The National Association of Enrolled Agents (NAEA), the organization that powers America's tax experts, has announced its intent to focus its advocacy efforts on tax code provisions in desperate need of reform. The association intends to work with other interested stakeholders in requesting that Congress address this important issue.
"The problem is that certain tax code provisions have been treated as 'set it and forget it' by Congress", said NAEA Government Relations Chair Lonnie Gary, EA, USTCP. "Millions of Americans are paying taxes based on rules that were created in financial environments that no longer exist."
Of particular concern to the NAEA are tax code provisions that are not indexed (to reflect cost of living changes), the most obvious example being the Alternative Minimum Tax (AMT):
The AMT was set in the late 1960s to catch high-income individuals who did not pay any income tax.
Today, taxpayers who itemize deductions and are subject to the AMT lose their deductions for state and local income and property taxes, among other benefits.
Even though the original AMT went after the tax shelters of the very wealthy, today's AMT targets the automatic deductions of the middle class.
If the AMT was not indexed annually by special acts of Congress, it would hit tens of millions of taxpayers.
While the AMT gets ample attention in ongoing tax reform conversations, the NAEA notes that others are not given much visibility, including Society Security benefits:
Section 86, which addresses the taxability of Social Security benefits, is not indexed.
Income thresholds above which Social Security benefits become taxable were set twice, once in the early 1980s and once in the early 1990s, and then never revisited. This has resulted in a much higher percentage of Social Security benefits that are taxable, effectively increasing taxes for many seniors on fixed incomes.
In light of inflation that has occurred in the last twenty years, adjustments to the base amounts are long overdue.
The National Association of Enrolled Agents (NAEA) is the professional society whose members are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. The association advocates for better tax policy and supports its members with resources, education and networking. Find out more about NAEA and enrolled agents on the NAEA website.