Two methods, two very different pictures of the same business.
Cash basis
Record revenue when money arrives, expenses when money leaves. Simple, and it lets you nudge taxable income by timing payments near year-end. Great for small, simple service businesses.
Accrual basis (GAAP)
Record revenue when earned and expenses when incurred, regardless of cash timing. It matches income to the work that produced it — the only view that reflects reality once you carry inventory, invoice on terms, or defer subscription revenue.
When the choice isn't yours
- Carry inventory, or pass certain revenue thresholds → the IRS generally requires accrual
- Raising venture money or a bank line → they'll expect accrual/GAAP statements
- SaaS with annual prepaids → cash basis wildly misstates you; accrual with ASC 606 is the honest picture
The bottom line
Cash for simple and small; accrual once you have inventory, deferred revenue, or investors. We set the method deliberately and convert cleanly when you outgrow cash.
Which method fits you?
We'll set the right basis, handle any IRS method-change filing, and produce statements that hold up.
See US GAAP Advisory Get a free quoteIf your business pays US contractors, three obligations follow you all year.
1. Collect a W-9 before you pay
Get a signed W-9 from every US contractor before the first payment. It gives you their legal name and TIN — the two things you need at filing time. Chasing W-9s in January from contractors who've moved on is how deadlines get missed.
2. Issue 1099-NEC on time
You report nonemployee compensation on Form 1099-NEC once payments to a contractor cross the reporting threshold for the year (historically $600; recent legislation raises it for payments made after 2025 — check the current figure when you file). The form goes to the contractor and the IRS by January 31.
- Payments to corporations are generally exempt (attorneys excepted)
- Payments made by credit card or through platforms like PayPal business are reported by the processor on 1099-K instead — don't double-report
- Foreign contractors working outside the US get a W-8BEN, not a 1099
3. Make sure they're actually contractors
The IRS looks at behavioral control, financial control and the relationship. Set their hours, provide the tools, make them exclusive — and you may have an employee, with back payroll taxes and penalties to match. When in doubt, run the facts past a professional before the relationship hardens.
The bottom line
W-9 up front, 1099-NEC by January 31, and honest classification. MOREOFTAX handles contractor reporting, payroll setup and classification reviews as part of bookkeeping and tax plans.
Contractor reporting handled for you
W-9 collection, January 1099 filings and classification checks — bundled into our bookkeeping plans.
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