Most Serious Problem? Complexity!

At the request of National Taxpayer Advocate W. Val Oveson, the AICPA tax executive committee recently provided a list of the 24 most serious problems encountered by U.S. taxpayers.

Complexity of the current tax law topped the list. We dont need a new tax code, said David A. Lifson, chairman of the tax executive committee. We need a tax code that is simpler.

Reiterating a position that the AICPA tax division has held since the late 1980s, the executive committee called for simplification of the code, saying that its complexity is the source of often overwhelming confusion and frustration for taxpayers. Simplification of the tax law should be everyones responsibility: lawmakers, regulation writers, judges and administrators.

Top Taxpayer Gripes The AICPA recently named the most serious problems taxpayers encounter.
  1. Tax law complexity
  2. Standards for raising an issue in an IRS examination
  3. Problems with notices
  4. Procedures for examination
  5. Power of attorney issues
  6. Unrestricted extensions of the statute of limitations
  7. Delays in case resolution
  8. Inconsistency in implementing IRS policies
  9. Lack of notice of intent to offset
  10. Misapplied estimated tax and other payments
  11. Interest computations
  12. Penalty administration
  13. Retroactivity of regulations
  14. Offer in compromise issues
  15. Slow response on freedom of information requests
  1. IRS employees lack of training, practical business sense and understanding of taxpayer viewpoints
  2. Reluctance of practitioners to contact the local taxpayer advocate for fear of reprisals
  3. Lack of adequate representation in small cases before the Tax Court
  4. Need for further safeguards for divorced or separated spouses and married persons in community property states
  5. Inability to take certain employee plan/exempt organization issues to the Appeals Office
  6. Rigid policies regarding technology
  7. Delays in expansion of IRS test programs
  8. Unified audit procedures issues
  9. Lack of cross-communication between functions within the IRS

From a policy standpoint, however, the link between equity and complexity in the tax code makes simplification difficult.

Simplicity and fairness are tradeoffs, explained William Stromsem, a director in the AICPA tax division. The fairer you make the tax code the more complex it becomes. The simpler you make the tax code the rougher the justice.

Lifson also offered an explanation of the dilemma: There is an eternal triangle in Congress consisting of the conflicting goals of fairness, simplification and economic policy, which all get in the way of one another.

There are hundreds of rules dispersed throughout the code that attempt to give tax benefits to particular groups, he said. The more targeting you do the more complex the tax system becomes.


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