§446 — Title 26 Internal Revenue Code | U.S. Code

§446 General rule for methods of accounting

Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter E— - Accounting Periods and Methods of Accounting › Part PART II— - METHODS OF ACCOUNTING › Subpart Subpart A— - Methods of Accounting in General › § 446

Last updated Apr 6, 2026|Official source

Summary

Figure your taxable income using the same accounting method you regularly use in your books. If you have no regular method or if your method does not show income clearly, the tax official will pick a method that does. You may use the cash method, an accrual method, any other method allowed by the tax code, or a mixture of these if allowed by the Secretary’s rules. If you run more than one business, you may use a different method for each. To switch methods you must get the Secretary’s consent before you compute tax under the new method, unless another part of the tax code says otherwise. If you don’t file a request to change, the lack of that consent cannot be used to stop or reduce any penalty or addition to tax.

Title 26, §446

Internal Revenue Code — Source: USLM XML via OLRC

(a)Taxable income shall be computed under the method of accounting on the basis of which the taxpayer regularly computes his income in keeping his books.

(b)If no method of accounting has been regularly used by the taxpayer, or if the method used does not clearly reflect income, the computation of taxable income shall be made under such method as, in the opinion of the Secretary, does clearly reflect income.

(c)Subject to the provisions of subsections (a) and (b), a taxpayer may compute taxable income under any of the following methods of accounting—

(1)the cash receipts and disbursements method;

(2)an accrual method;

(3)any other method permitted by this chapter; or

(4)any combination of the foregoing methods permitted under regulations prescribed by the Secretary.

(d)A taxpayer engaged in more than one trade or business may, in computing taxable income, use a different method of accounting for each trade or business.

(e)Except as otherwise expressly provided in this chapter, a taxpayer who changes the method of accounting on the basis of which he regularly computes his income in keeping his books shall, before computing his taxable income under the new method, secure the consent of the Secretary.

(f)If the taxpayer does not file with the Secretary a request to change the method of accounting, the absence of the consent of the Secretary to a change in the method of accounting shall not be taken into account—

(1)to prevent the imposition of any penalty, or the addition of any amount to tax, under this title, or

(2)to diminish the amount of such penalty or addition to tax.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1984—Subsec. (f). Pub. L. 98–369 added subsec. (f). 1976—Subsecs. (b), (c), (e). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

Statutory Notes and Related Subsidiaries

Effective Date

of 1984 Amendment Pub. L. 98–369, div. A, title I, § 161(b),

July 18, 1984, 98 Stat. 697, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [

July 18, 1984].”