Irs forms 2009 Two or more businesses. Irs forms 2009   If you operate two or more separate and distinct businesses, you can use a different accounting method for each business. Irs forms 2009 Generally, no business is separate and distinct unless a complete and separate set of books and records is maintained for each business. Irs forms 2009 Cash Method Most farmers use the cash method because they find it easier to keep records using the cash method. Irs forms 2009 However, certain farm corporations and partnerships and all tax shelters must use an accrual method of accounting. Irs forms 2009 See Accrual Method Required , later. Irs forms 2009 Income Under the cash method, include in your gross income all items of income you actually or constructively received during the tax year. Irs forms 2009 Items of income include money received as well as property or services received. Irs forms 2009 If you receive property or services, you must include the fair market value (FMV) of the property or services in income. Irs forms 2009 See chapter 3 for information on how to report farm income on your income tax return. Irs forms 2009 Constructive receipt. Irs forms 2009   Income is constructively received when an amount is credited to your account or made available to you without restriction. Irs forms 2009 You do not need to have possession of the income for it to be treated as income for the tax year. Irs forms 2009 If you authorize someone to be your agent and receive income for you, you are considered to have received the income when your agent receives it. Irs forms 2009 Income is not constructively received if your receipt of the income is subject to substantial restrictions or limitations. Irs forms 2009 Direct payments and counter-cyclical payments. Irs forms 2009   If you received direct payments or counter-cyclical payments under Subtitle A or C of the Farm Security and Rural Investment Act of 2002, you will not be considered to have constructively received a payment merely because you had the option to receive it in the year before it is required to be paid. Irs forms 2009 Delaying receipt of income. Irs forms 2009   You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. Irs forms 2009 You must report the income in the year the money or property is received or made available to you without restriction. Irs forms 2009 Example. Irs forms 2009 Frances Jones, a farmer, was entitled to receive a $10,000 payment on a grain contract in December 2013. Irs forms 2009 She was told in December that her payment was available. Irs forms 2009 She requested not to be paid until January 2014. Irs forms 2009 However, she must still include this payment in her 2013 income because it was made available to her in 2013. Irs forms 2009 Debts paid by another person or canceled. Irs forms 2009   If your debts are paid by another person or are canceled by your creditors, you may have to report part or all of this debt relief as income. Irs forms 2009 If you receive income in this way, you constructively receive the income when the debt is canceled or paid. Irs forms 2009 See Cancellation of Debt in chapter 3. Irs forms 2009 Deferred payment contract. Irs forms 2009   If you sell an item under a deferred payment contract that calls for payment in a future year, there is no constructive receipt in the year of sale. Irs forms 2009 However, if the sales contract states that you have the right to the proceeds of the sale from the buyer at any time after delivery of the item, then you must include the sales price in income in the year of the sale, regardless of when you actually receive payment. Irs forms 2009 Example. Irs forms 2009 You are a farmer who uses the cash method and a calendar tax year. Irs forms 2009 You sell grain in December 2013 under a bona fide arm's-length contract that calls for payment in 2014. Irs forms 2009 You include the proceeds from the sale in your 2014 gross income since that is the year payment is received. Irs forms 2009 However, if the contract states that you have the right to the proceeds from the buyer at any time after the grain is delivered, you must include the sales price in your 2013 income, regardless of when you actually receive payment. Irs forms 2009 Repayment of income. Irs forms 2009   If you include an amount in income and in a later year you have to repay all or part of it, then you can usually deduct the repayment in the year repaid. Irs forms 2009 If the repayment is more than $3,000, a special rule applies. Irs forms 2009 For details, see Repayments in chapter 11 of Publication 535, Business Expenses. Irs forms 2009 Expenses Under the cash method, generally you deduct expenses in the tax year you pay them. Irs forms 2009 This includes business expenses for which you contest liability. Irs forms 2009 However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained under Uniform Capitalization Rules in chapter 6. Irs forms 2009 See chapter 4 for information on how to deduct farm business expenses on your income tax return. Irs forms 2009 Prepayment. Irs forms 2009   Generally, you cannot deduct expenses paid in advance. Irs forms 2009 This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Irs forms 2009 Example. Irs forms 2009 On November 1, 2013, you signed and paid $3,600 for a 3-year (36-month) insurance contract for equipment. Irs forms 2009 In 2013, you are allowed to deduct only $200 (2/36 x $3,600) of the cost of the policy that is attributable to 2013. Irs forms 2009 In 2014, you'll be able to deduct $1,200 (12/36 x $3,600); in 2015, you'll be able to deduct $1,200 (12/36 x $3,600); and in 2016 you'll be able to deduct the remaining balance of $1,000. Irs forms 2009 An exception applies if the expense qualifies for the 12-month rule. Irs forms 2009 See Publication 538 for more information and examples. Irs forms 2009 See chapter 4 for special rules for prepaid farm supplies and prepaid livestock feed. Irs forms 2009 Accrual Method Under an accrual method of accounting, you generally report income in the year earned and deduct or capitalize expenses in the year incurred. Irs forms 2009 The purpose of an accrual method of accounting is to correctly match income and expenses. Irs forms 2009 Certain businesses engaged in farming must use an accrual method of accounting for its farm business and for sales and purchases of inventory items. Irs forms 2009 See Accrual Method Required and Farm Inventory , later. Irs forms 2009 Income Generally, you include an amount in income for the tax year in which all events that fix your right to receive the income have occurred, and you can determine the amount with reasonable accuracy. Irs forms 2009 Under this rule, include an amount in income on the earliest of the following dates. Irs forms 2009 When you receive payment. Irs forms 2009 When the income amount is due to you. Irs forms 2009 When you earn the income. Irs forms 2009 When title passes. Irs forms 2009 If you use an accrual method of accounting, complete Part III of Schedule F (Form 1040) to report your income. Irs forms 2009 Inventory. Irs forms 2009   If you keep an inventory, generally you must use an accrual method of accounting to determine your gross income. Irs forms 2009 An inventory is necessary to clearly show income when the production, purchase, or sale of merchandise is an income-producing factor. Irs forms 2009 See Publication 538 for more information. Irs forms 2009 Also see Farm Inventory , later, for more information on items that must be included in inventory by farmers and inventory valuation methods for farmers. Irs forms 2009 Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both of the following apply. Irs forms 2009 The all-events test has been met. Irs forms 2009 This test is met when: All events have occurred that fix the fact that you have a liability, and The amount of the liability can be determined with reasonable accuracy. Irs forms 2009 Economic performance has occurred. Irs forms 2009 Economic performance. Irs forms 2009   Generally, you cannot deduct or capitalize a business expense until economic performance occurs. Irs forms 2009 If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or as the property is used. Irs forms 2009 If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Irs forms 2009 Example. Irs forms 2009 Jane, who is a farmer, uses a calendar tax year and an accrual method of accounting. Irs forms 2009 She entered into a contract with ABC Farm Consulting in 2012. Irs forms 2009 The contract stated that Jane pay ABC Farm Consulting $2,000 in December 2012. Irs forms 2009 It further stipulates that ABC Farm Consulting will develop a plan for integrating her farm with a larger farm operation based in a neighboring state by March 1, 2013. Irs forms 2009 Jane paid ABC Farm Consulting $2,000 in December 2012. Irs forms 2009 Integration of operations according to the plan began in May 2013 and they completed the integration in December 2013. Irs forms 2009 Economic performance for Jane's liability in the contract occurs as the services are provided. Irs forms 2009 Jane incurs the $2,000 cost in 2013. Irs forms 2009 An exception to the economic performance rule allows certain recurring items to be treated as incurred during a tax year even though economic performance has not occurred. Irs forms 2009 For more information, see Economic Performance in Publication 538. Irs forms 2009 Special rule for related persons. Irs forms 2009   Business expenses and interest owed to a related person who uses the cash method of accounting are not deductible until you make the payment and the corresponding amount is includible in the related person's gross income. Irs forms 2009 Determine the relationship for this rule as of the end of the tax year for which the expense or interest would otherwise be deductible. Irs forms 2009 For more information, see Internal Revenue Code section 267. Irs forms 2009 Accrual Method Required Generally, the following businesses, if engaged in farming, must use an accrual method of accounting. Irs forms 2009 A corporation (other than a family corporation) that had gross receipts of more than $1,000,000 for any tax year beginning after 1975. Irs forms 2009 A family corporation that had gross receipts of more than $25,000,000 for any tax year beginning after 1985. Irs forms 2009 A partnership with a corporation as a partner, if that corporation meets the requirements of (1) or (2) above. Irs forms 2009 A tax shelter. Irs forms 2009 Note. Irs forms 2009 Items (1), (2), and (3) above do not apply to an S corporation or a business operating a nursery or sod farm, or the raising or harvesting of trees (other than fruit and nut trees). Irs forms 2009 Family corporation. Irs forms 2009   A family corporation is generally a corporation that meets one of the following ownership requirements. Irs forms 2009 Members of the same family own at least 50% of the total combined voting power of all classes of stock entitled to vote and at least 50% of the total shares of all other classes of stock of the corporation. Irs forms 2009 Members of two families have owned, directly or indirectly, since October 4, 1976, at least 65% of the total combined voting power of all classes of voting stock and at least 65% of the total shares of all other classes of the corporation's stock. Irs forms 2009 Members of three families have owned, directly or indirectly, since October 4, 1976, at least 50% of the total combined voting power of all classes of voting stock and at least 50% of the total shares of all other classes of the corporation's stock. Irs forms 2009 For more information on family corporations, see Internal Revenue Code section 447. Irs forms 2009 Tax shelter. Irs forms 2009   A tax shelter is a partnership, noncorporate enterprise, or S corporation that meets either of the following tests. Irs forms 2009 Its principal purpose is the avoidance or evasion of federal income tax. Irs forms 2009 It is a farming syndicate. Irs forms 2009 A farming syndicate is an entity that meets either of the following tests. Irs forms 2009 Interests in the activity have been offered for sale in an offering required to be registered with a federal or state agency with the authority to regulate the offering of securities for sale. Irs forms 2009 More than 35% of the losses during the tax year are allocable to limited partners or limited entrepreneurs. Irs forms 2009   A “limited partner” is one whose personal liability for partnership debts is limited to the money or other property the partner contributed or is required to contribute to the partnership. Irs forms 2009   A “limited entrepreneur” is one who has an interest in an enterprise other than as a limited partner and does not actively participate in the management of the enterprise. Irs forms 2009 Farm Inventory If you are required to keep an inventory, you should keep a complete record of your inventory as part of your farm records. Irs forms 2009 This record should show the actual count or measurement of the inventory. Irs forms 2009 It should also show all factors that enter into its valuation, including quality and weight, if applicable. Irs forms 2009 Hatchery business. Irs forms 2009   If you are in the hatchery business, and use an accrual method of accounting, you must include in inventory eggs in the process of incubation. Irs forms 2009 Products held for sale. Irs forms 2009   All harvested and purchased farm products held for sale or for feed or seed, such as grain, hay, silage, concentrates, cotton, tobacco, etc. Irs forms 2009 , must be included in inventory. Irs forms 2009 Supplies. Irs forms 2009   Supplies acquired for sale or that become a physical part of items held for sale must be included in inventory. Irs forms 2009 Deduct the cost of supplies in the year used or consumed in operations. Irs forms 2009 Do not include incidental supplies in inventory as these are deductible in the year of purchase. Irs forms 2009 Livestock. Irs forms 2009   Livestock held primarily for sale must be included in inventory. Irs forms 2009 Livestock held for draft, breeding, or dairy purposes can either be depreciated or included in inventory. Irs forms 2009 See also Unit-livestock-price method , later. Irs forms 2009 If you are in the business of breeding and raising chinchillas, mink, foxes, or other fur-bearing animals, these animals are livestock for inventory purposes. Irs forms 2009 Growing crops. Irs forms 2009   Generally, growing crops are not required to be included in inventory. Irs forms 2009 However, if the crop has a preproductive period of more than 2 years, you may have to capitalize (or include in inventory) costs associated with the crop. Irs forms 2009 See Uniform capitalization rules below. Irs forms 2009 Also see Uniform Capitalization Rules in  chapter 6. Irs forms 2009 Items to include in inventory. Irs forms 2009   Your inventory should include all items held for sale, or for use as feed, seed, etc. Irs forms 2009 , whether raised or purchased, that are unsold at the end of the year. Irs forms 2009 Uniform capitalization rules. Irs forms 2009   The following applies if you are required to use an accrual method of accounting. Irs forms 2009 The uniform capitalization rules apply to all costs of raising a plant, even if the preproductive period of raising a plant is 2 years or less. Irs forms 2009 The costs of animals are subject to the uniform capitalization rules. Irs forms 2009 Inventory valuation methods. Irs forms 2009   The following methods, described below, are those generally available for valuing inventory. Irs forms 2009 The method you use must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. Irs forms 2009 Cost. Irs forms 2009 Lower of cost or market. Irs forms 2009 Farm-price method. Irs forms 2009 Unit-livestock-price method. Irs forms 2009 Cost and lower of cost or market methods. Irs forms 2009   See Publication 538 for information on these valuation methods. Irs forms 2009 If you value your livestock inventory at cost or the lower of cost or market, you do not need IRS approval to change to the unit-livestock-price method. Irs forms 2009 However, if you value your livestock inventory using the farm-price method, then you must obtain permission from the IRS to change to the unit-livestock-price method. Irs forms 2009 Farm-price method. Irs forms 2009   Under this method, each item, whether raised or purchased, is valued at its market price less the direct cost of disposition. Irs forms 2009 Market price is the current price at the nearest market in the quantities you usually sell. Irs forms 2009 Cost of disposition includes broker's commissions, freight, hauling to market, and other marketing costs. Irs forms 2009 If you use this method, you must use it for your entire inventory, except that livestock can be inventoried under the unit-livestock-price method. Irs forms 2009 Unit-livestock-price method. Irs forms 2009   This method recognizes the difficulty of establishing the exact costs of producing and raising each animal. Irs forms 2009 You group or classify livestock according to type and age and use a standard unit price for each animal within a class or group. Irs forms 2009 The unit price you assign should reasonably approximate the normal costs incurred in producing the animals in such classes. Irs forms 2009 Unit prices and classifications are subject to approval by the IRS on examination of your return. Irs forms 2009 You must annually reevaluate your unit livestock prices and adjust the prices upward or downward to reflect increases or decreases in the costs of raising livestock. Irs forms 2009 IRS approval is not required for these adjustments. Irs forms 2009 Any other changes in unit prices or classifications do require IRS approval. Irs forms 2009   If you use this method, include all raised livestock in inventory, regardless of whether they are held for sale or for draft, breeding, sport, or dairy purposes. Irs forms 2009 This method accounts only for the increase in cost of raising an animal to maturity. Irs forms 2009 It does not provide for any decrease in the animal's market value after it reaches maturity. Irs forms 2009 Also, if you raise cattle, you are not required to inventory hay you grow to feed your herd. Irs forms 2009   Do not include sold or lost animals in the year-end inventory. Irs forms 2009 If your records do not show which animals were sold or lost, treat the first animals acquired as sold or lost. Irs forms 2009 The animals on hand at the end of the year are considered those most recently acquired. Irs forms 2009   You must include in inventory all livestock purchased primarily for sale. Irs forms 2009 You can choose either to include in inventory or depreciate livestock purchased for draft, breeding, sport or dairy purposes. Irs forms 2009 However, you must be consistent from year to year, regardless of the method you have chosen. Irs forms 2009 You cannot change your method without obtaining approval from the IRS. Irs forms 2009   You must include in inventory animals purchased after maturity or capitalize them at their purchase price. Irs forms 2009 If the animals are not mature at purchase, increase the cost at the end of each tax year according to the established unit price. Irs forms 2009 However, in the year of purchase, do not increase the cost of any animal purchased during the last 6 months of the year. Irs forms 2009 This “no increase” rule does not apply to tax shelters which must make an adjustment for any animal purchased during the year. Irs forms 2009 It also does not apply to taxpayers that must make an adjustment to reasonably reflect the particular period in the year in which animals are purchased, if necessary to avoid significant distortions in income. Irs forms 2009 Uniform capitalization rules. Irs forms 2009   A farmer can determine costs required to be allocated under the uniform capitalization rules by using the farm-price or unit-livestock-price inventory method. Irs forms 2009 This applies to any plant or animal, even if the farmer does not hold or treat the plant or animal as inventory property. Irs forms 2009 Cash Versus Accrual Method The following examples compare the cash and accrual methods of accounting. Irs forms 2009 Example 1. Irs forms 2009 You are a farmer who uses an accrual method of accounting. Irs forms 2009 You keep your books on the calendar year basis. Irs forms 2009 You sell grain in December 2013 but you are not paid until January 2014. Irs forms 2009 Because the accrual method was used and 2013 was the tax year in which the grain was sold, you must both include the sales proceeds and deduct the costs incurred in producing the grain on your 2013 tax return. Irs forms 2009 Example 2. Irs forms 2009 Assume the same facts as in Example 1 except that you use the cash method and there was no constructive receipt of the sales proceeds in 2013. Irs forms 2009 Under this method, you include the sales proceeds in income for 2014, the year you receive payment. Irs forms 2009 Deduct the costs of producing the grain in the year you pay for them. Irs forms 2009 Special Methods of Accounting There are special methods of accounting for certain items of income and expense. Irs forms 2009 Crop method. Irs forms 2009   If you do not harvest and dispose of your crop in the same tax year that you plant it, you can, with IRS approval, use the crop method of accounting. Irs forms 2009 You cannot use the crop method for any tax return, including your first tax return, unless you receive approval from the IRS. Irs forms 2009 Under this method, you deduct the entire cost of producing the crop, including the expense of seed or young plants, in the year you realize income from the crop. Irs forms 2009    See chapter 4 for details on deducting the costs of operating a farm. Irs forms 2009 Also see Regulations section 1. Irs forms 2009 162-12. Irs forms 2009 Other special methods. Irs forms 2009   Other special methods of accounting apply to the following items. Irs forms 2009 Amortization, see chapter 7. Irs forms 2009 Casualties, see chapter 11. Irs forms 2009 Condemnations, see chapter 11. Irs forms 2009 Depletion, see chapter 7. Irs forms 2009 Depreciation, see chapter 7. Irs forms 2009 Farm business expenses, see chapter 4. Irs forms 2009 Farm income, see chapter 3. Irs forms 2009 Installment sales, see chapter 10. Irs forms 2009 Soil and water conservation expenses, see chapter 5. Irs forms 2009 Thefts, see chapter 11. Irs forms 2009 Combination Method Generally, you can use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently. Irs forms 2009 However, the following restrictions apply. Irs forms 2009 If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. Irs forms 2009 If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. Irs forms 2009 Changes in Methods of Accounting A change in your method of accounting includes a change in: Your overall method, such as from the cash method to an accrual method, and Your treatment of any material item, such as a change in your method of valuing inventory (for example, a change from the farm-price method to the unit-livestock-price method, discussed earlier). Irs forms 2009 Generally, once you have set up your accounting method, you must receive approval from the IRS before you can change to another method of accounting. Irs forms 2009 You may also have to pay a fee. Irs forms 2009 To obtain approval, you must generally file Form 3115. Irs forms 2009 There are instances when you can obtain automatic consent to change certain methods of accounting. Irs forms 2009 See the List of Automatic Accounting Method Changes located in the Instructions for Form 3115. Irs forms 2009 For more information on changes in methods of accounting, see Form 3115 and the Instructions for Form 3115. Irs forms 2009 Also see Publication 538. Irs forms 2009 Prev  Up  Next   Home   More Online Publications