Since there is no conformity for accounting method (cash/accrual), one of my clients’ average gross revenue jumped to $14MM for 2018 which means that cash basis is acceptance for Federal purpose (under $25MM) but not for California. It’s a sub S corporation. The correct answer is obvious: continue to use cash basis for Fed purpose but convert to accrual for Calif purpose. Is this right? And do I rely on FTB notice 2000-8? It just seems like a lot of work for something that’s essentially a timing issue.
We are hoping for conformity but it won’t happen with the budget like we thought. I recommend waiting to file the return until the extended due date to see if we do conform. It may not happen until August