The American Institute of Certified Public Accountants (AICPA) has recently been participating in U.S. House of Representatives, Committee on Small Business hearings on tax reform with the goal of ensuring that main street isn’t left behind. One area of focus in this regard has to do with the permanence of tax legislation.
There are many examples in the past few years where Congress retroactively passed tax legislation such as the very popular section 179 expense election. Last minute and retroactive actions like this create uncertainty, confusion, and anxiety, along with administrative and financial burdens. Without permanency in the Tax Code, consequences include negative impact on a company’s financial accounting and reporting that can create unnecessary and undesirable ambiguity for financial markets.
Another negative consequence is the complexity and administrative burden for both the taxpayer and the IRS. When Congress enacts extensions of provisions late in the year or in the beginning of the following year, after the IRS has already finalized income tax forms, it causes confusion, complexity, and compliance burdens for taxpayers, practitioners, and the IRS. Instructions and forms delays cause the filing season to be even more compressed, and taxpayers are not able to file and receive their tax refunds until later in the year.
Ever-changing, often expiring, short-term changes to the tax laws make it increasingly difficult for small business and their owners to perform any long-term cash-flow or financial planning. If businesses are not able to rely on those tax benefits for the long-term, they are limited in their ability to plan, invest, grow and hire additional workers. At a minimum, Congress is urged to extend tax provisions sooner rather than later to help avoid these pitfalls.
By Dale F. Jensen, CPA