AICPA Tells Congress to Expand Use of Cash Accounting Method

The American Institute of CPAs has voiced its support for expanding the availability of the cash method of accounting to small businesses.

The nation's largest association of professional accountants, the AICPA gave written testimony to the House Committee on Small Business Subcommittee on Economic Growth, Tax and Capital Access. The hearing explored the usefulness of cash accounting for small firms.

“We wholly support the expansion of the number of taxpayers that may use the cash method of accounting,” the AICPA stated in its written statement.  “The cash method of accounting is simpler in application, has fewer compliance costs, and does not require taxpayers to pay tax before receiving the income being taxed.”

The AICPA also expressed its opposition to any legislative efforts to limit the use of the cash method for small and service businesses, including those businesses whose income is taxed directly on their owners’ individual returns, such as S corporations and partnerships.

“We have confidence that forcing more businesses to use the accrual method of accounting for tax purposes would increase their administrative burden, discourage business growth in the U.S. economy, and unnecessarily impose financial hardship to cash-strapped businesses,” the Institute’s testimony added.