National Association for the Self-Employed: "Lawmakers need to simplify the Tax Code'

From National Association for the Self-Employed --

Move Would Help Narrow $345 Billion Tax Gap, Decrease Taxpayer Headaches

Washington, D.C., June 30, 2011 – With spending up and revenues down, Senate lawmakers are looking to rein in the tax gap in order to bring down the national debt. The tax gap is the difference between what the IRS is owed versus what it collects each year and is currently estimated at $345 billion. The National Association for the Self-Employed (NASE) has been very active in suggesting ways that the gap might be closed, including small changes to current tax code and tax policy.

“Congress has been eager to pursue methods for reducing the tax gap, often at the expense of the self-employed and micro-businesses,” said NASE Executive Director Kristie Arslan. “Instead of further complicating the tax code with added regulatory burdens on small business and increasing enforcement activities, we suggest a more balanced approach that includes simplifying the tax code and enhancing taxpayer education.”

In the past, the federal government has targeted the self-employed (Schedule C filers) as part of their collection efforts. Recently, some agencies have publically acknowledged deficiencies in the tax system, including the IRS and the Government Accountability Office.  Both offices have acknowledged that most noncompliance is the result of inadvertent errors and tax loopholes that provide opportunities for noncompliance.  These agencies suggested what the NASE has said for years, that simplification of the tax code is a key component to narrowing the tax gap.

It is important to note that in review of current proposals to address the tax gap, we see that they solely focus on business to business transactions. Business to business transactions are already highly regulated and have substantial reporting requirements. A large area of potential non compliance and under reporting stems from business to consumer transactions. These dealings are currently not subject to reporting requirements and the creation of those requirements would likely be prohibitive to consumers and politically unappealing to legislators.

“In the fervent drive by Congress to recoup revenues for our fast depleting federal coffers, we must take the necessary steps to make certain the path we choose is balanced and effective, rather than detrimental. The NASE believes that the collective focus should be on supporting efforts for the survival, growth and innovation of small business as a foundation for long-term economic vitality,” remarked Arslan.

Read more here about the NASE’s position on specific tax gap proposals.