Burton Rockoff has seen the future under the new tax laws, and it isn’t pleasant.
“I anticipate 1987 to be an impossible year,” the accountant with J. Arthur Greenfield and Co. in Westwood said. “People are aware and concerned about the new tax laws, especially about tax planning. People want to know if they’re going to have to change their style of living. Some of them are quite nervous.”
Kary Bartmasser, a Sherman Oaks certified public accountant, said his first reaction to the new tax laws was to think about “moving my practice to Tahiti. But then I realized it would be too crowded with other CPAs.”
Flood of Questions
Bartmasser and Rockoff are not the only ones grappling with the new tax laws; this year millions of Americans must begin to face tax reforms, signed into law by President Reagan last October.
People are already scurrying to their accountants, financial planners and tax preparers with questions, even though this year’s returns are no different from last year’s. The new forms won’t be out until 1988.
While there have been no reports of pure panic yet, those in financial spheres say that calls from clients about the new tax laws are up as much as 40%.
The majority of inquiries have to do with the new W-4 (Employee’s Withholding Allowance Certificate) form, expanded from two pages to its new and improved size of four pages, including detailed worksheets. The document has some accountants baffled.
“This is typical,” sighed Bartmasser, of Bartmasser and Co. “They say that this tax bill will make it easier to file, but then they made the W-4 so complex that people have to call their CPAs just to file them.”
In Washington last week, IRS Commissioner Lawrence B. Gibbs admitted to congressional panels that the new W-4 form is confusing and added that the agency is trying to iron out the problems. He did not commit to revising the form but said he would try to find a way to avoid charging penalties to taxpayers who fill out the form incorrectly because they did not understand it.
Gibbs was responding to lawmakers who leveled strong criticisms over the new forms.
Meanwhile, Bartmasser’s clients are worried about “how this is going to affect them financially and emotionally.” And, he added, “My reading has increased at least 50%. I can’t say it’s interesting. If they ever wanted to change capital punishment, they should make it reading the new tax laws.”
At the IRS, calls are up considerably; 50,000 more in January alone than in that month last year in Southern California.
“The new law is not the bulk of what we’re getting,” said Dirk Heil, assistant division chief for the taxpayer service division of the IRS in Los Angeles. “The W-4 is the hot issue. Every time someone gets a paycheck and sees (less money withheld as a result of new withholding schedules), they’re worried that they’re going to have to pay more at the end of the year.”
Has he noticed a higher anxiety level among callers? “We have no opinion on that at this time,” he said. “But we don’t sense that people are any more anxious. We’re not getting a lot of complaints at this time.”
Over at H&R; Block’s main office on South Western Avenue, phones are ringing constantly, and tax practitioner Earlene Smyer says clients “are all anxious. They’ve heard various things, and if they’re applying new rules to themselves they’re more likely applying them wrong. They want to know if they’ll be able to deduct this or that, if they should buy property. A lot of them come in saying their friend told them something, or they read it somewhere. And they’re not fully understanding what they read.”
Peering Into the Future
Smyer, along with other preparers at H&R; Block, are doing “tax forecasting” for their clients to see what lies in the year ahead. “By doing that,” said Smyer, “I see that only about two of my clients are going to be worse off.”
One of Smyer’s clients who believes she will be better off is Jo Ann Evans, a psychiatric nurse specialist at the Veterans Administration. Evans said, “When I heard about the changes in the tax law, I did feel some apprehension and anxiety because it was new. I’m kind of in the middle (income) bracket and I didn’t know if it was going to be to my advantage or disadvantage. I found that the new laws will be to my advantage. The primary fear is the unknown--that’s what causes the anxiety.”
Taxpayers are nervous enough to start snatching up magazines and books that cover the new tax guidelines; Crown Books in Beverly Hills reports that on an average day, 40 of its 200 customers ask for books on taxes. Two titles in demand: “Arthur Young’s Tax Guide” for $10.95 and J. K. Lasser’s “What the New Tax Law Means To You,” $3.95.
One CPA in Silver Lake says he has started to weigh his mail because it contains so many tax newsletters, magazines, investment offers and other tax-related publications. “I was getting about a pound to a pound and a half every day,” said the tax preparer, who goes by the single name Sebastian.
“There’s a lot of misinterpretation of the new rules, and some of the information is being slanted so that people are getting sucked into things they don’t have to do. So, there is fairly often total misunderstanding--they’ll believe that they don’t have any deductions anymore, as if the new law eliminated all deductions.”
For all the homework on the new tax laws they must do, CPAs and financial planners can’t complain that much; they realize that the new tax laws are fueling their businesses. More and more people have come to depend on accountants and advisers for money matters. David Newman, a Beverly Hills financial consultant with Executive Planning Assn., says some clients don’t make a move without consulting him first.
Edward Horstman, who handles investments and properties for a family group in Pasadena, found himself “annoyed” at the new tax laws. “But then, I get annoyed at all taxes. I never expected this to be a tax simplification,” he said, “and I wasn’t disappointed. It’s just one of those things you have to live with, and I’m hopeful that in the long run I’ll have to pay less.”
Although taxes are inevitable, like that other dreaded certainty--death--they are still major contributors to stress. “I don’t think this is going to create a nation of tax phobics,” said Dr. Dennis J. Munjack, director of the anxiety disorders clinic at USC. “We’re not seeing people come in who complain primarily about that, (but) people are bringing that up as part of the discussion. They say they’re not sure about what to do, and they have a general sense of not being in control of their financial life now.”
Dr. Alfred Coodley, associate clinical professor of psychiatry at the UCLA school of medicine, agrees. “It starts with a universal attitude about taxes,” he said. “People visualize the IRS as a ruthless, authoritarian organization that is making complete and total demands for very accurate reporting. I believe that we will see as we get closer to April an increasing degree in tension, apprehension and resentment at the whole thing.”
It may help to realize, Coodley said, that practically everyone is in the same boat. “It’s like all stresses,” he said. “One has to step back from the issue and see what the situation is. The government understands it, accountants understand it; there’s going to be a universal period of confusion. And it’s essential that you realize that tax reports are as far from death as you can possibly conceive. They are in essence simply one of the things that around this time of year it’s necessary to fill out. And then you can forget about it . . . until one year later.”