Bills aimed at easing tax anxiety

July 28, 1991|By Dinah Zeiger | Dinah Zeiger,Knight-Ridder News Service

Here it comes again. Tax simplification made an encore appearance in Congress last week, with hearings on three bills before the House Ways and Means Committee. Some of the proposals could make figuring your taxes easier, and one of them could even help you pay them.

Many of the provisions pertain to large partnerships and international taxation issues. But others would directly affect individual taxpayers.

Among the proposals, for example, is a provision to allow you to pay your federal income taxes by credit card. Many states already permit you to pay state taxes that way.

Gail Sevier, a tax partner with the accounting firm Ernst & Young in Denver, thinks the credit card proposal is a "horrible" idea. "We struggle constantly with the Internal Revenue Service about when and how a payment was made. Canceled checks are still the best evidence and the best record," he said.

He also pointed out that the IRS charges 11 percent interest on unpaid taxes and that many credit cards charge 17 percent to 19 percent for unpaid balances and said, "It's not a good way to get the government off your back."

Another provision would make it easier to figure an earned-income tax credit, which benefits low-income taxpayers. New rules for 1991 allow a supplemental credit for a child under the age of 1 and is added to the earned-income credit. But it requires two separate calculations to figure out how much.

A proposal in one bill would repeal the supplemental provision and raise the basic rate that can be claimed as an earned-income credit.

Mr. Sevier called that idea "true tax simplification."

Another proposal would benefit investors in mutual funds by repealing the "short-short" rule, which limits the amount of earnings you can claim on your taxes from stock held less than three months.

The idea behind the rule was to discourage excessive trading by mutual funds. The bill also would require mutual funds and brokers to report information to taxpayers in a simplified form, which would help them track performance more accurately, a committee spokesman said.

"It'll be a pain for mutual funds and will probably be expensive," Mr. Sevier said. "But it will be good for Joe Taxpayer."

The proposal would not take effect until 1993 to allow time for the funds to add the necessary computer capacity and to do the average-cost-basis calculations, the committee spokesman said.

None of the proposals is likely to be on the books in time to affect 1991 taxes, the spokesman said. "But it's imprudent to speculate. Some elements [in the bills] could fall out entirely; others could be pushed through independently."

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