FR 2021-00306

The document from the Federal Register calls for public input on proposed changes related to U.S. business income tax return forms. The Treasury Department plans to send information collection requests to the Office of Management and Budget (OMB) for review. These requests pertain to forms that businesses use to report their tax liabilities, such as Forms 1065, 1120, and others. The notice highlights changes in regulations that affect these forms and outlines the hefty time and monetary burden businesses face when complying with tax filing obligations.

Summary and Concerns

The Treasury estimates that around 11.8 million business taxpayers could be impacted by these changes, with a staggering 1.085 billion hours and $44.279 billion in related out-of-pocket costs in 2021 alone. The document underscores the differences in burdens faced by various entities—from partnerships to corporations. However, it lacks sufficient transparency or justification for these extensive costs. The notice also mentions the obsolescence of 163 OMB numbers, yet fails to provide critical supplemental information on these within the document itself.

Additionally, the document relies on specialized terms like "total positive income" and "burden model estimates," which are not explained in detail, making it potentially confusing for those unfamiliar with such jargon. This complexity could deter the participation of small businesses without access to extensive legal or accounting support.

Impact on the Public and Stakeholders

The broader public stands to benefit if these proposed changes streamline the tax filing process and reduce the time and money spent by businesses. However, as presented, the notice implies minimal direct action to simplify or lessen these burdens. The Treasury's effort to gather public comments shows a willingness to engage with stakeholders, which could lead to beneficial adjustments based on the experiences and feedback of actual taxpayers.

For stakeholders, the impact is mixed. Larger corporations, potentially with more resources, could better absorb these costs and compliance burdens, while small businesses might struggle. The document outlines different burdens for partnerships, corporations, and pass-through corporations but does not sufficiently explain why these vary, leaving some stakeholders potentially puzzled about their specific compliance obligations.

Recommendations

The document could improve by providing clear examples or summaries of the "average" situations for different business entities. Transparent cost breakdowns or simplified explanations might make it easier for the general public to understand and for stakeholders to see where they fit within these changes. By articulating potential benefits or justifications behind these high compliance costs, the Treasury could gain broader public understanding and support for the proposed regulatory updates. Furthermore, incorporating strategies to lower compliance burdens would be a constructive step, particularly for smaller business entities that might disproportionately bear these administrative challenges.

The document outlines various financial figures related to tax compliance burdens for businesses in the United States. These financial references deserve careful examination to understand their implications and potential concerns.

The document states that the total estimated out-of-pocket costs for business tax compliance amount to $44.279 billion. This figure represents the collective expenses incurred by businesses while complying with tax filing responsibilities. These out-of-pocket costs include purchasing tax software, hiring third-party preparers, and covering printing and postage expenses.

Breaking down these costs further, on a per-respondent basis, partnerships incur an average out-of-pocket cost of $3,800, corporations face costs of $5,700, and pass-through corporations encounter costs of $3,000. The variability in these costs likely reflects the complexities and resources required for different types of business entities to maintain tax compliance.

Moreover, the document references the total monetized burden, which stands at $95.803 billion. This encompasses the overall financial impact of both time and money spent by businesses in navigating tax-related tasks. When subdivided, the estimated total monetized burden is $7,700 per partnership, $14,100 per corporation, and $6,200 per pass-through corporation.

These financial allocations raise several issues needing further examination. The high figures for total estimated out-of-pocket costs and total monetized burden suggest substantial financial demands on businesses. Greater transparency and justification of these costs would be beneficial in ensuring that the expenses are necessary and reflect the true burden on businesses.

Additionally, the distinct estimates for different types of business entities indicate that tax compliance impacts these entities variously. It could be challenging for readers unfamiliar with these distinctions to fully comprehend the reasons behind differing time and cost estimates. More clarity in explaining these variations would enhance understanding.

Finally, the significant financial burdens described in the document underscore the importance of exploring strategies to reduce them. Discussions around simplifying tax processes or finding ways to lessen the financial load could lead to more efficient compliance and help alleviate the considerable financial strain on businesses.