AICPA Applauds Passage of Mobile Workforce State Income Tax Act
The American Institute of CPAs (AICPA) applauded the U.S. House of Representatives for passing the Mobile Workforce State Income Tax Simplification Act of 2017, H.R. 1393. The bill would simplify state income tax reporting and withholding rules for employees who sometimes work outside their home states.
“The House’s passage of the Mobile Workforce State Income Tax Simplification Act of 2017 is a victory for taxpayers and their employers,” Barry C. Melancon, CPA, CGMA, president and CEO of the AICPA, stated. “Enactment of H.R. 1393 would eliminate the need for much of the complex recordkeeping that employers face when their employees cross state lines to work. It also would relieve many workers of the burden of filing state income tax returns for states in which they worked only a few days during the year.”
Melancon explained that the legislation would create a uniform national standard that would eliminate the compliance maze many employers and employees currently face because they have to keep track of numerous state income tax withholding laws and varying de minimis exemption periods imposed on nonresident workers. Employee earnings would not be subject to state income tax and withholding outside their home state unless the employee worked in a state for more than 30 days during the calendar year.
However, Melancon noted that under H.R. 1393 notable individuals, such as professional athletes, professional entertainers and public figures, do not qualify for the 30-day de minimis exemption. They would still have to pay tax to the state where they are appearing. Non-headline performers, including dancers and musicians, would be covered by the 30-day national standard.
Small Businesses Need Tax Cut, Says AICPA
Annette Nellen, CPA, CGMA, Esq., chair of the American Institute of CPAs’ (AICPA) Tax Executive Committee, testified today about the effect of various tax reform proposals on America’s small business owner-operators at a hearing titled Tax Reform: Removing Barriers to Small Business Growth, which was conducted by the Senate Committee on Small Business and Entrepreneurship.
“First, tax relief should not mean a rate reduction for C corporations only,” Nellen testified. “Congress should continue to encourage, or at least not discourage, the formation of sole proprietorships and pass-through entities. If Congress decides to lower corporate income tax rates, small businesses should receive a lower tax rate as well,” she said.
A reduced tax rate for income of small businesses would place additional pressure on the need to distinguish between profits of the business and compensation of the owner-operators, Nellen noted. “We should continue to use traditional definitions of ‘reasonable compensation’ for this purpose,” she said. “Partnerships and sole proprietorships should be required to charge reasonable compensation. We should not treat partners and proprietors as ‘employees,’ but rather as owner-operators whose labor is subject to appropriate withholding taxes.”
Nellen emphasized that no new limits on the use of the cash method of accounting should be imposed. “The cash method is simpler in application, has fewer compliance costs, and does not require taxpayers to pay tax before receiving their income, which is why entrepreneurs often choose this method,” she testified. “Forcing more businesses to use the accrual method, unnecessarily discourages business growth, increases compliance costs and imposes financial hardship on cash-strapped businesses.”
Initiative Launched to Spur Innovation in Accounting Profession
The AICPA and CPA.com are jointly sponsoring an initiative to accelerate the growth of early-stage companies that could have significant impact on the accounting profession. The goal is to promote innovation and give the profession early insight into disruptive technologies and services in finance and business.
The Association of International Certified Professional Accountants and CPA.com Startup Accelerator will look to support up to five early-stage companies over the next year. It will focus on startups in two key areas: 1) Technology and Financial Information, which could include advances in artificial intelligence, automation of routine tasks, and the application of blockchain/digital ledgers, and 2) Professional Competency Innovation, which can encompass machine learning to personalize professional education, collaboration tools for mentors and experts, and improvements in measuring professional competency, among other categories.
“The Association and CPA.com have a deep base of knowledge and resources to offer entrepreneurs looking to find a foothold in the accounting ecosystem,” said Lawson Carmichael, the Association’s executive vice president for strategy, people and innovation. “And for us, the startup accelerator offers a chance to ‘see around corners’ and take a more long-range view of opportunities in business transformation and innovation. There’s a compelling business case for collaboration.”
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