THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, December 31, 1995 TAG: 9512300449
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY KERRY DOUGHERTY, STAFF WRITER
LENGTH: Medium: 90 lines
Local tax accountants are having a lousy holiday season. And they know who's to blame: Washington.
The stalled budget bill, which has partially shut down the federal government, contains several proposed changes to the tax code that could have major implications for taxpayers, especially small-business owners. Some of those proposals may be retroactive to the beginning of 1995.
As a result, tax accountants for months have been besieged by clients anxious for advice on what to do to lessen their tax burden for 1995. Problem is, Friday was the last business day of the year and no one knows what Congress and the president finally will agree upon.
``Basically it's been crystal ball time, trying to guess what they are going to do up there,'' fumed Thomas H. Thatcher, a Virginia Beach CPA who works exclusively with small-business owners.
``I'd like to send Congress a message,'' he said. ``I'd tell those clowns to get off their duffs and pass the budget and stop acting like a bunch of little children.
``What they've done is created a nightmare. An accounting nightmare.''
While most of the public may assume that CPAs are seasonal workers - busy only during the hectic March-April tax-preparation season - that's not the case.
Most tax accountants are swamped with work during the fall, when they advise their clients on actions they can take before the end of the year to minimize their tax liability - selling off stocks or purchasing business equipment, for instance. In a normal year, when Congress has approved the budget and changes to the tax code during the late summer, CPAs take classes in the autumn to familiarize themselves with the new regulations.
Not this year.
Part of what has bedeviled taxpayers and preparers alike this year is the tantalizing prospect of a retroactive cut in the capital gains tax - a cornerstone of the Republicans' Contract with America. The capital gains provision, which was included in the budget package the president vetoed earlier this month, would have taken effect Jan. 1, 1995.
This provision would make 1995 a very good year to take a big capital gain. But what looked like a sure thing during the summer has been in limbo ever since.
``What do you tell a client who comes in right after Thanksgiving and wants to know if they should sell a piece of investment property before the end of the year?'' asked Olivia Walton, a Chesapeake CPA. ``I had to tell people to operate as if the old laws were going to stay - and if possible, if they wouldn't lose a buyer, just wait until the beginning of next year if they want to take advantage of a reduction in the capital gains tax.
``But who knows?''
Nick Nichols, a Norfolk CPA and former accounting professor at Old Dominion University, said he has simply tried to offer sound financial advice to his clients and make them aware of the many changes that are pending.
``I tell them these pending matters are like a poker hand,'' Nichols said. ``You decide whether you want to play it. I can't tell you what to do.''
Nichols said he's fed up with political meddling with the tax code.
``Without being crude about it, I think somebody ought to go up and kick congressional butt,'' he said. ``They just aren't doing what they are paid to do up there.''
Nichols said the latest budget debacle is especially frustrating when put in a historical context. The current tax code, he said, was made into law in 1913 with a 1 percent tax rate. Congress made two major code changes after that: one in 1939 and another in 1954.
It wasn't until the mid-1980s, Nichols said, that Congress ``started to go nuts'' by revising the code every year.
Last year, Congress passed a retroactive change to the code on April 11.
``We all had heard the change was coming,'' Nichols said. ``We had two choices, let people file, then file amended returns. Or get extensions for most of our clients. Either way, it was ridiculous.''
Thatcher said the frequent last-minute revisions are done without any thought to consequences.
``Congress doesn't seem to care what effect tinkering around with the tax code has on accountants who have to keep current with every change or with taxpayers who just can't plan anymore,'' he said.
From her office in Chesapeake, Walton struck the same theme. She said the greatest gift Congress could give taxpayers would be to stop tinkering.
``I'm in favor of the reduction in the capital gains tax, I think it's only fair,'' she said. ``But if I could send a message to Congress, I'd tell them to please allow the taxpayers to have confidence that the rules won't constantly be changing. Long-term stability is one of the best things Congress could give us for the economic climate.
``You really feel dumb when a client comes in and you have to tell them to plan under the old law because you have no idea what the new changes are going to bring.'' by CNB