Congress is considering new legislation that could streamline accounting procedures for tens of thousands of U.S. companies by liberalizing the rules for the use of the cash accounting method by small business taxpayers. The bill, introduced by Sen. Olympia Snowe, R-Maine, dovetails neatly with President Bush's drive to streamline the federal tax code -- a move that she said is needed to improve the efficiency of the U.S. tax system "and strengthen our overall economy." The main thrust of her legislation, however, is to provide relief for small businesses from "the burdensome record-keeping requirements that they must deal with currently in paying their income taxes." Some companies already enjoy such relief under rules set by Congress, allowing many small businesses with annual income under $5 million to use cash accounting. Cash accounting recognizes revenue and expenses when cash is received or disbursed, as opposed to when it is earned or incurred. Larger companies, however, are required to follow the accrual method of accounting, which Snowe said "tends to impose additional financial and administrative costs that should be eliminated." Under her proposal, the "obsolete $5 million threshold" for use of cash accounting would double to $10 million -- a change that would allow many more small business owners "to satisfy their tax obligation in a cheaper, more efficient manner," she told lawmakers. As a result, these entrepreneurs "will be able to invest more time and resources into their business," Snowe said. In urging other lawmakers to support her proposed accounting change, the senator argued that small businesses are overwhelmed by the complexity of today's tax system and by the burden of complying with unneeded accounting requirements.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access