Complexity is eroding voluntary compliance with U.S. tax laws, a member of the American Institute of CPAs Tax Executive Committee told the House of Representatives Small Business Committee this week.

"By and large, small businesses obey the law, but it's only human to inadvertently disobey a law if you do not or cannot understand the rules," TEC member Ronald B. Hegt said. Hegt said that a "lack of deliberation in the legislative process," frequent law changes in recent years, and the increasing magnitude and complexity of the Internal Revenue Code are creating serious compliance issues for small businesses.

"Complexity is manifested by Internal Revenue Code provisions which contain either vague or highly technical requirements," he told the committee. "These requirements are often riddled with exceptions, limitations and other special rules that even the most sophisticated of tax advisors can find difficult, if not impossible, to decipher.  Added to that is the fact that many provisions, complex on their own, often must be applied in tandem with other complex provisions."

Hegt said that the alternative minimum tax should be eliminated; that a more objective test is needed to determine if workers are employees or independent contractors; that objective, administrable tests relating to capitalization, expensing and recovery of capitalized costs are needed; that capital gains rules need to be simplified; and that estimated tax safe harbors should be rationalized. Hegt aslo said that he supported allowing new small businesses to select any fiscal year-end from April through November.

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