13 posts categorized "Edward Karl, CPA" Feed

“Taxation with Representation” – Where Are We with Tax Reform?

"People who complain about taxes can be divided into two classes: men and women."
-Author Unknown

I gave a test in my last tax reform blog. “What will be the greatest driver of tax reform?” and offered the following possible answers:

  • Bipartisan compromise?
  • Congressional leadership changes?
  • Current events?
  • Revenues?
  • Good tax policy?

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Federal Government Shutdown - It’s Deja vu All Over Again

Government-closedThere’s an old adage that “there’s nothing new under the sun” and so it is inside the Beltway.  As you are well aware, the federal government suspended most of its operations on Oct. 1 after Congress failed to pass a bill to extend funding to mid-November, the first such shutdown in 17 years. Strong political discourse is alive and well in America and it is part of the price we pay for democracy.  It was that way in 1996 when a shutdown lasted three weeks. Hopefully a compromise can be reached quicker this time around.

On the tax front, with more than 85,000 Internal Revenue Service workers now furloughed until Congress reauthorizes spending, many non-essential IRS functions have shut down, including all taxpayer services, as well as examinations. The closure of taxpayer and practitioner hotlines is particularly challenging for those individuals who must file a Form 1040 by Oct. 15 and need to contact the IRS. Nevertheless, no filing deadlines are postponed and returns must be filed. We have urged the IRS to consider the substantial burden imposed on taxpayers (and practitioners) by the inability to communicate with and obtain information from the IRS.

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Tax Reform: How Do We Catch Up with the Maldivians?

Time-for-changeGet ready for a test. What will be the biggest driver of fundamental tax reform?

  • Bipartisan compromise?
  • Congressional leadership changes?
  • Current events?
  • Revenues?
  • Good tax policy?


In my last blog, I predicted that fundamental tax reform would not come before 2014 so we have some time before the test answer arrives. But I do want to talk about good tax policy in this blog.

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Tax Reform: The Crystal Ball Never Lies

Crystal-ballPeople often ask me, “Ed, when do you think we’ll finally see tax reform?”

“Not before 2014,” I respond with assurance.
“How can you be so sure, Ed?” they say.
“My crystal ball never lies!

But I started getting a bit nervous about sounding so confident.  After a little digging, I found out my crystal ball had once predicted that the Titanic was unsinkable, yet it went down on April 15, 1912. How’s that for foreshadowing?! That forced me to do some soul searching and thinking.

Flash back to November 2011. I was sitting next to Pat Thompson, who chaired the AICPA Tax Executive Committee.  We were listening to Don Longano, former House Ways and Means Committee Chief Counsel and Washington tax insider, share his views on the prospects for tax legislation at the National Tax Conference.

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While You Were Coping With a Filing Season out of...

Sleeping-CPAIt’s hard to believe that I’m coming up on my 30-year anniversary at the AICPA.  Before that, I spent eight years in public practice – six with a local firm and two with an international one. Truth is those 30 years have not dimmed the memories of the challenge of filing season.  I joke about those memories but I also admit about how important it is for me to “feel the pain.” 

So many of our members are in public practice and have to “live the pain.”  That is one of the reasons why I am glad that my two directors have experienced many, many filing seasons - one of them ran her own practice for 17 years – as it motivates the Tax Team even more to lessen our members’ pain.

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Crossing the Finish Line with Circular 230

Tax Ethics and Horses

OK, raise your hand if you have that Circular 230 legend at the bottom of all your emails.  Great – now keep your hand up if you know why.  Not to worry – most of us are in the same boat.  So why the question now?  Here’s the story . . .

If you do any kind of tax work, I hope you're familiar with the AICPA’s Statements on Standards for Tax Services.  And if that work involves any kind of federal filing or representation, you'll also need to be familiar with Treasury Department Circular No. 230

Horse-raceCircular 230 isn’t new - its roots go back to the Civil War. The post-Civil War Congress enacted legislation that gave citizens the authority to make claims with the Treasury Department for the value of horses and other property lost during the war.  It soon became evident that more claims had been submitted than horses lost.  On July 7, 1884, President Chester Arthur signed what became known as the Horse Act, giving Treasury the authority to regulate the admission of representatives of claimants before them and to take related disciplinary action.  Eventually, the Horse Act led to the system we have today in which licensed CPAs are automatically admitted to represent taxpayers to the IRS with full practice rights.

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In the News: AICPA Advocates for Fiscal Responsibility

National debtAs many of you may recall, in an effort to bring attention to how and why the financial sustainability of our nation is at risk, earlier this year the AICPA developed What's at Stake? A CPA’s Insights into the Federal Government’s Finances, which explicitly spells out the issues for policy makers and the public.

Following up on those calls for solutions to our nation’s financial problems, Accounting Today reported that the AICPA’s board of directors recently voted toadopt a resolution calling on lawmakers to do more to ensure the long-term fiscal health of the United States by better controlling the growing national debt. One aspect of this resolution involves the AICPA supporting two non-partisan efforts, the Campaign to Fix the Debt and the Comeback America Initiative, both of which align with the AICPA’s goals of putting America on a better path toward fiscal responsibility.

As AccountingWEB notes, the resolution will also be shared with state CPA societies as the AICPA continues to seek ways to advocate for reduced complexity for American businesses and individuals. Stay tuned.

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What Happens When a Lame Duck Meets a Fiscal Cliff?

10 (Tongue in Cheek) Predictions

Fiscal-cliff-questionsLast year, I wrote a blog about the congressional “super committee” created by the Budget Control Act of 2011 to deal with government’s immense debt and the deep deficit hole in which we find ourselves. The super committee of 12 members of Congress was unable to reach consensus on specific ways to wrestle with our unruly fiscal problems. That means, come this January, Washington will face $1.2 trillion in automatic spending cuts (known as sequestration).

What else is staring at us as we head towards the winter solstice? Not too much - there's the 2011 extenders including the AMT patch, 2012 extenders, the 2% payroll tax cut, the debt ceiling limit, expiration of the Bush tax cuts, and oh, the grim reaper is chasing the estate tax yet again. Did I also mention that we have a very contentious presidential election leading up to a lame duck session of Congress? Federal Reserve Chairman Ben Bernanke calls it a “fiscal cliff.” I'm exhausted just thinking about it!

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Shine a Light on What Taxes You Pay

Total Tax Insights Calculator

Every year, politicians, economists, tax practitioners and others talk about making changes to our federal and state tax systems. Some of the proposed changes are more fundamental – the adoption of a consumption tax, for example. Other proposals, on the other hand, call for varying degrees of modification to the existing system, such as adding or expanding tax incentives to encourage savings, modernizing the international tax rules, or making procedural changes to improve compliance.

In a presidential election year, and at a time when our country faces unprecedented levels of debt and extraordinary amounts of governmental-operating deficits, taxes will continue to be one of the most pressing issues for public discourse. Have you heard any of the candidates mention the “T” word lately? We all know, however, that talking about taxes in this environment takes a lot of political courage.

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In the News: Tax Tips for Procrastinators

IRS tax Form 1040I’m a procrastinator by nature. I can’t help it. I wait until the last possible second to do things - even important things that I know I need to do, like file my taxes. Many of you reading this may be in the same boat as me, staring at the calendar and wondering how it’s possible you still haven’t gotten around to filing yet.

I hear you, and I also hear the clock ticking as it counts down to the April 17 deadline.

As luck would have it the AICPA has helpfully compiled the 10 Top Last Minute Tax Tips to help get us through the process as painlessly as possible. In fact, one of the most helpful last minute tax tips for me was the news that I can have my CPA e-file for me. So this year, even though I waited until the last minute I won’t have to sprint up the steps of the Post Office just to make the deadline, as I have in years past.

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Doing the Right Thing…When Tax Ethics Get Murky

Dictionary_definition_ethicsI often get phone calls from members who are troubled by a professional ethics issue. “Ed, I have a conflict with a client; I don’t trust him.” Or, “I just engaged with a new client and I suspect the old accountant of doing something wrong; should I turn her in?”  The scenarios change but in the end, they always ask: “What should I do?”  And I always tell them: “I can’t tell you what to do!”  Really, it comes down to a matter of ethics and who am I to tell someone how to behave?

Over the years, while teaching classes on subjects like the AICPA’s enforceable tax ethics, the Statements on Standards for Tax Services, or the Internal Revenue Services’ Circular 230, I often ask the participants to define ethics.  “Guided by a code of conduct,”  “acting with integrity,” “having a moral code,” “moral principles that govern a person’s behavior,” or “living your life with high values” are examples of what I’ve heard.  The definition that resonates best with me is “doing the right thing.” 

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“Who’s on First” with the Best Deficit Reduction Idea

deficit reduction ideasWell, it seems as if deficit-reduction watching has nudged baseball out as America’s favorite pastime!!  With a full count on the debt ceiling, Congress came together on August 2 to strike out the looming debt ceiling cap and hit a $1 trillion in spending cuts.  At the same time, lawmakers also agreed to come to grips with the monumental deficit.  The agreement created the “Dirty Dozen,” a bipartisan Joint Congressional Committee that is charged with moving forward additional deficit-reduction ideas of at least $1.5 trillion by November 23, 2011. Automatic, across-the-board spending cuts will ensue if Congress fails to come up with a specific plan by the end of December.

So what’s still in the field of play of ideas? 

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Did the IRS Get the Reg. Tax Preparer Program Right?

Seal of the Internal Revenue Service

For years, AICPA members have approached me at conferences and asked, “Ed, why doesn’t the AICPA support efforts to regulate paid income tax preparers?”  Or, “Why can’t the IRS discipline 'unenrolled' preparers under Circular 230 (the rules governing practice before the IRS)?”  

They believed that the playing field deserved a little bit of leveling for certain “players.”  They weren’t alone.  The Government Accountability Office and Treasury Inspector General for Tax Administration both issued compliance studies (cited in the IRS Commissioner’s report) that implicated the “unenrolled” preparer community as the source of compliance problems.

Well, we support those efforts now!

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