How should I calculate W2 income using accrual?

[Kara2]

I previously changed my accounting method to accrual. This is the first W2/regular employment I've had. I just have some questions.

1) So here's how I plan to calculate this. Any work weeks completely performed in 2018 but paid in 2019 I will include in 2018's taxes. Any partial week's I'll count a percentage of it on 2018 income based on how many days. Good so far?

2) Should I also be calculating accrual taxes paid (So that taxes not actually paid but owed based on 2018 income count as paid taxes)?

Also, regardless if you know the answer to 1 and 2 something else that's important:

3) Since I am filing accrual does the IRS know my W2's won't match or  if I try to file online will I get a mismatch? Should I just do it by paper and include an explanation the reasoning for the mismatch is the accounting method? If so do I need to do it by paper every year?

For more details see: https://ttlc.intuit.com/questions/4523606-i-file-my-taxes-accrual-basis-because-of-self-employment-i...

[DDollar · Accepted solution]

You cannot account for W-2 income on an accrual basis.  If you are receiving a W-2 it is for wage income, not self-employment income.  You must report the W-2 just as it is on the form.  If you do otherwise, it won't match with the IRS records, they will make an adjustment to your return and send you a letter notifying you.

[Kara2]

So even though I filed form 3115 to change my overall individual accounting method to accrual (schedule A) that does not apply to wage income?

This was asked to someone else on the thread I linked to.

[Kara2]

Furthermore, does filling that form only apply to self-employment income and nothing else?

I've read online that individuals can switch to accrual and I want to be sure I'm doing my taxes right because I think by filling that out I've switched to accrual. Or if it's only for self-employment, I just need to know. My intention was to change it overall but figure out the implications of the form later on.

[DDollar]

It's only for self-employment, partnerships, and corporations.  You can operate your business on an accrual basis, but all other aspects of your personal taxes remain on a cash basis.

[DDollar]

I guess you could do it. You choose an accounting method when you file your first tax return. If you later want to change your accounting method, you must get IRS approval.  If it is approved, each year your tax return will not match with the IRS records.  It will create additional accounting.  Unless you have a really good reason to do so, I would recommend against it.  You can account for business and personal items using different accounting methods. For example, you can determine your business income and expenses under an accrual method, even if you use the cash method to figure personal items.