The Account-Ants

I like the WSJ's Peggy Noonan, but she doesn't like me, or at least my chosen profession.

[G]overnment increasingly forces us to become: a nation of accountants.

No matter what level of life in which you operate, you are likely overwhelmed by forms, by a blizzard of regulations, rules, new laws. This is not new, it's just always getting worse. Priests are forced to be accountants now, and army officers, and dentists. The single most onerous part of ObamaCare is the tax change whereby spending $600 on goods or services will require a 1099 form. Economists will tell you of the financial cost of this, but I would argue that Paperwork Nation is utterly at odds with the American character.

Because Americans weren't born to be accountants. It's not in our DNA!

Ms. Noonan goes on about how the rich and powerful elites insulate themselves against the rules and regulations they inflict upon the rest of society. The elites can hire "armies" of accountants.

No one likes filling out forms, even us account-ants. We know that the person who receives the form that we've painstakingly completed only cares about two things: whether we've paid the balance due at the bottom and whether all the questions have been answered. Accountants would rather use their talents to build planning models and help clients make decisions, not fill out pieces of paper designed by lawyers.

The new Form 1099 requirement to which Ms. Noonan refers is a particularly boneheaded piece of legislation. The current requirement to report over-$600 in annual payments to independent contractors does allow the IRS to catch some under-reporting, but the new law is a gross over-reach; it mandates the reporting of over-$600 annual payments to everyone. Payments to the local utility, the package delivery service, and the office supply chain-store must now be added up and reported to the IRS after the vendors' taxpayer ID numbers have been obtained. The problem is: the vast majority of corporate businesses report revenue based on accrual, not cash basis accounting.

Under accrual accounting revenue is recognized when the right to receive is established, not when payment is received. If the office supply store makes a shipment to you in December and grants you net-30 terms, it will report its December income in the current tax year while your 1099 will report a cash payment in January of the succeeding tax year. The 1099 will be useless in the tax audit of the office supply store.

One can go through the trouble of performing a lengthy reconciliation between the stack of 1099's (which don't separate the payments for shipments made for the current and previous years) and the store's sales register, but there are much more accurate and efficient ways for an agent to audit revenues. The new law imposes tremendous burdens on society without any benefit to the Treasury; it was clearly designed by people who have no idea how businesses, accounting, and control systems work.

I suppose that I should be grateful that accounting is not one of the jobs that will be disappearing over the next ten years, but I'm not happy that clients are miserable when they call us, and it's a self-inflicted misery that doesn't have to be.