Cash Accounting No Longer an Option?

ORLAND PARK, Ill. - July 21, 2014 - PRLog -- On July 10^th, a subcommittee of the House of Representatives' Committee on Small Business held a hearing to discuss the merits of using cash basis of accounting in small businesses, and whether small businesses should be required to use the accrual basis.

What does this mean for small business owners? “This would only be a one year windfall for the IRS, but an ongoing headache for most small businesses,” says Kim Shannon, President of Off-Site Business Services in Orland Park, IL.

Most business owners think in terms of "cash in" and "cash out," especially when starting a new business venture. This means that business owners claim the income when payment is received, and claim the expense when it is paid. Accrual accounting claims the income when the invoice is created and the expense when a bill is received from a vendor. This potentially creates a tax liability for small businesses.

“For example, let's say that a business invoices a client on December 31 for a very large job that is a significant part of their annual revenue”, says Shannon. “The client has a history of paying after 90 days. Using the cash basis, the client is invoiced on December 31st, the income is not taxable until the payment is received. With the accrual basis, the income becomes taxable on the date of the invoice (December 31.) This could create a financial hardship for a small business if the payment is not received from their client until April 1 or later after taxes are due.”

“Owning a small business is hard enough without the complication of forcing business owners to spend more time on bookkeeping and taking time away from generating revenue,” says Shannon

Off-Site Business Services, Inc. has, since 1993, been providing business owners with comprehensive, professional office management in the areas of Bookkeeping, Administrative and Database Management Services.  Each staff member regularly goes through extensive training in the latest payroll, bookkeeping and software services. They offer full-time access year round and charge for only the hours of service used.

For more information, call 1-877-966-4441 or go to www.offsitebiz.com.