Tax year choices
Most individuals and small businesses use a calendar tax year. Partnerships and S-corps must generally adopt the tax year of their owners (a calendar year for owner-individuals). Adopting a fiscal year requires a business purpose under Revenue Procedure 2002-39.
Cash method
Income is recognized when received; expenses are deducted when paid. Available to most small businesses with average annual gross receipts under the inflation-adjusted threshold ($30 million in 2024). Simpler than accrual, gives more timing flexibility, and is the default for sole proprietors.
Accrual method
Income is recognized when earned (right to receive is fixed and amount is determinable); expenses are deducted when the liability is fixed and economic performance has occurred. Required for some businesses with inventory or for large taxpayers above the gross-receipts threshold.
Inventory and the small-business exception
Historically, businesses with inventory had to use accrual. The Tax Cuts and Jobs Act let "small businesses" (under the gross-receipts threshold) treat inventory as non-incidental materials and supplies and use cash method. This is a major simplification for small e-commerce and product businesses.
Changing methods
Form 3115 is required to change accounting methods. Many common changes — including switching to cash method under the small-business exception — are automatic-consent changes not requiring IRS user fees.
How to find what you need quickly
Reading an IRS publication straight through is rarely the right move; using it as a reference is. Open the PDF, jump to the table of contents, identify the chapter that matches your facts, and skim the worked examples at the end of that chapter first — they usually answer 80% of practical questions. The detailed rules in the body of the chapter then make sense in the context of an example. The publication's index, while less polished than a commercial tax-research database, is searchable in any PDF reader with Ctrl+F and surfaces the exact paragraph you need in seconds.
What the publication does not say
IRS publications are summaries, not the law. They do not cite every controlling regulation, and they routinely omit edge cases that would make the discussion harder to read. For close calls, escalate from the publication to the underlying Internal Revenue Code section, the related Treasury regulations, the relevant revenue rulings or revenue procedures, and (if the dollars warrant) the leading court cases. The IRS-published Internal Revenue Manual and the Audit Techniques Guides — also free on IRS.gov — provide the agency's internal procedural perspective, which often clarifies how the publication's rules play out in an examination.