WASHINGTON – U.S. Sen. Olympia Snowe has introduced a bill to simplify the tax code and reduce compliance burdens placed on small businesses.

The measure would let businesses that generally earn less than $10 million during the tax year use cash accounting methods to report their income.

The provisions of S. 2675 should substantially reduce the cost of hiring bookkeepers, accountants, and lawyers for thousands of small businesses now forced to use costly accrual accounting methods. Under current law, only those taxpayers that earn less than $5 million per year are typically allowed by the Internal Revenue Service to use the cash method.

Snowe, who chairs the Senate Committee on Small Business and Entrepreneurship, emphasized that the bill would not reduce the amount of taxes a small business pays.

Under accrual accounting rules, a small business is deemed to have income when a sale is made, even though the business may not collect cash from the customer until some future date. As a result, a small business may be deemed to have taxable income well before it has any cash to pay the tax.

“Clearly, the cash accounting method is much easier and simpler for small-business taxpayers to comply with,” Snowe said. “Raising the threshold will reduce both time and money small-business owners spend on complying with the tax code.”