Tax reform: past, present and future
The latest encouraging news for small business is that the U.S. Congress is completing action on an Internal Revenue Service (IRS) reform bill that is designed to make the IRS work better for the American taxpayer. Earlier this year, Congress gave small businesses a 20 percent capital gains tax and increased estate tax exemptions. There have also been increases in business equipment tax deductions and health care costs for small businesses.
The Clinton Administration supports the IRS reform bill, which has three key components:
I. Shift the Burden of Proof
The bill shifts the burden of proof in court proceedings from the taxpayer to the IRS. This is contingent on the taxpayer cooperating fully during administrative proceedings with reasonable requests from the IRS for documents, receipts and other records within the taxpayer's control that are relevant to ascertaining the accuracy of an item on the taxpayer's return. This policy change applies to all corporations, individuals and partnerships with a net worth of $7 million or less.
II.Twenty-eight New Taxpayer Rights
The reform plan creates 28 new rights for taxpayers involved in disputes with the IRS. These new rights allow a taxpayer to sue the IRS for up to $100,000 for damages resulting from the negligence of IRS employees involved in collection action.
It will also simplify the process for recovering legal fees and costs incurred in disputes with the IRS. Access to the tax court's less burdensome and inexpensive Small Case Calendar (small claims court) will be made easier for taxpayers. These are just a few of the new rights created under the reform plan.
III.An Independent Oversight Board
The bill establishes an independent, 11-member oversight board with the authority to hold the IRS accountable for change. The board will be made up of the secretary of the Treasury, the commissioner of the IRS and a representative of the IRS's employees union. The U.S. president will select the remaining non-governmental experts to serve on the board.
The board will: 1) review and approve the IRS's annual strategic plan; 2) review IRS operations, plans for modernization, and agent training and education; 3) review the selection and compensation of senior managers; and 4) review and approve IRS reorganization.
House Ways and Means Chairman Bill Archer of Texas is spearheading the reform bill, which is a product of legislation drafted by Rep. Rob Portman of Ohio and Rep. Ben Cardin of Maryland. President Clinton has stated he will sign the legislation. In anticipation that the bill will pass, and as an analogy of the biblical story of David and Goliath, Archer stated, "David is about to get a bigger slingshot."
What lies ahead? Rep. Dick Armey of Texas and Sen. Richard Shelby of Alabama have introduced flat tax bills in the House and Senate that will kick off the tax debate in 1998. House congressional leaders are conducting public meetings around the country to gauge the public's reaction to creating an entirely new tax code.
The Automotive Service Association and other small-business trade associations joined together in submitting testimony to the U.S. Senate Committee on Small Business. There were four general themes in this testimony:
- Lack of training for IRS examiners.
- The overall complexity of the code.
- The problems of a blended personal tax system.
- Specific challenges of compliance by family-owned businesses.
If small-business people are to have more control over how much they pay in taxes, they have to encourage their legislators to address tax policy in 1998. If small-business people do not speak up, change will not occur.
How's your business? || EGR systems: operation and diagnosis || Achieving pre-accident condition, avoiding diminished value || Tax reform: past, present, future || Coping with extended warranties || Value-added services build loyalty || Guest Editorial: It's time to role up our sleeves || Tech Tips || News Briefs || Taking The Hill || Around ASA || Shop Profile || Net Worth || Chairman's Message
AutoInc. Magazine ®, Vol. XLV No. 12, December 1997