Schock Legislation Included in Small Business Tax Reform Discussion Draft
Legislation Considered Vital Part of Comprehensive Tax Reform Package
Mar 12 -
Congressman Aaron Schock’s (R-IL) bipartisan legislation to simplify tax compliance and accounting methods that small businesses follow has been included as part of the Ways and Means small business tax reform discussion draft released today. Schock’s Small Business Accounting and Tax Simplification Act, allows businesses with up to $10 million in gross receipts to be eligible for a more simplified tax filing method with the IRS. Schock introduced the bipartisan legislation with Congressman Mike Thompson, a Democratic Ways & Means Committee member.
For many small businesses, the cash accounting method offers more flexibility in tax planning as it is a simplified method that more accurately reflects the way a small business collects income and pays expenses. Schock’s legislation would allow small businesses with $10 million in gross receipts to utilize the cash-basis form of accounting. The $10 million level would be indexed for inflation moving forward.
“With a bloated tax code, which stands at over 70,000 pages, small businesses are put at a disadvantage when it comes to dealing with the IRS,” said Schock. “By expanding the eligibility for small businesses to use cash accounting, we will provide them with a vital tool to save time and money, and allow these entrepreneurs to focus more on growing their business than complying with complex IRS regulations.”
According to the National Federation of Independent Business small businesses spend annually between 1.7 billion and 1.8 billion hours on tax compliance and $18 billion to $19 billion on compliance costs. The result is that 88 percent of small business owners hire a paid tax preparer to complete their returns. “This expansion of the availability of cash accounting for tax purposes will help simplify tax filing and reduce the paperwork burden for many small businesses,” said Dan Danner, President and CEO of the National Federation of Independent Business. “NFIB and its members would like to thank Congressmen Schock and Thompson for this common-sense approach to helping job creators operate as efficiently as possible during this time of economic recovery. It will certainly help make it easier for many small businesses to grow and create jobs.”
As part of the Ways and Means committee’s broader effort on comprehensive tax reform, Chairman Dave Camp (R-MI) today released the small business tax reform discussion draft. Reforming the small business tax rate will be a significant part any tax reform package. Eight out of ten businesses file their taxes as individuals, not as corporations and the pass-through model of small businesses (Sole proprietorships, S-corps, LLCs and Partnerships) has tripled from 10.9 to 30 million over the past 30 years. These pass-through businesses should be afforded flexible tax and accounting rules that reflect their needs for current cash flow to finance operations and their focus on long-term, generational markets. Schock’s legislation is considered a critical part of tax reform to allow for the type of flexibility that is needed.
“One key provision included in today’s discussion draft is based on a provision championed by Congressmen Schock and Thompson that is aimed at simplifying and expanding the use of cash accounting for small businesses. Allowing businesses with $10 million or less in gross receipts to use cash accounting can simplify their tax compliance efforts so that they can use their time, energy and resources in a more effective way – toward growing their business. Aaron and Mike’s commonsense proposal will ease the burden that too many face as they struggle with today’s broken tax code and is a step toward the fairness and simplicity that small businesses need and want,” said Camp.
“Employers who pay their business taxes as individuals account for 54 percent of all private sector employment in the U.S. Our country’s ability to put people back to work is proportional to how we treat small businesses under the tax code and how we provide employers with the flexibility they need to focus on building a businesses versus dealing with a burdensome tax system. This discussion draft will allow the committee to continue its work toward creating a fairer tax system that doesn’t penalize success and will help grow our economy at the same time,” added Schock.
Background on Schock’s Efforts to Advocate for Comprehensive Tax Reform
Schock has been an active participate and advocate for the need for comprehensive tax reform to simplify the tax code and ensure a fairer system that doesn’t penalize hard work, provides additional middle-class tax relief, streamlines the code for small businesses, and promotes economic growth. In February, Schock was named to the Ways and Means Financial Services Working group, a subgroup tasked with developing a portion of the committee’s overall tax reform package. In the last two years, the Ways and Means committee has held more than 20 hearings focused on comprehensive tax reform.
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