The American Institute of CPAs said that it supports H.R. 3359, a bill pending in Congress that would create a uniform national standard for state withholding of nonresident income tax.
The AICPA pointed out that the bill would be especially helpful to small businesses, as well as larger businesses. Businesses and accounting firms that do a great deal of business across state lines are negatively affected by nonresident income tax withholding laws.
"We need a simple and uniform system governing how states apply taxes to nonresidents doing business in their states," said James Metzler, vice president of small firm interests at the AICPA, in a statement. "Recordkeeping can be voluminous under the current regulatory scheme."
The AICPA has submitted a statement to the House Judiciary Subcommittee on Commercial and Administrative Law on the bill, which is known as the "Mobile Workforce State Income Tax Fairness and Simplification Act of 2007."
Metzler noted that 41 states impose a personal income tax on wages and partnership income, and those states have many different tax requirements for withholding of income tax for nonresidents.
The complexity grows deeper because exemptions are not handled uniformly in different states. Several states have reciprocity agreements with other states that exclude taxation of residents of those states that have signed the agreements.
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