Do I need to switch accounting methods? (sales, profit, pay)

[thepinksquid]

I'm getting a lot of conflicting information about this, and I'm hoping to perhaps save myself an email to our accountant.

My husband has had an LLC (taxed as sole prop) since 2009 and until this year has only received income for service-related work (web/application development). However, in 2012 he also began developing electronics components that he sells online (in addition to the other work). So far, this has taken up a very small portion of his income (< 10% gross), but we've accrued some costs in the development/production stage.

Do we have to change our accounting method to accrual now? I'm seeing some sources state that if the sales of the physical product are not the "majority" of the revenue (and under $1M -- which we def. are) then we can stay as cash method, but other sources are basically saying that ANY sales of a physical good force a business to switch to accrual. Any insight?

One of the biggest concerns, is that if the components don't work out, he may stop selling them and go back to only doing service-related work. I don't want to play the game of having to switch methods every few years, and having 2 different LLCs seems like a bigger hassle than it's worth (plus, in CA that's an extra $800/year).

[cpg35223]

I would always be on an accrual basis, but pay taxes on a cash basis.

[thepinksquid]

Originally Posted by cpg35223

I would always be on an accrual basis, but pay taxes on a cash basis.

I'm mostly just referring if we need to 'officially' change our method with the IRS. But yeah, we keep track of the items' profitability on an accrual basis for ourselves. However, for simplicity's sake, I would MUCH prefer to stay as cash for taxes.