Tax law too complicated and preparers too unprepared

April 20, 2009
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I have a lot going through my mind as I approach the end of what I think is my 40th tax season. It is 2 a.m. on Easter morning, so don’t expect brilliant commentary. My thoughts are pretty simple.

Our tax system is far too complicated.

Before I delve into that, let us be assured that the tax errors made by Ways and Means Committee Chairman Charles Rangel and Secretary of the Treasury Timothy Geitner were not caused by a lack of understanding. They are just cheaters.

Both men are elitist snobs using their power to steal from the very people who pay them. They do it with impunity because Americans expect corruption and dishonesty from their elected officials. AIG was too big to fail. They were too important to be held to a standard of ethics.

Regarding my point on the complexity of the tax system, you should look at the rules on accounting for an owner’s health insurance in an S corporation. It is the most convoluted, unbearably complicated waste of time I can imagine. There is an easy way to do it which the IRS does not allow, and the way the IRS insists on is mind-numbingly complicated.

This is just one example of the thousands of complexities that burden American businesses with costs that would be better used to become more competitive in the world market.

Our tax law is out of control and nobody has the inclination to clean it up. With the current administration, things are going to get much worse.

Do you know what you have to do to become a hair dresser in Michigan? You have to pass a test and get a license.

Do you know what the requirements are to be an accountant and tax preparer in Michigan? Your body has to be above room temperature for more than 24 hours.

CPA firms spend a lot of money and time on training and educating their staff. Then they must compete with non-CPA offices that have no such requirements and that cover their lack of capability with expensive advertising.

How would you like your accounting fees used? Would you prefer to have them pay for extensive staff training and education, or for advertising? From which would you benefit more?

My frustration stems from a new business client one of my employees acquired recently. A new business needs all the capital it can get. We amended the client’s returns for very substantial refunds. From the returns, we could tell that the original preparer had lacked even a rudimentary understanding of accounting and taxes.

The tax system should not be that complicated, but it is. And there should be some requirements for working in it.

How about that new Michigan Business Tax? Is that a study in stupidity or what?

We replaced one really bad tax with an equally bad tax at enormous cost to the state. Lawmakers are negotiating to do away with the surcharge and go to a graduated income tax. That will attract a lot of new entrepreneurs.

In the world of politics, it is perfectly understandable. How does an anti-business governor, who is in office at the behest of the union bosses in Detroit, deal with a self-inflicted budget crisis? She makes a big show of activity costing millions of dollars, only to accomplish nothing.

The purpose was to maintain the status quo. Mission accomplished.

I have this vision of 50 years from now: Our Democratic leaders, elected by a margin of 50 to 49 of Michigan’s remaining residents, will damn John Engler and George Bush for ruining the state.

It is now 4 a.m. and I am tired. I hope I remember to save this. I might be better off if I forget.

Paul A. Hense, CPA, is president of Hense & Associates, a local accounting firm. He also is past chairman of the National Small Business Association and of the Small Business Association of Michigan.

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