W. Va. Code R. § 110-21-6

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 110-21-6 - Accounting Periods And Methods

6.1. Accounting periods. A taxpayer's taxable year under these regulations shall be the same as his taxable year for federal income tax purposes.

6.2. Change of Accounting Periods. If a taxpayer's taxable year is changed for federal income tax purposes, his taxable year for purposes of these regulations shall be changed so that it is identical to that used by the taxpayer for federal income tax purposes. If a taxable year of less than twelve (12) months results from a change of taxable year, the West Virginia personal exemptions, and any credits allowed under the West Virginia Code shall be prorated to reflect the portion of the year which is being covered by the return being filed due to the change of accounting periods.

6.3. Accounting Methods. A taxpayer's method of accounting for West Virginia income tax purposes shall be the same as that used for federal income tax purposes. In the absence of any method for federal tax purposes, his taxable income for West Virginia tax purposes shall be computed under a method which will clearly reflect income.

6.4. Change of Accounting Methods.

6.4.1. If a taxpayer's method of accounting is changed for federal tax purposes, his method of accounting shall be changed for West Virginia tax purposes so that the accounting method is identical to that used by the taxpayer for federal income tax purposes.

6.4.2. If a taxpayer's method of accounting is changed, other than from an accrual to an installment method, any additional tax which results from adjustments determined to be necessary solely by reason of the change shall not be greater than if such adjustments were ratably allocated and included for the taxable year of the change and the preceding taxable years, not in excess of two(2), during which the taxpayer used the method of accounting from which the change is made.

6.4.3. If a taxpayer's method of accounting is changed from an accrual to an installment method, any additional tax for the year of such change of method, and for any subsequent year which is attributable to the receipt of installment payments properly accrued in a prior year shall be reduced by the portion of tax for any prior taxable year attributable to the accrual of such installment payments.

6.4.4. Example-A. A sole proprietor, has been engaged in a service oriented business and uses the cash basis method of accounting. A decides to expand his business so that in addition to providing services, A will also make sales from inventory. As a result of A's use of inventory, current federal income tax law requires A to adopt the accrual method of accounting. A must change to the accrual method of accounting for purposes of West Virginia's personal income tax as well.

W. Va. Code R. § 110-21-6