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CPA Now
Jun 23, 2014

Tax Ambush from Harrisburg

By Peter Calcara, Vice President - Government Relations

tax imageThe Pennsylvania Department of Revenue’s (DOR) decision to unilaterally deny taxpayers’ legitimate unreimbursed business expense (UE) deductions has set off a firestorm of criticism. The PICPA, our members, and many others in the tax preparer community have been vocal over this outrage. After all, there have been no changes to the tax laws that govern unreimbursed expenses to dictate a change in policy, and there has been very little communication from the DOR to the tax practitioner community. The act comes across as a regulatory ambush.

In brief, the DOR implemented a procedural change in the tax return review process that has flagged taxpayers who had legitimate, unreimbursed business expenses, and rejected them. Under the previous procedure, taxpayers’ unreimbursed expenses were accepted and only adjusted during the audit process. This new procedure denies taxpayers of their legitimate expense deductions, resulting in unforeseen increases in taxes and costs of compliance.

The PICPA Committee on State Taxation met during the week of June 16, and a primary agenda item was the DOR’s new UE policy enforcement posture and what the PICPA’s response should be. The committee directed the PICPA to continue its dialogue with the DOR, but also begin a more aggressive outreach with members of the General Assembly (members who attended the PICPA’s June 3 Day on the Hill raised this issue with their state lawmakers) and work with Pennsylvania business journals to get the story out about the DOR’s aggressive enforcement posture.

The committee also instructed PICPA staff to review legislative options as well. This is not an easy course of action, but it may be the only remedy available to the citizens of Pennsylvania.

How can you help? The PICPA urges members and nonmembers to reach out to their local state legislators and let them know about the impact of this egregious policy change.

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Disclaimer
Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.