Switch To Accrual Accounting Would Increase Tax Burden
>Forty-six senators from 32 states signed a letter to the leaders of the Senate Finance Committee this week saying that a proposed change to accounting methods would hurt small business and should be dropped. The switch to accrual accounting from cash accounting could raise more than $23 billion in additional tax revenue over the next decade, but the senators say the change would be unfair and burdensome.
CFO Journal said the change would essentially require some businesses to pay income taxes on money they have not yet received, but anticipate in the future. Some businesses have said they would need to take out loans to pay the higher taxes. In their letter, the senators wrote, “Requiring more businesses to use the accrual method of accounting would create unnecessary complexity in the tax law and substantially increase compliance costs.”