Academic journal article Journal of Accountancy

Workload Compression Proposal Poised for Legislative Journey

Academic journal article Journal of Accountancy

Workload Compression Proposal Poised for Legislative Journey

Article excerpt

Dorene B. Smith, a sole practitioner in Atlanta, knew that from the first weekend in January through the middle of April she would average over 70 hours per week preparing tax returns. Smith is spending so much time in her office because the bulk of her accounting and tax work, which before enactment of the Tax Reform Act of 1986 was spread over a 12-month business cycle, must now be completed within 3 1/2 months. The 1986 act required partnerships, S corporations and personal service corporations to adopt calendar years. To Smith, legislation to ease this pressure would mean more time with her family as well as better service for her clients. This relief may be on its way.

Congressman E. Clay Shaw Jr. (R-Fla.) has introduced a bill that could provide important relief from the workload compression problem. If enacted, HR 1661 would give back to partnerships and S corporations the option to choose any fiscal year they wanted. In return, the bill would protect the government against revenue loss. When the provision requiring calendar years for pass-through entities was enacted in 1986, it was expected to raise $1.7 billion in additional taxes over a five-year period. The amount lost in a simple repeal of that measure today would be much higher given the higher individual tax rates and the explosive growth in S corporations since 1986.

To make the legislation revenue neutral, pass-through entities that choose a fiscal year and whose average income per 2% owner is less than $250,000 would be required to pay quarterly estimated taxes of 34%. …

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