It is widely thought, within and without the industry, that continued and constantly added complexity in the US Tax Code is good for our business. I remember that the Tax Reform Act of 1986 was referred to by many as “The Accountant’s Full Employment Act”.
I strongly disagree. Complexity is bad for business. While it may drive clients to use tax professionals, and certainly generates more billable hours, the real result is additional aggravation, agita and anxiety for tax professionals as well as the increased potential for error and preparer penalties. It creates more work – but more unnecessary and wasteful work.
There are only so many hours in the tax season. I would much rather prepare more returns that are simple for lower fees, with less agita and error potential, than less returns that are complicated but generate higher fees.
I have said for years that I would make more money, experience less agita, make less errors, and substantially reduce the number of GD extensions needed each year if I did nothing but 1040As all day during the tax filing season.
I firmly believe my clients would not decide to do their own returns if the tax system was simplified; they would continue to come to me. Most taxpayers who use a tax professional simply don’t want to be bothered with the task of preparing their tax return, and want to make sure they do not miss anything. And even with a more simplified tax system there would still be a need to complete Schedules C, D, E, F, SE and related forms.
Less complication also reduces my cost – for paper and ink and for CPE. The less complicated the tax return the less additional forms, schedules and worksheets it generates and the less continuing education I need to keep up-to-date and educated on the complexities.
The current proposed tax law changes resulting from the belief by the Republicans in both houses of Congress that “pass-through” business income should be taxed at a lower rate on the 1040, a truly stupid idea to begin with, is a good example of unnecessary complexity.
Much of the complexity forced upon tax professionals comes from the continued erroneous and inappropriate practice by the idiots of both parties in Congress of distributing government social welfare and other benefit programs via the Tax Code, and in the process making the IRS and tax preparers become social workers. Not only the complexity of the tax law, but the added excessive due diligence requirements, wastes our time and resources.
And another bad result – the additional work that should generate additional fees, especially when it comes to the Earned Income Credit, the refundable Child Tax Credit, and the Premium Tax Credit and penalties of the Obamacare individual mandate, applies to low income clients who can least afford the additional fees – and are more often than not charged less than appropriate additional fees, or no additional fees, by tax preparers,
Tax professionals should champion the cause of tax reform that produces true tax simplification.
Check out my website A TAX PROFESSIONAL FOR TAX REFORM.