Washington, D.C. (March 3, 2011) – Congress should simplify the tax rules for all small businesses when it writes tax reform legislation, Patricia Thompson, chair of the Tax Executive Committee of the American Institute of Certified Public Accountants, told the House Ways and Means Subcommittee on Select Revenue Measures.
Many U.S. businesses are not organized as corporations. The taxes of these businesses, often referred to as pass-through entities, are paid by the business owners on their personal tax returns. Congress will have to address individual tax reforms, too, Thompson said.
“Tax reform cannot merely involve changes to corporate tax rates or other tax provisions targeting corporations if the desired impact is to help all small businesses overcome the burdens and complexities of tax compliance,” she said.
Tax rules regarding depreciation of property, retirement plans, partnerships and the alternative minimum tax were identified by Thompson as being important areas for reform. She noted that inconsistent definitions in the tax code and uncertainty about tax laws add complexity. For example, a small business might be defined based on its average annual gross receipts or on the number of its employees. However, the amount of gross receipts and number of employees that qualify a business for small business status vary by code section, adding further confusion.
The Select Revenue Measures Subcommittee hearing focused on the particular burdens the tax code places on small businesses and the need for reform in order to address those problems.
A copy of the testimony is available at http://www.aicpa.org/InterestAreas/Tax/DownloadableDocuments/WrittenTestimonyforPatThompson.pdf.