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E.
Martin Davidoff, founder, firm manager and CPA of E. Martin
Davidoff & Associates
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E. Martin Davidoff & Associates
RESIDENCE: East Brunswick
EDUCATION: Bachelor's of science in management from the Massachusetts Institute of Technology, an MBA from Boston University School of Management and a law degree from Washington University
FIRST JOB: Lifeguard
THUMBNAIL SKETCH: An accountant/attorney for 26 years, Mr. Davidoff was recently named one of the "Top 100 Most Influential People in Accounting for 2004" by Accounting Today magazine because "his views on issues affecting tax practice are heard at the highest levels of government." His practice is located in the Dayton section of South Brunswick.
As founder and chairperson of the American Association of Attorney-Certified Public Accountants' IRS Tax Liaison Committee, what are some accomplishments you're particularly proud of?
After 9/11, there was a meeting called by IRS Commissioner Rossotti, and there were about 20 people in the room or on the telephone, and he said, "What do you think we should do?" After nearly everyone had offered their suggestions, I was the only one to suggest that we give everyone an extension of time of two weeks throughout the country. The commissioner asked whether a week would be enough. And, so everyone who had a payment of tax filing due on September 17 now had until September 24, whether it was individuals or corporations.
Have you identified other areas of tax law or IRS procedure in need of reform?
I'd like to see the Alternative Minimum Tax (AMT) modified by Congress if they are unwilling or unable to eliminate it altogether. In 2001, the AMT impacted 660,000 taxpayers. If it remains unchanged, it will impact 32 million taxpayers by 2010. It hurts more people in high tax states like New Jersey, New York and Massachusetts. And when it has lowered other tax rates, Congress has not lowered the AMT rates. If you don't cut both rates at the same time, it's like with the right hand we're giving you a tax cut, but with the left we're taking it back with the AMT. If the AMT is not repealed, I would like to see the rates and exemptions indexed.
Also, there used to be something called Problem Solving Day with the IRS, where once or twice a year you could go into the IRS and have people help you right on the spot. When they abandoned that they created something called Everyday Tax Solutions, where you could call up and meet with someone. The IRS gives it lip service, but makes little effort to make sure it is a viable program. Ideally, one should be able to make an appointment with a single phone call, sit down and solve your problems by having a reasonably intelligent conversation with an individual who has the authority to solve your problem.
If elected, Sen. John Kerry has promised to support rolling back tax cuts on individuals earning incomes above $200,000 per year. Would this affect small business owners?
Whether you believe it's the correct move socially, and frankly I think it should be made, the thing is ... higher tax rates always provide less incentives for businesses and people to work harder and make more money. The question is: would a difference from 35 to 39.6 percent have a significant difference? I don't think it's going to have a big effect. If you were going to take the rate from 35 percent to 50 percent, then that would be significant.
How should the outcome of this election affect people's end-of-year tax strategy?
If Democrats take control of the government, clearly the tax rate in 2005 will be greater then the tax rate in 2004 for high-income (over $200,000 per year) taxpayers. The strategy then would be to accelerate income from 2005 to 2004 and/or push deductions off from 2004 to 2005 so as to increase taxable income in 2004. However, all of this has to be done with the AMT in mind and its impact. So, people should really run tax projections for 2004 and 2005 and see what's the impact of various planning steps.
If Republicans retain control, it is likely that the opposite strategy — one that defers income and accelerates deductions — would be appropriate, as it has been for the past several years. However, some think there may be an increase in capital gains rates even with Republicans in control. It all remains to be seen.