Humorist Art Buchwald once described tax reform as taking the taxes off things that have been taxed in the past and putting taxes on things that haven’t been taxed before. Buchwald’s amusing analysis notwithstanding, tax reform is an arduous task. There are a lot of moving parts being studied on Capitol Hill at the moment. And one part in particular is of great concern to the nation’s CPAs.
As Congress considers the most significant attempt at tax reform in almost 30 years, the House Ways and Means Committee has produced a small business tax reform discussion draft that focuses on simplifying the tax codes for small businesses, including individuals and passthrough entities. While supportive of the Committee’s efforts to simplify the tax code and responsiveness to taxpayer concerns that the code is too complex, the AICPA strongly opposes a proposed limitation on the use of the cash basis method (for the non-CPAs among us, the cash method recognizes revenue and expenses when cash is received or disbursed rather than when earned or incurred. It is simpler in application, has lower compliance costs, and does not require taxpayers to pay tax before receiving the income being taxed).