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  • US Accountants Look For Income Tax Simplification

    The American Institute of Certified Public Accountants (AICPA) has submitted suggestions to the US Senate Finance Committee Working Group on individual tax reform.

    The individual income tax regime in the US is relatively important, as individual income tax is imposed on the income of “pass-through” businesses, such as partnerships, sole proprietorships, and S corporations, whose profits are taxed on their owners’ tax returns. Such businesses account for 95 percent of all US businesses, more than 60 percent of all business income, and more than 50 percent of all employment.

    Above all, the AICPA proposes that a new, simplified income tax rate structure should be introduced. “We suggest Congress eliminate all surtaxes as they are complicated, confusing, and lack transparency, similar to the alternative minimum tax (AMT) which we advise repealing. Congress should apply a simplified rate structure with only one set of rules, as opposed to the current system, which arguably includes three vastly different taxation systems (regular tax, AMT, and net investment income tax).”

    The AICPA expressed concern “that provisions to limit or eliminate the use of certain deductions and exclusions for the top tax bracket will continue the flaws of the current system. We urge Congress to use tax reform as an opportunity to develop the best definition of taxable income by creating a simple, transparent, possibly higher tax rate schedule that does not include hidden additional taxes and is applied consistently across all rate brackets.”

    “Perhaps no situation illustrates unneeded complexity better than the proliferation of terms that have similar meanings but contain vastly different tax consequences,” it continues. “We recognize that there are legitimate anti-abuse justifications for differences in the application of, for example, small business status, family relationships, entity ownership, and entity attribution operating rules. However, we believe that it would reduce complexity and increase compliance if these types of provisions are identified and reduced.”

    In his letter including the AICPA’s suggestions, Troy Lewis, Chair of the AICPA Tax Executive Committee, wrote that “we understand the challenges that Congress faces as it tackles the complex issues inherent in drafting tax legislation, and note that both taxpayers and tax practitioners are interested in, and need, tax simplification.”

    “Compliance burdens for individual taxpayers are too heavy, both in terms of time required and out-of-pocket cost. Likewise, complexity increases the ‘Tax Gap’ and may impair the efficiency of tax administration,” he added. “While there are revenue costs associated with simplification reforms, it is also important to recognize the elimination of significant compliance burdens by such reforms.”

    Source: www.tax-news.com


  • U.S. Treasury Dept. to expand relief for filers affected by Form 1095-A

    The U.S. Treasury Department announced on Friday that it is expanding relief for individuals who filed their tax returns with a marketplace tax statement that previously included incorrect information.

    In expanding the relief, the department said it will not require individuals who filed returns with the incorrect information to file an amended return. In addition, the IRS “will not pursue the collection of any additional taxes from these individuals based on updated information in the corrected forms,” the Treasury Department said in a statement.

    The announcement comes several weeks after the department disclosed that approximately 20% of individuals who purchased coverage from the Health Insurance Marketplace last year were provided with inaccurate data in Form 1095-A. The form was provided to individuals who received advanced payments of a tax credit that was intended on helping filers ameliorate the costs associated with purchasing coverage on the marketplace.

    In February, the department alerted approximately 800,000 individuals or less than 1% of filers that Form 1095-A included incorrect information regarding their benchmark premiums. At the time, approximately 50,000 individuals filed their tax returns with information containing incorrect premiums.

    A tax filer could still stand to gain from amending their return if their monthly premium for 2015 from their Silver (or second-tier) plan is lower than the premium they paid each month in 2014, the Treasury Department added.

    Source: http://www.nasdaq.com/