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Congressional Proposals Requiring Law Firms to Report Taxable Income on the Accrual Method of Accounting

The proposals in Congress could fundamentally shift how many large law firms must report their taxable income for US federal income tax purposes. Two similar proposals have been introduced that would mandate that certain qualified professional service firms (which encompass law firms) change their overall method of accounting from cash to accrual in order to determine taxable income. Under the proposals, the cash method of accounting would be limited to taxpayers with gross receipts of $10,000,000 or less (inflation adjusted) using an average annual gross receipts test over a three taxable-year period.

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David Gaulin
US Law Firm Services Practice Leader
Tel: +1 (646) 471 1810

Gary Pogharian
Tax Partner
Tel: +1 (646) 471 7202

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