Michael Smart
801-378-7320
[email protected]
PROVO, Utah -- If you don't fully understand the new tax laws, don't worry--your accountant probably doesn't either.
"Even for us professionals, the tax law has become so complicated it is sometimes impossible to administer," says G. Fred Streuling, head of the American Institute of CPA's Tax Policy and Simplification Committee.
The Brigham Young University accounting professor thinks the 1997 Taxpayer Relief Act is more burden than relief. The law was passed to provide tax breaks to parents, students, investors, homeowners and a host of others but in doing so, Streuling says, muddles an already mind boggling tax code.
"It's a slap in the face," he says.
Streuling acknowledges it sounds strange to hear accountants, who make money when regular folks can't understand their taxes, complaining about convoluted laws. But the 330,000 members of his professional association "feel it is literally so complex it's almost incomprehensible," he says.
For example, the new law decreases taxes on long-term capital gains. The tax rate drops from 28 percent to 20 percent on assets held more than 18 months and to 10 percent for those in the 15- percent tax bracket.
There are further discounts for assets purchased after Dec. 31, 2000, and held for five years, but by then accountants will probably still be reading the 3,000-page volume that explains the new law.
Streuling's copy shares a bookshelf with the 10,000-page Internal Revenue Code and six-volume set of Administrative Interpretations provided by the Department of the Treasury.
There are so many rules, Congress itself can't keep track of them, he says. In the 1997 Act, legislators were so excited about adjusting capital gains rates that they failed to clarify rules for offsetting capital losses. "They forgot to mention it," he says incredulously.
"When legislators make an error in passing a tax law, they fix it and call it a 'technical corrections bill.' But when an accountant makes an error trying to interpret their work, they call it malpractice," says Streuling.
Embattled IRS staffers also can barely keep up with the new regulations, Streuling says. "It was very hard for them just to change some forms involved with the new laws. It takes a while for them to be trained," he says.
The professor, a former director of BYU's accounting program that is now ranked third in the nation by the Public Accounting Report, warns excited taxpayers that the new act's benefits may not be as "relieving" as they seem.
"The $400-per-child tax credit only applies to qualifying children under 17," he says. "Most people think that if the kids live at home, they qualify. Not so--if your 16-year-old turns 17 in 1998, he or she doesn't count."
And the aforementioned capital gains cuts do not apply to assets sold before May 6, 1997, he cautions.
Until Congress cleans up its "acts," Streuling recommends the average taxpayer get help.
Volunteer Income Tax Assistance services sponsored by universities and professional groups can provide valuable, free advice, Streuling says, adding that BYU's VITA serves between 3,000 and 5,000 taxpayers.
True to his trade, Streuling also advocates turning to professional tax preparers. Many don't charge that much, he says.
"Plus, the fee is tax deductible."
Note: Streuling (pronounced "stroi -- ling") can be reached at his office: 801-378-3100
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