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The pros who prepare tax returns aren't feeling itchy over simplification

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The words ``tax simplification'' don't hit tax preparers the same way they do the rest of us. So one would expect President Reagan's recent tax proposal to create panic in the corridors of H & R Block.

But the tax-preparing company isn't concerned. ``I just don't see where [the proposal] simplifies tax preparation,'' says Thomas Bloch, president of tax operations at H & R Block, which uses the ``k'' to avoid mispronunciation.

In fact, the President's changes in the tax code may initially be a boon for tax preparers. ``The more confusion [over the tax code], the better for our business,'' says Robert Murray, president of Tax Man, which has 30 offices in New England.

In the long run, the President's proposal or some variant of it would cost tax preparers the low end of the business by making more people eligible for the short form (and more likely to figure their own taxes). But demographics (and a healthy economy) giveth what ``simplification'' taketh away: As more baby-boomers come into long-form affluence and buy houses and other investments, more will file the complicated returns and seek the advice of tax counselors.

Tax preparation is one of those industries that like to be buffeted by the winds of change. Each time Congress and the White House tinker with the system, which has been fairly often in recent years, the tax preparation business gets a lift.

The National Association of Tax Practitioners estimates there are 1.5 million people involved in tax preparation (including lobbyists and publishers of tax literature). People pay $1.2 billion to $1.6 billion to have the task done for them, the association estimates. In 1983, 37.2 million people used tax preparers, according to the Internal Revenue Service.

But the business is mature, with the number of professionally prepared returns growing at less than 2 percent a year for the last five years, and preparers can ill afford to have even the low end lobbed off. The President's tax proposal would do that in several ways.

Eliminating deductions for state and local taxes, for example, would mean fewer people would itemize, which could lead them to figure their own taxes. Eliminating deductions for interest payments on second homes and capping deductions for other interest payments at $5,000 would also mean more people would use the short form. And if the personal exemption is increased from $1,040 to $2,000, fewer people would itemize; some would stop filling out the tax form altogether, since they would fall below the minimum filing requirement.

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