Challenge
A stonemasonry business encountered significant tax liabilities due to its use of the accrual method of accounting. Because the business was a C corporation and the 2017 Tax Cuts and Jobs Act offered opportunities for tax relief to organizations such as theirs, the owners reached out to CBM’s construction and real estate team for assistance.
Solutions
CBM’s team was familiar with the tenets of the Tax Cuts and Jobs Act due to having assisted several other businesses and advised the stonemasonry business to switch their accounting to the cash basis, which was available to businesses with less than $25 million in annual gross receipts. With CBM’s guidance, the company revised its tax filings under Section 481a of the Act.
Outcome
CBM successfully deferred $300,000 of taxable revenue over a four-year period by aligning revenue recognition with actual cash receipts and significantly lowering the stonemasonry company’s tax liability. The organization also decreased its taxable revenue for future years, an unintended additional benefit to collaborating with CBM. The result: long-term tax savings and financial stability.
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Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.
