CPAs should plan for eventual tax hikes

Dec 08, 2011
Expect status quo at best in a presidential election year, said one speaker at OSCPA’s MegaTax conference, a theme which was underscored time and again at the two-day event.

CPAs should be having discussions now with clients about how to maximize the current tax environment, because it’s not likely to improve in the coming months, said Dean Zerbe, JD, LLM, national managing director of the Alliantgroup LP’s Washington, D.C. office.

“Where you are now in terms of taxes is the high water mark,” he said. “This is about as low as taxes are going to be for a while, so you need to be working with clients now to go through the tax code and find where you can lower their burden like the big guys do.”

Zerbe spoke on the second and final day of the popular event. He said with a presidential election looming, tax reform is unlikely in 2012.

“Do you think the White House is going to be a part of a plan that has the top rates coming down after all the hue and cry over that?” he said. “And it’s hard to see Republicans, if their candidate is doing well, saying, ‘Oh, yes, let’s move forward with it.’

“There will be uncertainty on taxes until after the election. Both sides have their hands out, but they are still 100 yards away from each other.”

He said when Congress does get serious about tax reform it needs to ensure legislation helps businesses of all sizes – not just big ones.

“I think regardless of what you see with tax reform, you’ll see that rough-and-ready revenues will stay constant, and they will keep the progressivity of the tax code in place,” he said.

In a Federal Tax Update session, Edward Zollars, CPA, of Thomas, Zollars & Lynch, Ltd. of Phoenix, said Congress did not make many significant changes in 2011, with the exception of problem earned income tax credit filings. He said given the election and the current political climate, “we have a better chance than we’ve had in years for total gridlock and total inaction.”

During the Tax Practice Update session, Zollars warned CPAs to be familiar with changes in Treasury Department Circular No. 230, which prescribes the rules governing practice before the IRS. Amendments affecting every subpart of that circular took effect Aug. 2.

“If you violate 230, that is a professional death sentence,” he said. “If the Office of Professional Responsibility comes for you, you won’t be doing anything from a tax perspective.”

In the area of state tax issues, Ohio Tax Commissioner Joe Testa discussed potential tax simplifications in Ohio, most notably on municipal income taxes. A lack of uniformity in local income taxes has become a hot issue in recent months, as the state has looked for ways to improve Ohio's economic development environment.

Testa said any reforms are only in the discussion phase now.

“There is tremendous interest in this issue,” he said. “OSCPA is for it, and many municipal resolutions oppose it.”

Testa said that while he understands the concerns of municipalities, he also thinks the situation “is probably the worst in the country. Ohio’s got to be better than this.”

During his talk, Testa touted cost-cutting measures his department has been working on in 2011, including increasing participation in electronic filing and improving the process, amnesty programs for consumer use and general taxes and reducing a backlog of tax appeals.

He said in the coming months, the Ohio Department of Taxation will work on processing returns and answering questions more efficiently and helping the business community through tax simplification.

“I don’t know how much we can get done, but I don’t want to see Ohio in the middle of the pack,” Testa said. “… Governor Kasich’s priority has been, ‘What can you do to advance the growth of jobs?’ We’re taking stock of things that have been in place for many years – in the previous administration going back to the administrations before that – and asking, ‘where are the key bottlenecks?’”

To that end, Testa said, CPAs play a critical role because they have a close, first-hand view of challenges in Ohio’s tax code. “They are on the front line with businesses, interpreting the tax code and advising,” he said.

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