Chairman and Members of the Subcommittee,
I appreciate the opportunity to submit this written statement for the official record
of your May 20, 1983, hearing on efforts to reduce taxpayer burdens.
As you know, a deduction for tax return preparation expenses is available to those
taxpayers who file returns claiming itemized deductions. This encourages taxpayers to seek
professional tax help, thereby reducing their burden in preparing their tax returns. But a
similar tax assistance benefit is not available to those who do not itemize deductions --
usually lower income taxpayers and those who are least able to understand the tax laws.
Millions of our clients view this as a glaring inequity.
A fair solution to this inequity -- while recognizing our governments' responsibility
to help all taxpayers meet their tax responsibilities -- is to grant a small tax credit to
all taxpayers for tax preparation expenses. Any costs exceeding the small credit should be
deductible, as now allowed by those who itemize deductions.
It is by now universally recognized that it is vital to the health of the income tax
system that it be perceived by all taxpayers (those with smaller incomes as well as those
with larger incomes and those who understand the ever-more-complex law and those who don't
understand it) as a system which has the fundamental objective of fairness and evenhanded
treatment of all taxpayers. It is unjust and incomprehensible to the taxpayer who files
the two-page Form 1040A or who files a Form 1040 but does not itemize, that he or she is
not entitled to a tax benefit for the expenses incurred in having his or her return
prepared by professional preparers.
Quite aside from the inequity of the situation, practical advantages to the government
should result from an amendment to the Internal Revenue Code providing for such a benefit.
Some, but not all, of the advantages would seem to be as follows:
1. The government is aware of the difficulties and high costs of administering its own
tax assistance program. The provision for the new credit should encourage taxpayers to
seek private sector assistance in lieu of visiting or telephoning offices of the Internal
Revenue Service. This should help reduce the Internal Revenue Service taxpayer assistance
budget and make more resources available for compliance, audit, collection and enforcement
activities and for tax return processing work.
2. The amendment should help reduce some of the costs of printing and distributing
forms and instructions since many private sector preparers do not utilize government
forms. Unless requested by the taxpayer (by checking a box on the return) there would be
no need distribute the forms packages. A reminder card with the peel off address label
would suffice. A number of states have already recognized the potential savings in this
area and adopted such practice.
3. Assistance from qualified tax return preparers will help insure the preparation and
filing of returns that generally are, and should continue to be, more accurate than those
prepared by taxpayers themselves. A credit will encourage taxpayers to seek assistance
from qualified preparers which should improve accuracy and thus the functioning of the
entire system.
4. Such a credit and the subsequent encouragement to taxpayers to use qualified tax
return preparers should have the additional result of more peace of mind to taxpayers that
they have not under- or over-reported their tax obligations and that if and when audited,
they would be accompanied by a qualified individual with supporting data.
5. Public confidence in the tax system would increase, especially on the part of the
lower income taxpayers who do not understand the law and who are concerned with obtaining
reliable advice but often cannot afford to do so. In any event, the IRS is regarded by
many of these taxpayers as an enforcement agency, and to them information received from
the IRS is therefore suspect. The only real choice for many taxpayers is a reliable tax
return preparer.
6. The success of the American tax system is dependent to a great extent on voluntary
compliance. Such voluntary compliance would be enhanced as a result of the adoption to
this benefit with more revenue received by the government.
7. If tax withholding on interest and dividends becomes a fact, taxpayers will have
heavier compliance burdens. The assistance of professional preparers should decrease the
compliance burden of taxpayers and result in fewer errors on returns filed, thus
decreasing the IRS processing and compliance burden resulting from such withholding.
In summary, public policy reflected in the Internal Revenue Code for many years is
intended to encourage the use of paid tax preparation assistance for itemizing taxpayers
who are usually higher income taxpayers. The tax savings from such a policy until recently
was worth as much as 70% of the fees paid to preparers and will still be worth as much as
50% under current law.
Such a policy should be applicable to all taxpayers. It may even be argued that from a
public interest standpoint it is even more important to have the policy apply to lower
income taxpayers since they are frequently the ones who find it difficult to understand
tax laws, are uncertain about deductions and exemptions, are unable to deal with the forms
themselves and can least afford to pay for tax preparation help. Millions of individuals
file forms 1040A or 1040EZ and numerous others do not itemize deductions. They deserve the
same benefit and incentive to seek competent tax preparation assistance from the private
sector as the itemizing taxpayer.
A reduction in the tax burden for non-itemizing taxpayers and equal access to tax
preparation assistance for all taxpayers would be best achieved by a tax credit for income
tax preparation fees.
I respectfully request that you introduce a bill which would allow a $25 tax credit for
everyone regardless of the tax form used with any expenses incurred for tax preparation
fees over the $25 credit being allowed as a deduction for those who itemize deductions.
This would help substantially the masses of taxpayers without giving any significant added
benefit to those with high incomes.
I would be pleased to discuss this in greater detail with you or a member of your
staff.
Very truly yours,
Henry W. Bloch
H & R Block, Inc.
Corporate Headquarters
4410 Main Street
Kansas City, Missouri 64111
(816) 932-8413
