Posted: Apr 26, 2005 By: Mike Casey

Subject: Tax reform

Comment: If the tax was calculated on cash receipts and disbursements only, the code would be greatly simplified. It would not matter what size the entity is. It would be taxed on the net cash receipts over cash disbursements. You would eliminate depreciation as the assets would be expensed as purchased. The selection of methods, bonuses, section 179 and other depreciation options are too much. The record retention for these alternative methods are overly extensive. The recapture rules alone are far too confusing. You would also eliminate transactions relating to inventory, accounts receivable, pension funding, accounts payable and all other accruals which are most of the time subjective. Will a business entity (includes S/E taxpayers filing Schedule C) load up on inventory at the end of the year? Probably, but they can't do it year after year because in most cases to much inventory is not a good business practice.

For individuals, the passive activity rule is a nightmare. The record retention can go on for years. In fairness to taxpayers, the at risk rule should be the only the only regulation that's necessary. There are far too many tax credits and they become confusing with the limitations on income. The phase-outs should be eliminated for all tax activities.

Simplify the code to allow LLCs, S Corps, and Schedule C filers to deduct insurance, pension contributions and other deductions allowed on C Corps.

The rules regarding all the deferred retirement account should be simplified. The income limitations and participation rules should be eliminated. The rollover rules from an a traditional IRA to a Roth IRA should be eliminated.

Then there's the AMT!

Mike Casey