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Reform…The Last Frontier?

Reform…The Last Frontier?

Do you think that the federal government should simplify our tax code? Well you aren’t alone in thinking so – but the problem is one man’s positive reform is another negative. Closing loopholes and lowering rates has the ability to help and harm many American tax payers- which means that finding middle ground on any reform package is going to be, well… really, really hard.

Essentially the problem stems from the fact that every benefit that can be found in the tax code has its champions who want to pay lower rates. To get these lower rates another type of benefit must be eliminated. Meaning any tax reform would result in many discrepancies between different groups of tax payers. Some may lose most of their benefits while others gain more.

The American Institute of CPA’s has sent a written testimony to Congress highlighting the need and importance for a small business tax reform. In their letter the organization mentioned eight issues that it believes must be addressed urgently. These issues are:

  • Cash method of accounting
  • Civil tax penalties
  • Retirement Plans
  • Alternative Minimum tax repeal
  • Tangible property regulations – de minimis safe harbor threshold
  • Permanence of tax legislation
  • Tax return due date simplification
  • IRS taxpayer assistance

Steve Chabot, House Small Business Committee Chairman understands the need for a simpler, flatter and fairer tax code for small businesses – but for now the AICPA still awaits action on behalf of Congress. Testimony from the AICPA stated, “Compliance burdens for small business tax payers are too heavy, both in terms of time required and out of pocket costs. The proliferation of new income tax provisions since the 1986 tax reform effort has led to compliance hurdles for taxpayers, administrative complexity, and enforcement challenges for the IRS. We encourage you to examine all aspects of the tax code to improve the current rules.”

Although many presidential hopefuls have laid claim to the idea that a flatter tax system would help our economy, only time will tell how a tax reform will play out.

 

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