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Saturday, July 28, 2012

Guest Post - Tax Law: How CPAs Can Affect Reform

Today I have a guest post from Grant Webb with some ideas and reminders that CPAs can affect the tax law and tax policy.

By Grant Webb with Bisk CPA Review. Grant writes and reports on accounting code, policy, and law in attempt to help accountants in their journey to becoming a CPA.

Taxes and taxation are always at the forefront of any political debate and there will never be a pristine method of how people in the United States should be taxed by the federal government. Almost everyone has a differing opinion on what type of tax should be implemented in the United States, whether it is a progressive or a regressive tax. CPAs play a large role in taxation in the United States, including helping to formulate the tax codes all the way down to filing tax forms on behalf of their clients.

The Federal tax law affect almost everyone living in the United States. Tax reform is an ongoing process where it seems almost nothing ever gets done. There has been talk for years about reforming the tax code. It seems during election years the rhetoric ramps up, but the action dies down. This election year is no exception.

Every year, at least in recent history, there are a number of tax laws that expire and require action by Congress to extend. Although Congress typically doesn’t extend these laws until the “lame duck” session. A lame duck session occurs following the November general election and gives an opportunity for those leaving office to vote their conscience. It also prevents a legislator’s vote from being held over them during the election, with hope that most voters will forget the vote, if it was controversial, by the time the next election rolls around. During lame duck sessions there also seems to be more of an urgency on both fronts to get things done. Politicians on their way out of office may want to achieve as many of their agendas they set out to accomplish the day they started their term. Additionally, there is also is a lot more compromise between both Democrats and Republicans during these lame duck sessions, whether it is on tax laws, immigration laws, or healthcare reform. An example of a compromise during a lame duck session occurred in 2010 after the Congressional elections because the Republicans took back the House and six seats in the Senate. After much deliberating on both sides, Democrats agreed to extend the Bush tax cuts for all taxpayers.

However, this may also a good time to propose tax reform, as it may have a good chance of getting accomplished. Of course, a CPA would need to prepare and prep before the lame duck session and the reforms would have to be vetted with sponsors and so forth to even be considered during the lame duck session.

A CPA going to Capitol Hill may want to consider targeting CPA members of Congress or members that sit on the appropriate committees, as they will be more familiar with tax reform. That said, a CPA can also use their knowledge to explain accounting and taxation principles to government officials in terms that they can understand.

Another area a CPA might consider influencing tax policy, is at the regulatory level. The IRS regularly holds comment periods on tax regulations, soliciting professional opinions on the rules and procedures they implement based on laws passed by Congress. While one won’t be able to change the law at this level, they can affect how it is implemented.

Professional associations are another great way for CPAs to advocate for tax reform. Leveraging the volume of members a professional association, such as the AICPA or a state CPA society, has to enact reform is a common method. Most professional associations hold “lobby days” or trip to Capitol Hill to meet with your elected representatives. This can be a great time to come prepared with tax reform talking points.


Barry said...

Are there ways that auditing firms can also affect tax reform in a similar manner?

Grant said...

Thanks for your Question Barry. Yes there are ways that auditing firms can chime in. It's actually pretty similar to the approach that any individual would take. I've never personally attempted this but any firm or representative could gather documentation supporting there views on reform and bring it to hearing. Why you or your firm feels a particular change is necessary would need to be accompanied by hard evidence. Just suggesting changes can be done by anyone, however, not everyone works for an auditing firm that has documentation supporting their views and requests for tax reform.

Good question

Anonymous said...

CPA's are historically one of the weakest lobby groups. It must go against their logical/analytical minds.

Think about it - how much tax reform has been actually initiated by CPA's? Any ideas to streamline taxation has been met with a thud over the last decade.