Accounting methods

Accrual method

In most cases, as a self-employed person you report business income by using the accrual method of accounting. With this method, you:

  • report your income in the fiscal period you earn it, regardless of when you receive the income; and
  • deduct expenses in the fiscal period you incur them, whether you paid them in that period or not. Incur usually means you either paid or will have to pay the expense.

As income from professional activities is business income, you report it using the accrual method.

Cash method

If you are a self-employed commission sales agent, you can use the cash method to report your income and expenses, as long as it accurately shows your income for the year. With this method, you:

  • report income in the fiscal period you receive it; and
  • deduct expenses in the fiscal period you pay them.

Change your reporting method

If you are a self-employed commission sales agent, you can decide to change from one accounting method to the other. To change from:

  • the accrual method to the cash method, you must file your return using the cash method. You must also

    include a statement that shows each adjustment you had to make to your income and expenses because of the change in methods; or

  • the cash method to the accrual method, you must submit a written request to the director of the taxpayer's Tax services office (TSO) before the due date of the tax return. In your letter, explain why you want to change methods. If you receive this permission, the first time you file your return using the accrual method, you must include a statement that shows each adjustment you had to make to your income and expenses because of the change in methods.
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