American Bar Association President Paulette Brown sent letters to the leaders of the Senate Finance Committee, the House Ways and Means Committee, and the House Ways and Means Tax Policy Subcommittee urging them to reject any proposals that would require many law firms and other personal service businesses to switch from the simple cash method of accounting to the more complex and costly accrual method.
The committees invited stakeholders to give their views, and the ABA expressed concerns that, if enacted, the proposals would cause substantial financial hardship to many lawyers, law firms, and other personal service businesses by forcing them to pay tax on “phantom” income they have not yet received and may never receive.
Although the ABA commends Congress for its efforts to craft legislation aimed at simplifying the tax laws, the ABA opposes proposals that would require all personal services businesses with annual gross receipts over $10 million to use the accrual method of accounting rather than the traditional cash receipts and disbursement method.
A copy of the Senate Finance Committee letter, the House Ways and Means Committee letter and the House Ways and Means Tax Policy Subcommittee letter can be read online at www.americanbar.org/advocacy/governmental_legislative_work/letters_testimony/tax_law.html.
- Posted April 25, 2016
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ABA warns of proposed tax on phantom income
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