In a letter to the Department of the Treasury and the Internal Revenue Service (IRS), the American Institute of CPAs (AICPA) made recommendations to simplify the tax reporting requirements for partnerships and S corporations (collectively, passthrough entities, or PTEs). The suggestions include recommendations to help alleviate time compression constraints currently impacting the ability of tax practitioners to prepare complete and accurate returns for PTEs, specifically those with tiered structures.
The AICPA’s letter recommends that Treasury and the IRS implement a comprehensive and proactive vetting approach to developing, revising and evaluating PTE reporting requirements to ensure optimal efficiency, simplicity and relevancy. Specific recommendations include:
- Prioritize transparency and stakeholder input by ensuring that changes to PTE reporting requirements, whether introduced through forms, instructions, frequently asked questions (FAQs) or other guidance, are published with sufficient advance notice and accompanied by a longer comment period.
- Simplify and regularly assess current requirements by revisiting all current PTE reporting requirements to simplify, reduce their scope or eliminate them where appropriate. The AICPA also recommended that existing reporting requirements be assessed on a regular basis to either improve or eliminate them.
- Enhance reporting requirement implementation processes by:
- Introducing reporting requirements to a control group to understand the intricacies of the information to be reported.
- Ensuring that all forms and schedules are available for electronic filing at the time they are introduced.
- Collaborating with tax software providers, including providing a longer reporting implementation period, to allow for optimal coordination and troubleshooting.
- Enhance the paperwork burden analysis under the Paperwork Reduction Act of expected time and resource commitments of new reporting requirements and their impact on the tax preparation industry.
“Our comments encourage Treasury and the IRS to adopt a proactive vetting process that promotes transparency, simplification and coordination to ease the administrative burden of PTE reporting,” said Michelle Zou, Senior Manager for Tax Policy & Advocacy with the AICPA. “While these improvements would benefit all areas of tax, they are especially critical for PTEs, where the administrative challenges are particularly detrimental.”
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