U.S. Chamber Applauds Treasury and IRS Simplification of Small Business Accounting Procedures

WASHINGTON, D.C. – The United States Chamber of Commerce applauded the release of a Proposed Revenue Procedure to liberalize and simplify accounting procedures for small businesses.

"This is a huge victory for small businesses across the country," said Bruce Josten, Chamber executive vice president. "Making the tax system simpler and more fair will benefit as many as 500,000 taxpayers."

Under accrual accounting, revenue is taxed when "earned," but before actually received. This often causes cash flow problems for businesses, when taxes must be paid before funds become available. The new rules delay payment of taxes until the revenue is received, alleviating a significant hardship for many small business owners.

The new rules allow certain small businesses with gross receipts of $10 million or less to use the cash method of accounting for their income and expenses. This can greatly simplify accounting for these small businesses – service providers and custom manufacturers, in particular – and provide certainty about what the rules are. Formerly, because of uncertainty in interpretation of the rules, their scope and application were often left to the courts.

"This frees up taxpayers to devote more of their resources to operating their businesses, rather than wasting them on attempting to comply with ambiguous tax guidance," said Josten. "This will help small businesses to increase their productivity, something that is vital to recovery of the U.S. economy."

The U.S. Chamber of Commerce is the world's largest business federation representing more than three million businesses and organizations of every size, sector and region.

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