In an effort to maintain the cash method over the accrual method as the standard means of accounting for tax purposes, a bipartisan majority in the House of Representatives--comprised of 233 members--issued a letterto House leader John Boehner (R-Ohio) and other House leaders on Tuesday, stating that the accrual method "will have a severely detrimental impact on thousands of businesses in our districts."
“Those who use the cash method of accounting include many of our local job creators and professionals including accountants, architects, attorneys, dentists, engineers, farmers, physicians and financial service professionals,” the letter explained. "Importantly, the cash method of accounting is the foundation upon which these businesses have built their business models for decades."
The House letter states that the cash method of accounting will recognize income as soon as it is collected. On the other end of the spectrum, the accrual method of accounting instead counts income when a service is performed, not taking into account of when cash is actually collected. "If forced to pay taxes before income is received, as would be required under the accrual method," the legislators write, "less money would be available to small businesses for growth and job creation.”
The House effort has been led by Representatives Brad Schneider (D-Ill.), Richard Hudson (R-N.C.), Mike Quigley (D-Ill.) and Blaine Luetkemeyer (R-Mo.).
The AICPA has also been vocal against the accrual method, garnering support from CPA societies and state firms to voice their opposition.
"Colleagues from state CPA societies and our members have been instrumental in this effort,” said AICPA president and CEO Barry C. Melancon in a press release. “Thanks to them, more than half of the House and nearly half of the Senate from both parties and every state have voiced their opposition to a proposal that unfairly penalizes CPA firms, among other businesses. The accrual accounting mandate is bad tax policy that should be abandoned by the House and Senate.”
Arelated effortin the Senate last month gained the backing of 46 members in that chamber.