By Christopher Walker. IRS Commissioner Charles O. Rossotti announced a new rule governing cash accounting for many service-related small businesses, including contractors, with annual receipts between $1 million and $10 million. The new rule allows such businesses to use the cash receipts and disbursements method rather than the accrual and inventory method to report their income and expenses.
Sen. John F. Kerry (D-Mass.), chair of the Senate Committee on Small Business and Entrepreneurship, praised the decision, saying the new rule "will ease the paperwork burden for millions of America's small businesses." Sen. Christopher S. Bond (R-Mo.), the ranking Republican on the committee, said the change will "free the independent home builder or repairman from having to account for every nail, board, can of paint, or shingle used over the course of a year."
According to a press release from Kerry, the next step in easing the administrative burden on small businesses is to allow for joint filing of state and federal taxes. Several states are currently working with the IRS on a pilot program to create a single form for reporting both state and federal employment taxes, and Sen. Kerry has introduced legislation to move the program beyond the pilot phase.
