A bipartisan group of lawmakers is asking the tax-writing House Ways and Means Committee to avoid enacting any proposed tax reforms that would limit accounting flexibility for small businesses.
A
In a letter sent Monday to Ways and Means chairman Dave Camp, R-Mich., and ranking member Sander Levin, D-Mich., the legislators wrote, “For many small businesses, mitigating the one-time costs of switching accounting methods would be extremely difficult, as would the continued use of the more complex accrual method of accounting. Across sectors, small business owners are concerned at the possibility of complying with a more complex accounting system that requires them to report income before they receive the cash .it is our shared goal to simplify and reform the tax code into one that enables growth and competitiveness while reducing the cost of compliance and maintaining fairness.”
Pass-through entities account for more than 90 percent of all business entities in the United States and are represented across a diverse range of business professions and sectors, including dentists, physicians, accounts, lawyers and engineers, they noted.
The cash method of accounting, in which receipts are recorded when revenues are received, is a simple and appropriate manner for taxing both individuals and the many businesses that are taxed at the individual rate, the lawmakers said. Instead of expanding the use of a more simple accounting technique, this reform would move many businesses to the accrual method of accounting, in which receipts are recorded when transactions are made rather than when payments are received.
The letter has received support from the American Institute of CPAs, the American Farm Bureau Federation, the American Council of Engineering Companies and the American Dental Association.
