Former IRS Commissioner Meets with Greenwalt CPAs and Firm Clients

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By Jim Wagoner, CPA | Partner, Director of Tax Services

imageOn Tuesday, September 24, 2013, Mark W. Everson, former IRS Commissioner and current Vice Chairman of our strategic tax incentives partner, The Alliant Group, met with our partners and staff and a number of concerned clients. We received an update on the environment for tax change in our country, and to learn what is going on within the IRS. Some of Mr. Everson’s comments are summarized below:

Our country is in a period of transition as it relates to globalization and international competition, but any focus on this has been pushed aside due to the many other economic issues such as the housing bubble, economic recession, foreign wars and healthcare. Many of our foreign competitors have adopted a capitalistic style making the landscape even more competitive. As a result, we have not done a very good job of addressing what we need to do to remain competitive.

Our country will have record revenues for the year ending September 30, 2013, and our current year deficit will have decreased to $642 billion-one might well ask the question, why aren’t we doing better as a country in providing jobs for our people? The forecast, however, is for significant continued growth in the deficit due in part to social security and other entitlements. Our national debt is expected to increase by over $1.1 trillion this year.

The IRS faces many challenges

  1. Our Congress does not have any champions who really care about tax administration.
  2. Identity theft is a huge growing problem and a mortal threat to our tax system. The IRS has over 3,000 employees working on trying to reduce/control identity theft.
  3. The personnel/retirement policies have changed so as to no longer create incentives for more experienced employees to stay. Thus there is an experience/brain drain.
  4. The Affordable Care Act and other tax incentive programs are severely straining the resources of the IRS, yet there are threats that reduce the IRS budget. At best the budget will remain flat.
  5. The taint that resulted from the political targeting scandal will have a continuing adverse impact on the effectiveness of the IRS. There was in fact a leadership breakdown, particularly in the “investigation selection” process. Now there are many groups of people who are imagining that they are targets of the IRS.
  6. All of these factors complicate tax reform, and in addition, interest in tax reform has receded. Businesses want tax reform to remain competitive globally, but with over 50% of the populace not paying any income taxes and not itemizing, there is a lot less interest in reform in that sector.

The Affordable Care Act

  1. Is extremely complex, with many moving parts. People will have to make decisions about things with which they are unfamiliar, and the “Navigators”, who are supposed to help them, did not get funded until late in the game, and will only be receiving 20 hours of training. So far, execution has been middling at best.
  2. The underlying architecture for the program is flawed. Penalties to induce compliance are not severe enough for employers and employees. The financial success of the program depends heavily on healthy people participating in the plans and paying for insurance. For many of the younger healthy folks who think they are indestructible, they may rather pay the penalties.
  3. The rules are forcing a reduction in employment/hours worked in order for companies to reduce the employees for which they would be required to provide coverage. This has the effect of hurting workers who can afford it the least.

Tax Reform and Tax Extenders

  1. If there is any tax reform this year, it won’t be done until late in the year.
  2. Any tax extenders would also likely be passed late.
  3. The last bill was pushed into the first of the following year, perhaps setting precedent for a repeat.
  4. This would disrupt the filing season even more than last year.

Contact:

Jim Wagoner, CPA | Partner, Director of Tax Services | 317.260.4428 | jwagoner@greenwaltcpas.com