The American Institute of CPAs (AICPA) recently recommended a number of ways to simplify and clarify the current tax code in the upcoming year to the Department of the Treasury and the Internal Revenue Service. These recommendations aim to streamline the tax filing process and provide a more straightforward framework for taxpayers.
Promoting Simplicity in the Tax Code
In a letter dated May 9, 2023, addressed to the IRS, the AICPA once again advocated for tax simplification and outlined several key recommendations to help achieve this goal, including:
- Utilizing the Simplest Approach: The AICPA encourages the use of the most straightforward method to achieve policy objectives, reducing unnecessary complexity for taxpayers.
- Providing Safe Harbor Alternatives: The implementation of safe harbor alternatives would offer taxpayers clearer guidelines, reducing uncertainty and the need for extensive record-keeping.
- Offering Clear and Consistent Definitions: Clear and consistent tax term definitions would make forms easier to understand, leading to more accurate taxpayer compliance.
- Employing Horizontal Drafting: To promote consistency and reduce confusion, the AICPA recommends the IRS adopt horizontal drafting, where a rule applied in one section of the Internal Revenue Code is consistent across all relevant sections.
- Leveraging Existing Record-Keeping Practices: Since taxpayers use established business and industry-standard record-keeping practices, the tax could should also use these familiar processes to increase compliance.
- Balancing General and Detailed Rules: Striking a balance between simple general rules and more complex detailed rules ensures that taxpayers receive clear guidance while addressing specific circumstances adequately.
- Matching Complexity to Taxpayer Sophistication: Tailoring the complexity of tax rules to the sophistication of targeted taxpayers helps mitigate confusion and ensures appropriate compliance for different groups.
Comprehensive Guidance Recommendations
Along with these suggestions for tax code simplification, the AICPA provided guidance recommendations on various other topics. These recommendations are available in the organization’s letter, which can be accessed alongside other tax policy and advocacy comment letters issued by the AICPA.