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Publication 538 - Introductory Material


Future Developments

The IRS has created a page on IRS.gov for information about Publication 538, at www.irs.gov/pub538. Information about recent developments affecting Publication 538 will be posted on that page.

Introduction

Every taxpayer (individuals, business entities, etc.) must figure taxable income for an annual accounting period called a tax year. The calendar year is the most common tax year. Other tax years include a fiscal year and a short tax year.

Each taxpayer must 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 the accrual method.

Under the cash method, you generally report income in the tax year you receive it, and deduct expenses in the tax year in which you pay the expenses.

Under the accrual method, you generally report income in the tax year you earn it, regardless of when payment is received. You 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 some cases, you may have to refer to other sources for a more in-depth explanation of the topic.

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

  You can send us comments from irs.gov/formspubs. Click on “More Information” and then on “Give us feedback.” Or you can write to:

Internal Revenue Service 
Tax Forms and Publications  
1111 Constitution Ave. NW, IR-6526 
Washington, DC 20224

  We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

  Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.

Ordering forms and publications.   Visit www.irs.gov/formspubs to download forms and publications. Otherwise, you can go to IRS.gov/orderforms to order current and prior-year forms and instructions. Your order should arrive within 10 business days.

Tax Questions.   If you have a tax question not answered by this publication, check IRS.gov and How To Get Tax Help at the end of this publication.

Photographs of Missing Children

The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

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

  • 2553 Election by a Small Business Corporation

  • 3115 Application for Change in Accounting Method

  • 8716 Election To Have a Tax Year Other Than a Required Tax Year

See Ordering forms and publications, earlier for information about getting these publications and forms.


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