President Obama delivered his State of the Union address to the nation Tuesday night and included verbiage that offers encouragement for accountants struggling with issues surrounding the new 1099 regulations.
Obama promised to fix unnecessary burdens on businesses, and Edward Karl, vice president of taxation for the American Institute of Certified Public Accountants (AICPA) interprets this to mean that the President supports a halt to the onerous 1099 requirements set forth in the Patient Protection and Affordable Care Act (aka Obamacare).
Speaking with AccountingWEB after the President's address, Karl stated",Absolutely - I've heard him specifically talk about it. I heard him say right after the election in November when there was already discussions about repealing health care that he would entertain specific issues, and he mentioned the 1099 provision. That’s something that we [the AICPA] clearly support."
The President also made a general statement about simplifying the tax code. "There have already been indications as we always get with new Congresses that there's an interest in pursuing fundamental tax reform", said Karl. "He had his deficit reduction panels in the last two years look at fundamental tax reform; we participated in those hearings. I think there is a general interest, but obviously in his speech he didn't cover any specific measures."
Obama stated that certain taxpayers "with accountants or lawyers to work the system can end up paying no taxes at all." Karl did not take offense at that remark.
"Clearly people who use knowledgeable professionals to assist them minimize their taxes, they're compliant with the law, to the best that the professionals advise them, so it's always a question about whether or not businesses and individuals who have good help have some advantages over others who don't. That's one of the reasons why we've always advocated an organized, logical, in-depth review of the taxes. Fundamental tax reform - it's something that he talked about a couple of times in his address.
"What he's saying in terms of accountants or lawyers, that if you get good advice from your professionals, you can be compliant possibly to your advantage to some degree. I think it's the truth that professionals help taxpayers. They help government understand complex tax law, and implement it to make their individual lives and their business lives work legally and effectively - so I think it’s the truth - it's' not insulting."
Obama also made reference to a desire to make the tuition tax credit permanent, but didn't specify to which of the tuition initiatives he was referring. Karl said",There are a couple of different tax education incentives - I'm not sure which one he was referring to."
In conclusion, Karl summed up the issues relating to tax reform by indicating a hope for some permanent changes. "The totality of everything else [Obama] said really refers to a look at the whole tax system. We support a logical, rational, lasting review of something like that. We see the extenders every year, the temporary provisions - we feel that something rational, thoughtful, and lasting is appropriate."