Even Tax Preparers Stumped by Tax Complexity
February 24, 2006
It turns out that the company who largely lives off of the complexity of the individual side of the income tax code may need to pay closer attention to the corporate side of taxation. From Reuters:
H&R Block Inc., which provides tax advice to millions of Americans, made an embarrassing confession on Thursday. It goofed on its own taxes.
The company, which is in the middle of its make-or-break season preparing other people’s tax returns, said it had underestimated its own “state effective income tax rate” in previous quarters — meaning it owes another $32 million in back taxes.
As a result, H&R Block said it would restate previously reported earnings going all the way back to 2004.
“It wasn’t particularly material,” said Alexander Paris, an analyst at Barrington Research in Chicago. “And it’s not particularly unusual. A lot of companies are going back and reviewing their controls because of Sarbanes-Oxley and finding tax errors. But for a company like H&R Block, it was particularly embarrassing.”
For more on the problem of complexity in our tax system and on the compliance costs this creates, check out the recent Tax Foundation special report entitled The Rising Cost of Complying with the Federal Income Tax.