Any problem with accrual basis S Corporation

I went to a discussion group yesterday, and this one lady was adamant that you can't use accrual accounting for tax purposes with an S Corporation because individuals who are shareholders are on the cash basis.

I looked it up, and I don't see any problem with it. Does anyone out there know otherwise?

And if there is not a problem, then if you pay the CA PEET tax in 2022 for 2021, shouldn't a corporation be allowed to accrue that tax owed on the 2021 Form 1120S and get a federal deduction for it?

Comments appreciated.

There's no issue with adopting or changing to the accrual method for an s-corp.
Hell, you can do it with a Sch C business.
I always find it funny how some people get invested in certain positions based on half-authority.

And if there is not a problem, then if you pay the CA PEET tax in 2022 for 2021, shouldn't a corporation be allowed to accrue that tax owed on the 2021 Form 1120S and get a federal deduction for it?

When is the accrual? As of the year that the income was earned that is the basis for the PTE, or as of the date that the election is made on the return for 2021, which is filed in 2022? Until the entity makes the election, isn't the payment just a deposit? The company can obtain a refund of that payment by not making the election.

Lots of discussion on this, and practitioners do not agree. It would be nice if the IRS would provide guidance. Until we hear otherwise, I think it is a deposit until the election is made, so not deductible until 2022.

So this is where it gets weird. The corporation pays the 2021 PEET in 2022, the payment is shown on the 2021 Form 1120S, and the credit is shown on the 2021 Form 1040. Right? But then the federal deduction is not taken for the 2021 year, but for the 2022 year? Hmm. Just doesn't seem to line up.