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Forms over substance.

Forms Over Substance

I am about to attempt to write a column which will seek to persuade tax practitioners to feel sympathy for the Internal Revenue Service. If I can accomplish this, it will be no small feat.

However, I think I approach this task armed with some very convincing evidence: the actions (or inactions, as the case may be) of the Congress of the United States. To be specific, I am referring to the annual scramble engaged in by the IRS' tax forms staff in response to last-minute changes to the Internal Revenue Code.

The Forms Subcommittee of NSPA's Federal Taxation Committee just completed its annual meeting with the IRS Tax Forms Coordinating Committee. As is usually the case, it was a very productive session. NSPA gave the IRS a few very good ideas to consider, and the IRS explained a lot of the difficulties it faces. None of these problems is more overwhelming than last minute tax law changes.

Consider this: there are only a very few printers in the country who can accommodate the press space that the IRS requires to print its billions of documents each year. That space must be contracted for in April of each preceding year. The forms are supposed to be printed that November in order to be distributed by January.

Now, those presses don't sit idle for the other 11 months of the year. IRS jobs are fit into a very tight press schedule. If Congress changes the tax laws in August, the agency has to scramble to meet the November deadline. If Congress passes tax law changes in November, the agency is really behind the eight ball. The printing house is not going to "stop the presses" for a week so the IRS can decipher Congress' latest whimsy. This is how deadlines often get missed, and forms get back-ordered until mid-February.

No one is suggesting that Congress isn't allowed to change the tax laws late in its session. However, common sense dictates that last minute changes shouldn't be effective in the same year they're enacted.

Nor is the Tax Forms Coordinating Committee the only voice within the IRS calling for a cut-off on changes effective in the year of enactment. Commissioner Fred T. Goldberg, Jr., himself has on several occasions reminded the Congress and the tax community of the difficulties presented by last minute changes. The commissioner correctly notes that these difficulties affect not only the agency, but practitioners and the public as well.

The National Society of Public Accountants agrees with Commissioner Goldberg and has for some time called for such a cut-off date. Three times already this year, in fact, NSPA has urged such a requirement in its testimony before the Congress.

In February, for example, the National Society told Congress that many of the forms difficulties its members encounter are the result of statutory mandates, not bureaucratic SNAFUs. "Certainly the IRS makes mistakes," NSPA stated, "but it is our experience that, on the whole, the agency's form drafters do an admirable job of transforming the will of Congress into a package of uniform reporting materials."

Later, in April, we again urged Congress to consider the issue. "The establishment of a cut-off would enable the tax community to timely digest the changes enacted. This additional time would no doubt enhance compliance with the tax laws. Moreover, it would allow the government, through the IRS, sufficient time to prepare for and administer the mandated changes," NSPA noted.

As with most things in Washington these days, the problem here is the budget deficit. Since our leaders, on both sides of the aisle and at both ends of Pennsylvania Avenue, continue to dodge the deficit bullet, federal budgets don't get written until the last minute. Lately, they're not even written until after the last minute, usually in October or November. Since the budget numbers are more or less "backed into", the precise combination of tax law changes needed to effect the prescribed "revenue enhancements" (i.e., new taxes) is similarly not known until the last minute. Because the revenues are for the current fiscal year, the effective date of these changes is immediate, if not retroactive. The IRS, practitioners and taxpayers end up whip-sawed by the process.

Accordingly, NSPA recognized in its testimony the difficulties inherent in cutting off tax legislation before the federal budgeting process is complete for a given year. In balance, however, the Society told Congress that it believes strongly that the short term deferral of tax revenues (or losses) is outweighed by the increased lead time in adjusting to change. NSPA told Congress that it is seriously committed to the concept of a cut-off date, and urges its thoughtful consideration by the nation's tax writers.

In short, the National Society realizes that as long as there are budget deficits, there will always be revisions to the Internal Revenue Code. It is probably not possible to stop change. However, if it cannot be stopped, it's pace can at least be slowed down. NSPA's cut-off proposal would be of great service toward this end.
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Title Annotation:IRS's tax forms
Author:Berkery, Peter M., Jr.
Publication:The National Public Accountant
Article Type:column
Date:Aug 1, 1990
Previous Article:Bonnie Moore and CAIA vs. the State Board of Accountancy.
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