Washington (April 1, 2004) -- The Internal Revenue Service is receiving high marks from the nation’s tax accountants for its handling of the relatively glitch-free 2004 filing season.


Testifying before a House Ways and Means subcommittee on Tuesday, American Institute of CPAs Tax Executive Committee chair Robert Zarzar told Congress that this year’s tax season is progressing “largely without any significant problems,” and that both taxpayers and accountants “generally are pleased with the service’s performance.”


But without new legislation to streamline the federal tax code, future filing seasons could become more troublesome, Zarzar warned. The enactment of additional “tax simplification measures is integral to the success of future filing seasons,” he said, adding that the institute is particularly supportive of pending legislation to soften the impact of the alternative minimum tax.


The AICPA spokesman tempered the association’s praise for the IRS by citing a series of “information return problems” that bedeviled tax practitioners and their clients this year.


“Compliance with the new 15 percent dividends tax rate has proved to be the biggest challenge for taxpayers” during 2004, Zarzar told Congress. “Brokerage firms and mutual funds are having major difficulties determining which dividends that a taxpayer receives qualify as a ‘qualified dividend’ and the new 15 percent tax rate, resulting in large numbers of erroneous Forms 1099-DIV being mailed by financial institutions to taxpayers.”


This situation created "havoc" for many taxpayers who “filed their Form 1040, only to receive an amended Form 1099-DIV from a financial institution after the fact from a financial institution,” Zarzar told Congress. “The taxpayer and preparer are faced with the dilemma as to whether an amended return should be filed; or whether the earlier filed return remains a realistic and reasonable ‘snapshot’ of the taxpayer’s tax position for 2003 and therefore, obviating the need to file an amended return.” Even then, “there is nothing to say that the same taxpayer will not receive a third generation of corrected Forms 1099-DIV,” he said.


-- Ken Rankin

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