While Congress debated the merits of the two-month extension of the payroll tax holiday, no one mentioned the devasting economic impact this legislation will have on our small and large businesses, nor the tens of millions of dollars wasted by the Senate to come up with this hiccup.
Our Senate did a disengenous job at compromise merely to enable them to go home on vacation. There is absolutely no consideration of the havoc being wreaked on our economy and our businesses due to the instability that comes with not knowing what the tax rate will be in the long run. A one year extension is bad enough – does anyone seriously think that businesses will hire or that individuals will spend just because of another even a one year 2% reduction? But extending for only two months is far worse.
Even now, these companies with payroll will have to make changes and adjustments. They have been waiting with uncertainty as to how to proceed in the coming year – and we are mere days away from 2012. Forms cannot be printed, and when they are printed, around-the-clock overtime will result. The same is true with respect to accounting software. And how can a business institute any new changes to the tax schedule in a proper and timely matter? It’s ludicrous, not only regarding the nightmare of compliance and calculation, but also the inefficiency from all the extra man hours spent.
As a lifelong CPA, I can assure you that such a short-lived extension in the middle of tax season creates the absolute certainty that mistakes will be made– lots of them. Mistakes mean IRS penalties. The financial and wasted cost from our government sending out notices, following up, making corrections, and dealing with taxpayers fighting the penalties is a gross misuse of time and resources, all because Congress is incompetent and short-sighted. And then Congress and the IRS will spend more time writing regulations explaining the extent to which these penalties are to be abated.
More money will be spent than saved, with higher costs endured by our businesses; this extension is a sham.