Academic journal article Journal of Accountancy

Workload Compression Reaches House Hearing

Academic journal article Journal of Accountancy

Workload Compression Reaches House Hearing

Article excerpt

Robert L. Israeloff, chair of the American Institute of CPAs board of directors, told members of the House Ways and Means Committee that the workload compression problem for CPAs was "the equivalent of scaling Mount Everest the first four months of the year and trekking through Death Valley the rest." The chairman said 65% to 75% of the annual workload of many CPA firms--especially small- and medium-sized firms--fell between January 1 and April 15, creating a practice management problem of major proportions.

The 1986 Tax Reform Act required trusts, partnerships, S corporations and personal service corporations to adopt calendar years for tax purposes as a way to pay for a liberalization of the low-income housing credit. The change by so many clients to calendar years has resulted in a tremendous shift of work to the first four months of the year. Israeloff told the House committee that the problem was exacerbated with the enactment of the 1993 increase in individual tax rates. "Because of the mechanics of Internal Revenue Code section 444, the deposit presently payable on deferred income has increased with those individual rates and is now set at a 40.6% rate. Simple financial self-interest dictates that, for most affected entities, the proper course of action is to terminate the fiscal year election, making CPAs' workload compression problems even more intense."

The Small Business Tax Flexibility Act of 1995 (HR 1661) would allow S corporations, partnerships and trusts to elect their own tax years. …

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