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On Tuesday, National Taxpayer Advocate Erin Collins said at the AICPA & CIMA National Tax Conference that the IRS “has to deal with it,” “it” being the large backlog of ERC claims the agency is processing at a snail’s pace for fear of letting fraudulent claims slip through.

Said Journal of Accountancy of her comments at the conference:

The claims involve “a lot of good taxpayers in there that are entitled to this money,” she said. And the Taxpayer Advocate Service, which Collins heads, can get involved when a businessperson has a hardship, she said, such as a client who needs to pay their rent or car payment or needs money for food.

“We get a lot of people reaching out to us and saying, ‘I mortgaged my home because I thought I was going to get this ERC money so I could keep my business afloat. I need to pay this off. The interest is killing me.’ Or ‘I paid my employees out of my assets to keep them on the roll. I need this money back.’ I’ve had people saying they’re possibly going to shut down. They’re going to have these challenges so we are trying to help those individuals, and it is not as fast as I would like.”

ERC was initially created at the onset of the COVID-19 pandemic to encourage businesses affected by lockdowns to retain staff on payroll. Recent IRS estimates say there could be $9 billion of fraud related to various COVID measures, including but not limited to ERC. Tax pros we’ve spoken to say it’s likely a lot higher.

Shortly after the package of relief measures under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) rolled out, a cottage industry of aggressive promoters with the work ethic of extended car warranty salesmen popped up. The promoters would take a fee based on the expected ERC payment — sometimes as much as 40% — while the business owner waited around for the actual payment. As we know, many of those business owners are still waiting. A bunch of them can be found on Reddit at r/ERCchat.

Here’s CPA Larry Gray explaining more about this scheme that caused the IRS to issue a moratorium on processing ERC claims in 2023:

In September, U.S. Senators Mitt Romney (R-UT), Thom Tillis (R-NC), and Joe Manchin (I-WV) introduced the Employee Retention Tax Credit Repeal Act, bipartisan legislation that would disallow the processing of Employee Retention Credit claims filed after January 31, 2024. Estimates suggest the credit has added $230 billion to the deficit through Fiscal Year 2023 and could eventually cost up to $550 billion. The IRS’ own analysis of more than one million backlogged ERC claims shows that only 10-20% are low risk — meaning likely legitimate — while 60-70% have unacceptable risk and 10-20% are in the high risk category. The agency said the total value of these analyzed claims is over $86 billion.

“This is not a five-minute exercise,” acknowledged Collins in her comments to the AICPA & CIMA National Tax Conference. “We’ve made various suggestions and recommendations [to the IRS], but, as you can see, they aren’t moving fast.”

Taxpayer advocate: Unprocessed ERC claims could total 1 million at year end [Journal of Accountancy]

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With all the election noise of the last week or two we almost missed this: RSM sent orders down from on high to get tax people back in the office. We don’t know if other service lines have received similar orders but were told that all functions are trying to get more people in the office.

In an email reviewed by GC, leadership requested — rather, strongly advised — a minimum of three days a week in the office or at a client site. “Being face-to-face with our teams and clients is essential,” said the email sent out by federal specialty tax leader Dave Kautter. “We ask that you ensure you’re spending at least three days in the office with your people and/or visiting clients and prospects in person. I leave it to each of you to determine what days work best for you and your teams to be together.”

In addition, senior managers were reminded of their duty to train up their future replacements. IN PERSON. “With new colleagues, fall and winter interns, and your existing teams, we’ve talked about the importance of being together,” the letter said. “But we must make the most of working side-by-side with our people.” Right. Just being in proximity of

RSMers must be slipping on their tedious paperwork game because the email also reminded recipients that their work “is a balancing act with equal parts client service and operational tasks.”

“I’d like you to work with your teams and TFLs to identify your target client and prospect visits for the coming months and the operational responsibilities (e.g. billing, scheduled billing, off-strategy clients, SOWs/CLEAR, etc.) you must complete,” said Kautter. “We are a team and we must work together to succeed. Ensure all of your people are contributing to the tasks at hand.”

We suspect this bit at the bottom is a big reason why the firm is pushing these people to get into the office elbow-to-elbow with the impressionable associates and senior associates:

Meeting these expectations, I know we will be well-positioned to capitalize on this moment and demonstrate our roles as first-choice advisors. The U.S. election is behind us and we can expect a flurry of middle market activity with clients looking to us for guidance on tax policy. Let’s show up for them together.

As you may recall, RSM laid off 3 percent of its workforce in September. As far as we know these cuts were limited to audit and consulting. On October 11, RSM US announced it would be merging with RSM UK to “establish a partner-owned multinational organization dedicated to delivering quality, globally integrated services for the middle market.”

Get that bag, RSM.

If anyone has info on other service lines being called back to the mothership get in touch.

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Ignition has released its 2024 US Accounting and Tax Pricing Benchmark report and it reveals that the 325 Ignition customers surveyed are going all-in on fee increases in 2025. Or at least half-in.

90% plan to increase fees for individual tax returns, 87% plan to increase fees for business tax returns, 85% plan to increase fees for bookkeeping and accounting, and 76% plan to increase fees for CFO and controller services. 57% of accounting firms plan to increase fees across all services in 2025. Clients are just going to loooove that.

Per the 2023 National Association of Tax Professionals Fee Study, the overall average charge for individual returns, regardless of method, increased $35 and the overall average charge for business returns, regardless of method, increased $85. Nearly half of firms surveyed by Ignition (49%) charge $400 to $799 for basic individual tax return services, with approximately 17% nationally charging less than $400.

A few more key findings from Ignition’s survey:

• 54% use fixed-fee or value-based pricing for tax preparation services
• 67% use fixed-fee or value-based pricing for tax planning and advisory services
• 79% use fixed-fee or value-based pricing for bookkeeping and accounting services
• 75% use fixed-fee or value-based pricing for CFO and controller services

The report also benchmarked current fees for tax, accounting, and advisory services, which varied based on firms’ annual revenue range. The greatest variance in pricing was for tax planning and advisory services in particular. For firms with revenue of as much as $250k, about 23% said they charge less than $500 for these services, while a near-equal number (around 21%) said they charge more than $2000.

According to Ignition Global President Greg Strickland, very few firms are raising fees just to raise revenue. “While accounting firm owners are embracing price increases in 2025, the report shows that the majority (around 58%) cite rising business costs as the main motivator,” he said in a press release. “Only 5% are raising prices to increase revenue, which indicates an opportunity for firms to leverage pricing as a strategic tool to unlock revenue growth.”

Here’s what the report had to say:

Heading into 2025, many US accounting firms are re-evaluating their pricing strategies, embracing the need to increase fees for the services they offer, with nearly 57% of firms planning to increase fees next year for all services. As for the extent of these increases, the most common range is from 5% to 10% increase across all services, highlighting an industry-wide shift toward higher pricing.

The rising costs behind price increases

Mounting business expenses are driving the decision to increase fees, with nearly 58% of firms citing rising costs as the primary motivator. This indicates that firms are looking to maintain profitability by adjusting prices to keep pace with inflation, wage increases, and the general cost of running a business in current market conditions.

A missed opportunity for strategic revenue growth?

Interestingly, only around 5% of firms reported increasing fees with the specific goal of growing revenue, revealing a potential gap in how firms are leveraging pricing as a strategic tool. Although covering operational costs is essential, this finding suggests that many firms are not fully capitalizing on the opportunity to use pricing as a proactive driver for revenue growth.

Firms confidently adapting pricing strategies

Whether the goal is to manage rising costs, improve profit margins, or introduce premium service offerings, firms are taking a more strategic approach to pricing services. There is a clear shift from traditional hourly billing toward fixed-fee and value-based pricing models, signaling a broader transformation in how firms are packaging and delivering services. With hourly rates declining in popularity, this shift highlights the growing recognition that pricing should reflect outcomes and results rather than the invested time. By embracing fixed-fee and value-based pricing, firms are positioning themselves to cover rising costs and enhance their client relationships, offering the clarity and value that build long-term trust.

It sure took them long enough to get the memo.

Quick update: Completely related article we posted today.

US Accounting and Tax Pricing Benchmark [Ignition]

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Apparently they were planning to do a little maintenance on the Tax Pro Account systems from October 13-15. No biggie. This is fine. It’s just like any other weekend. A holiday weekend no less!

but why?!? pic.twitter.com/IpyTDXaAdc

— Andrea Carr CPA (@andreacpa0) October 12, 2024

The notification no tax pro wants to see on the days leading up to 10/15:

Good news though! Thanks to a large number of exhausted tax pros taking time out of their busy emotional breakdowns to complain, the IRS decided not to torture them further with scheduled maintenance after all.

The #IRS Tax Pro Account maintenance this weekend has been postponed. The system will remain open. We appreciate tax pros and especially the long hours they’re putting in to serve taxpayers ahead of the 10/15 deadline. Thank you to #TaxTwitter pros for flagging this!

— IRSnews (@IRSnews) October 12, 2024

Happy 10/15, everyone.

Earlier:

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How X is feeling.

TurboTax states they’ll beat your last preparer’s 2023 price by at least 10% if you’ve got a receipt. Full Service currently starts at $129 for simple filers.

Has anyone worked as a TurboTax live expert? Let me know, I’d be curious to hear your experience.

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These are CPA Evolution pass rates for the first and second quarters of 2024. If you have working eyes, you’ll see Tax Compliance and Planning (TCP) has an obscenely high pass rate; 82.36% for Q1 and 75.67% for Q2.

I’m actually glad they covered this in the webinar because I’d wondered myself if TCP was just crazy easy or what. 82.36% is ridiculous.

The benevolent overlords of the CPA exam like to say that pass rates are not indicative of easier or harder exams but rather a reflection of the preparedness of candidates for any particular testing window. Meaning pass rates are higher when candidates are better prepared. To demonstrate this, I lifted this graphic of CPA exam section pass rates from Gleim that covers 2010-2023. Pay special attention to the red line representing BEC (RIP):

Did BEC suddenly get hard in 2023 when it went from a 60% pass rate in 2022 to about 47%? No. I mean, probably not. What did happen was a ton of people rushed to take it before the year ended because any active candidate who hadn’t passed BEC by the launch of CPA Evolution in January 2024 was going to have to choose one of the new disciplines and ain’t nobody got time for that. We can safely assume that many of these people weren’t well prepared thus the section’s pass rate tanked.

Looking at pass rates for 2023, we see a very predictable drop off at the end of the year across all sections except AUD. Again, expected. It’s the end of the year, people are distracted by the holidays, and with CPA Evolution coming around the corner you had a higher number of candidates rushing to sit.

Do they make FAR even harder at the end of the year? Unlikely. But you do get a lot of people who have been dragging ass all year and want to squeeze in a section once it dawns on them that the year is almost over. Those people tend not to be overly prepared.

Back to the topic of TCP. In the NASBA webinar, Joe specifically said that TCP’s pass rate is higher — for now — because “a smaller number of well-prepared candidates did really well” on it in Q1. The AICPA even mentions this on their website:

In review and analysis of candidate performance across Discipline Exam sections in the 24Q1 testing window, the AICPA and the Board of Examiners noted TCP candidates were generally better prepared to take TCP than the BAR candidates were to take BAR and ISC candidates were to take ISC.

If you don’t know, BAR is FAR’s slightly less intimidating cousin. And contains cost accounting which so many people struggle with. So of course candidates didn’t kill it on BAR.

In the webinar, Joe added that he thinks TCP pass rates will go down over time as things normalize. Meaning the hardcore super studiers got it out of the way already, now it’s up to the average CPA exam candidates to take a stab at it.

All this to say, don’t take TCP just because it has the highest pass rate of the disciplines by far. Take it because you fucking love tax.

Related:

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That IRS press release, for your reading pleasure:

IRS moves forward with Employee Retention Credit claims: Agency accelerates work on complex credit as more payments move into processing; vigilance, monitoring continues on potentially improper claims

The ERC program began as an effort to help businesses during the pandemic, but as time went on the program increasingly became the target of aggressive marketing – and potentially predatory in some cases – well after the pandemic ended. Some promoter groups called the credit by another name, such as a grant, business stimulus payment, government relief or other names besides ERC or the Employee Retention Tax Credit (ERTC).

To counter the flood of claims, the IRS announced last fall a moratorium on processing claims submitted after Sept. 14, 2023, to give the agency time to digitize information on the large study group of ERC claims, which are made on amended paper tax returns. The subsequent analysis of the results during this period helped the IRS evaluate next steps, providing the agency valuable information to improve the accuracy of ERC claims processing going forward.

The detailed review during the moratorium allowed the IRS to move into this new stage of the program with more payments and disallowances. In addition, the IRS will remain in close contact with the tax professional community to help navigate through the complex landscape.

While this might be good news for the few business owners who’ve been waiting a long time for their legitimate ERC claims to go through, apparently some senators weren’t so happy to hear this.

U.S. Senators Mitt Romney (R-UT), Thom Tillis (R-NC), and Joe Manchin (I-WV) said on September 19 they’ve introduced the Employee Retention Tax Credit Repeal Act, bipartisan legislation that would disallow the processing of Employee Retention Tax Credit (ERTC) claims filed after January 31, 2024 and increase penalties on fraud.

In the IRS’ own words, ERC has been rife with fraud and abuse, hence the moratorium they placed on processing of new ERC claims last year. Employee Retention Credits made the yearly Dirty Dozen list of tax scams two years in a row.

Said the senators in their news release:

The ERTC has been highly susceptible to fraudulent schemes—costing taxpayers nearly 200% more than anticipated and adding an estimated $230 billion to the national debt through Fiscal Year 2023. By eliminating the ERTC, the senators’ bill would save taxpayers an estimated $79 billion over 10 years.

“In a rare moment of widespread agreement in Washington, almost all members of Congress agree that we should eliminate the ERTC—which has been pervaded by fraud and cost nearly 200% more than originally projected,” said Senator Romney. “Stealing from the government is stealing from hardworking taxpayers. Instead of repurposing ERTC funds for future spending programs, we should eliminate this plagued credit now to lower our national debt.”

“Repealing the ERTC is a critical step towards addressing America’s debt crisis,” said Senator Tillis. “It’s past time to eliminate this fraud-ridden pandemic-era policy so we can concentrate on getting our fiscal house in order.”

Estimates suggest the ERC credit has added $230 billion to the deficit through FY2023 and could eventually cost up to $550 billion.

“Congress established the ERTC during the onset of the COVID-19 pandemic to encourage businesses to retain employees during such unprecedented circumstances. As President Biden formally ended the COVID-19 Public Health Emergency in May 2023, it’s time for the IRS to move on, too. I’m proud to join the bipartisan ERTC Repeal Act, which would end the ERTC for claims submitted after January 31, 2024—cutting down on the staggering and unexpected costs of this program—and would enhance anti-fraud measures for claims still being processed,” said Senator Manchin.

Over the summer, the IRS The IRS spent months digitizing information and analyzing data for more than one million ERC backlogged claims, the total of which was more than $86 billion. Through this analysis, the agency determined 10-20% of claims were low-risk, 60-70% of claims had unacceptable risk, and 10-20% had high risk. Meaning only about 10-20% of these million ERC claims were most likely legitimate and met the requirements to claim the credit.

As of August, he IRS has sent out 28,000 disallowance letters to businesses whose claims showed a high risk of being incorrect, disallowances that will prevent up to $5 billion in improper payments according to IRS estimates. Thousands of audits are underway, and 460 criminal cases have been initiated. The IRS has moved 50,000 low-risk ERC claims into the pipeline for payment processing in coming weeks.

Text of the Employee Retention Tax Credit Repeal Act can be found here [PDF].

Romney, Tillis, Manchin Introduce Bipartisan Legislation to Repeal COVID-Era Tax Credit Riddled with Fraud [Senator Mitt Romney]

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Imagine thinking this is true#TaxTwitter pic.twitter.com/ClJT86yG6Z

— TaxBirdie (@tax_birdie) September 10, 2024

Thread

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Said the IRS in a press release:

The new combined effort follows a variety of increased scams and schemes that intensified during the past filing season that aimed to exploit vulnerable taxpayers while enriching fraudsters and promoters.

Convened at the request of IRS Commissioner Danny Werfel, the coalition of federal and state tax agencies along with software and financial companies as well as key national tax professional associations agreed to a three-pronged approach. They will work to expand outreach and education about emerging scams, develop new approaches to identify potentially fraudulent returns at the point of filing and create infrastructure improvements to protect taxpayers as well as federal, state and industry tax systems.

Some familiar names have joined the effort, namely the National Association of Computerized Tax Processors, National Association of Tax Professionals, National Association of Enrolled Agents, and the National Society of Accountants. The AICPA is on board too. As are the McTax companies: Intuit, H&R Block, Jackson Hewitt, and Liberty Tax.

The IRS said there has been increased activity involving a variety of scams and schemes harming taxpayers, including the Fuel Tax Credit, household employment taxes and the Sick and Family Leave Credit.

The IRS has seen hundreds of thousands of dubious claims come in where it appears taxpayers are claiming credits for which they are not eligible, leading to refunds being delayed and the need for taxpayers to show they have legitimate documentation to support these claims.

Numerous other scams and schemes continue to be seen circulating on social media and are highlighted through efforts including the annual IRS Dirty Dozen list and alerts from the Security Summit partners. The new approach will increase collaborative efforts to raise awareness and education about schemes, not just during tax season but throughout the year.

Yes, folks, they’ve created a coalition to battle TikTok tax advice. Finally. “Social media is an easy way for scammers and others to try encouraging people to pursue some really bad ideas, and that includes ways to magically increase your tax refund,” said IRS Commissioner Danny Werfel back in April. “There are many ways to get good tax information, including @irsnews on social media and from trusted tax professionals. But people should be careful with who they’re following on social media for tax advice. Unlike hacks to fix a leaky kitchen sink or creative makeup tips, people shouldn’t rely on made-up ways on social media to patch up their tax return and boost their refund.”

Mmm, we might need a Coalition Against TikTok Makeup Hacks too.

Statements of support from leading members of the nation’s tax community for Coalition Against Scam and Scheme Threats task force [IRS]

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Yet another accounting firm has reported a data breach, this time Heier Weisbrot & Bernstein of Gibbsboro, New Jersey and the details are a bit scarier than just bad actors caught digging around in the firm’s files. In this case, an unauthorized someone or someones got into HW&B’s tax software and attempted to file fraudulent tax returns.

This is what they said in a consumer notification filed with the attorney general of Maine on August 7 (emphasis ours):

Heier Weisbrot & Bernstein, LLC recently completed its investigation of an incident involving unauthorized access to a certain computer system in its network. On June 27, 2024, Heier Weisbrot & Bernstein, LLC detected an attempt by an unauthorized actor to file fraudulent tax returns for a small number of clients. The fraudulent returns were identified and reported to the IRS to be remedied. Heier Weisbrot & Bernstein, LLC worked with the IRS to ensure that any other attempted fraudulent returns are not processed.

Heier Weisbrot & Bernstein, LLC launched an investigation with the assistance of a third party cybersecurity firm. The investigation found that an unauthorized actor accessed Heier Weisbrot & Bernstein, LLC’s tax software between approximately June 22 and June 26, 2024. The files accessible in the tax software contained the name and one or more of the following for seven Maine residents: Social Security number, driver’s license number, and financial account number(s) used for direct deposit of any tax refund if provided to Heier Weisbrot & Bernstein, LLC. For certain of the individuals, the investigation could not conclusively determine whether their information was accessed or acquired by the unauthorized actor. Heier Weisbrot & Bernstein, LLC completed its analysis of the personal information contained in its tax software on July 29, 2024.

According to the full consumer communication filed with the Vermont attorney general [PDF], HW&B is offering a year of identity monitoring services through IDX. These services include: “one year of credit and CyberScan monitoring, a $1,000,000 insurance reimbursement policy, and fully managed identity theft recovery services.”

The firm went on to “strongly encourage” recipients to enroll in the IRS’ Identity Protection PIN (“IP PIN”) program and directed them to IRS.gov/IPPIN to do so.

Added the firm:

We apologize for any inconvenience this may have caused. We have and will continue to take steps to enhance the security of our computer systems to help prevent events such as this from occurring in the future.

See our previous coverage of accounting firm data breaches, including biggies at EY and PwC, here.

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After an explosive report showed thousands of Internal Revenue Service (IRS) employees owe nearly $50 million in overdue taxes, U.S. Senator Joni Ernst (R-Iowa) blasted IRS Commissioner Daniel Werfel for a complete lack of accountability and introduced the Audit the IRS Act, requiring annual audits of agency employees and the termination of every IRS agent who isn’t paying their taxes.

Beyond the widespread tax evasion, the Department of Treasury Inspector General for Tax Administration (TIGTA)’s audit, conducted at the request of Senator Joni Ernst, is full of jaw-dropping pieces of information about the agency, including that it knowingly rehired individuals who committed criminal and sexual misconduct.

“The spirit of 1776 is still alive and well with a tax revolt happening right now at the most unlikely of places in Washington, the IRS,” said Ernst. “While the IRS warns, ‘tax evasion is a serious crime punishable by imprisonment, fines, and the imposition of civil penalties,’ the agency is rewarding its own tax dodgers with paychecks and lavish benefits made possible, ironically, with the taxes paid by law-abiding citizens. My legislation will create a zero-tolerance policy for tax evasion and misconduct while ensuring these IRS bureaucrats are no longer allowed to live by one set of rules and enforce another on honest, hardworking Americans.”

Hold up, lavish benefits? At the Internal Revenue Service? Citation needed.

Her strongly worded letter to IRS Commissioner Danny Werfel is below and the text of her bill here.

Ernst Exposes Massive Tax Evasion at IRS, Demands an Audit of the Auditors [Senator Joni Ernst, R-IA]

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He writes:

Last month, the Internal Revenue Service (IRS) announced an extension of a pause on processing Employee Retention Credit (ERC) claims submitted after Sep. 14, 2023. The agency closely examined ERC claims in backlog and determined that 10-20% of claims were low-risk, 60-70% of claims had unacceptable risk, and 10-20% had high risk. I applaud the IRS’ prudent use of the increased funding from the Inflation Reduction Act to sift through invalid claims, identify low-risk claims, and perform a timely analysis of millions of ERC claims.

The IRS has said that it would “begin judiciously processing more” low-risk claims, with the first payments going out later in the summer. However, the already identified low-risk ERC claims, submitted by struggling small businesses, should be approved and paid now. Immediately approving and paying low-risk ERC applicants would greatly benefit the roughly 150,000-300,000 applicants who are still operating in a challenging economic environment.

In a June 20 news release, the IRS announced plans to deny tens of thousands in “improper high-risk” ERC claims following a detailed review of unprocessed claims. The IRS spent months digitizing information and analyzing data for more than one million ERC claims, the total of which was more than $86 billion.

Of the timeline for issuing payments for those claims deemed low risk the IRS said:

The IRS anticipates some of the first payments in [the low risk] group will go out later this summer. But the IRS emphasized these will go out at a dramatically slower pace than payments that went out during the pandemic period given the need for increased scrutiny.

As the additional IRS processing work begins at a measured pace, other claims will begin being paid later this summer following a final review. This additional review is needed because the submissions may have calculation errors made during the complex filings. For those claims with calculation errors, the amount claimed will be adjusted before payment.

The IRS also noted that generally the oldest claims will be worked first, and no claims submitted during the moratorium period will be processed at this time.

Just to make sure people who are waiting on ERC claims to be paid out are very, very clear on the timeline, the IRS then said:

The IRS cautioned taxpayers who filed ERC claims that the process will take time, and the agency warned that processing speeds will not return to levels that occurred last summer. Taxpayers with claims do not need to take any action at this point, and they should await further notification from the IRS. The agency emphasized those with ERC claims should not call IRS toll-free lines because additional information is generally not available on these claims as processing work continues.

“These complex claims take time, and the IRS remains deeply concerned about how many taxpayers have been misled and deluded by promoters into thinking they’re eligible for a big payday. The reality is many aren’t,” Werfel said. “People may think they are on safe ground, but many are simply not eligible under the law. The IRS continues to urge those with pending claims to use this period to review the guideline checklist on IRS.gov, talk to a legitimate tax professional rather than a promoter and use the special IRS withdrawal program when there’s an issue.”

In wrapping up his piece, Rettig said “It is true that the fog of war and the predatory schemes of some bad actors misled some small businesses into thinking they were eligible for ERC when they were not.”

“However, fighting fraud should not come at the expense of legitimate small businesses with claims pending at the IRS.”

The IRS is right to scrutinize pandemic-era employee retention credit claims—but legitimate filers can’t afford more delays [Ex-IRS Commissioner Chuck Rettig in Fortune]

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Seeing that post reminded me that some months ago, we were informed of yet another — perhaps even superior — remix of IRS hold music that I never got around to posting. Seeing as it’s a holiday week and there’s little going on, there’s no time like the present.

Ladies and gentlemen, feast your ears on Jason Staats‘ IRS Hold Music but it’s lofi beats.

Oh, and here’s a completely related article The New York Times published a couple days ago: Millions of Taxpayers Call the IRS for Help. Two-Thirds Don’t Reach Anyone.

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To tide you over until we can do that deep dive, the good folks at TR just published an article on tax firms’ top strategic priorities. Talent continues to influence the obsessive thoughts that bubble over in firm leadership’s brains when they’re trying to fall asleep every night however growth, pricing, and efficiency are of significant importance, too. Depending on what size firm you ask.

Here’s a handy chart:

Says the full report:

• Small firms (1-3 people) tended to lean in the direction of maintaining the status quo, preferring a more balanced approach to prioritization.
• Midsize firms (4-29 people) were much more likely to pursue talent development as a priority and drive efficiencies through streamlined workflows and aggressive use of automation.
• Large firms (30-plus people) had the resources to pursue multiple priorities at once, including talent development and growth through efficiencies found using more sophisticated technology and automation. Large firms were also more likely to explore different pricing strategies for the broad range of business services they offer.

On the topic of pricing, Thomson Reuters says this is the first time ever it has appeared in the top priorities list. Ron Baker and the rest of the Death to the Billable Hour gang will love this part:

…largely because the wisdom of hourly billing is being questioned by both clients and their firms. Many clients don’t like hourly billing because it is unpredictable; hence the rise in flat-fee and project-based pricing, among other alternatives types of pricing. Firms, too, have come to realize that hourly billing doesn’t necessarily capture the true value of their services, particularly in the areas of business consultation, tax strategy, and decision support.

This makes a lot of sense when you think about how popular advisory services are these days. Don’t expect this change to happen as rapidly as automation, they’ve been debating this for like 15 years and the old-timers are really having trouble letting go. Here’s Ron Baker’s value pricing pitch from almost ten years ago:

A big problem with hourly billing is it’s an internally focused metric. It looks at our costs and our inputs. It doesn’t look at our outputs and outcomes. There’s nothing in the hourly billing formula that looks at client value.

The other problem with it is it limits an accounting firm’s income. As more and more firms are moving to the cloud, a lot of labor that CPAs used to do is now being automated. If you’ve got a business model that says, “I sell time,” and the time it takes you to do more work is being driven down because of all these technological changes, unless your hourly rates are increasing faster than productivity, your income is going to suffer, and your profitability is going to suffer. And our hourly rates have not been increasing faster than our productivity. So it’s a very limiting business model.

But back to the report. Comparing 2023 to 2024, we see efficiency still dominates the list, talent is once again a headache (note: retention is now the word of the day when we talk talent which should not be confused with the pipeline problems that get all the headlines), and growth has slipped a bit.

“Growth may have slipped down the priority list; but then again, lack of growth hasn’t been a problem for most firms either,” says the report. “Indeed, a majority of firms reported an average revenue increase of 24% over the past 12 months. So whatever firms are doing, it’s still working.” Mid-size firms interpret growth as expanding their client base while the larger firms see implementation of automation as the best way to grow. In other words, “growth” means different things to different-sized firms.

We’ll do a deeper dive into the report later, hopefully this has whet your appetite.

Survey Methodology:
Surveys for the 2024 State of Tax Professionals Report were conducted in the first quarter of 2024.* The survey involved 500 respondents from tax & accounting firms of all sizes, although a bit more than half (51%) of respondents were from midsize firms (4-29 people), and 38% were from small firms (1-3 people). By region, slightly more than half (51%) of respondents were from firms in the United States; the rest were from firms in the United Kingdom, Canada, Australia, Brazil, and Argentina. Also, 60% of the respondents were male, and the age range of all respondents was represented relatively equally by decade, from under 40 years old to over 60 years old. The vast majority (85%) of respondents reported having leadership roles in their organization, and almost half (48%) were either partners or principals.

The post Let’s Talk About This Year’s Strategic Priorities at Tax Firms appeared first on Going Concern.

In a press release issued yesterday, the IRS said it’s exploring ways to expand Direct File to more taxpayers “including covering more tax situations and inviting all states to partner with Direct File next year.” More details to come in the next few months.

The decision follows a highly successful, limited pilot during the 2024 filing season, where 140,803 taxpayers in 12 states filed their taxes using Direct File. The IRS closely analyzed data collected during the pilot, held numerous meetings with diverse groups of stakeholders and gathered feedback from individual Direct File users, state officials and representatives across the tax landscape. The IRS heard directly from hundreds of organizations across the country, more than a hundred members of Congress and from those interested in using Direct File in the future. The IRS has also heard from a limited number of stakeholders who believe the current free electronic filing options provided by third party vendors are adequate.

There’s still plenty of analysis left to do but the agency said initial post-pilot analysis was enough to make them decide not to abandon the experiment.

And added:

The IRS noted that an early decision on 2025 was critical for planning and programming both for the IRS and for additional states to join the program. IRS Commissioner Danny Werfel recommended to Secretary of the Treasury Janet L. Yellen to make Direct File permanent. He cited overwhelming satisfaction from users and improved ease of tax filing among the reasons for his recommendation, which Secretary Yellen has accepted.

Users of Direct File did seem pleased with it. 90% of respondents ranked their experience as Excellent or Above Average, 86% of respondents said that their experience with Direct File increased their trust in the IRS, and 90% of survey respondents who used customer support rated that experience as Excellent or Above Average.

The TurboTax thing in the headline is a joke, they didn’t actually say that. Though wouldn’t it be a riot if they did. What they did say was:

As a permanent filing option, Direct File will continue to be one option among many from which taxpayers can choose. It is not meant to replace other important options by tax professionals or commercial software providers, who are critical partners with the IRS in delivering a successful tax system for the nation. The IRS also remains committed to the ongoing relationship with Free File Inc., which has served taxpayers for two decades in the joint effort to provide free commercial software. Earlier this month, the IRS signed a five-year extension with industry to continue Free File.

“The clear message is that many taxpayers across the nation want the IRS to provide more than one no-cost option for filing electronically,” said IRS Commissioner Danny Werfel. “So, starting with the 2025 filing season, the IRS will make Direct File a permanent option for filing federal tax returns. Giving taxpayers additional options strengthens the tax filing system. And adding Direct File to the menu of filing options fits squarely into our effort to make taxes as easy as possible for Americans, including saving time and money.”

IRS makes Direct File a permanent option to file federal tax returns; expanded access for more taxpayers planned for the 2025 filing season [IRS]

The post The IRS Says F*** You to TurboTax and Makes Direct File a Forever Thing appeared first on Going Concern.

Based in Massachusetts, Rinke has more than two decades of international tax experience, notably involving cross-border transactional and operational planning for multinational corporations. His diverse industry experience includes pharmaceutical, biotech, manufacturing, chemicals, semiconductors, retail, and finance.

As you can see, he’s thrilled to be opening this next chapter in his esteemed professional career.

The rest of the news release is the usual fluff meant to flaunt their new recruit’s wealth of experience to current and prospective clients. “Rinke is focused on providing strategic guidance that helps clients address changing macroeconomic conditions, reconfigure operational profiles to improve business sustainability, and navigate complex global tax laws and regulations.” We get it, he’s good.

PwC isn’t specifically mentioned in the press release (“a Big 4 firm”) because that would be tacky. They do, however, drop other names:

He earned a JD, cum laude, from Syracuse University School of Law; an LLM in Taxation from Georgetown University School of Law; and a BA in Philosophy, cum laude, from Minnesota State University Moorhead.

Going by Daniel Rinke’s LinkedIn experience, it’s unclear if this was an outright robbery. Usually when someone is unhappy at their current firm and leaves for another, they align their leaving and starting dates to reflect a direct jump which he has not.

Hilarious. Did a year as associate at KPMG and was like nah, I’m outta here. Good for you, Dan.

Best of luck to him in the new gig. That’s not sarcastic.

Rinke joins CohnReznick as International Tax Principal [CohnReznick]

The post CohnReznick Snags a Longtime PwC International Tax Guy and Issues a Press Release appeared first on Going Concern.

Some time last year I noticed more and more practitioners and firm owners on #TaxTwitter expressing a desire to take a step back and sort out the problem clients before filing season hits. We observed many of them raising prices, implementing thorough onboarding procedures that would immediately eliminate the pain in the ass clients who can’t fill out basic paperwork in a timely manner, and best of all (for them, not the clients), tax preparers across the board were turning away clients left and right. How do we know? Because mainstream media was talking about how it might be hard to find a tax preparer this year. As we all know, they normally ignore this entire sector and pretend the science of accounting doesn’t exist if they can help it.

Filing Season 2024 definitely sucked for many clients.

So how’d it go? How are you now? What are you doing to decompress and rejoin the land of the living? Drop a comment or, if you prefer, shoot me an email.

And should any clients come across this, please remember:

If your tax person isn't answering your calls and emails today, you don't have to worry. We're okay. We just need a few days to recover. #TaxTwitter pic.twitter.com/R2f7G1qvgc

— Jan Roberg (@RobergTax) April 18, 2024

p.s. if you need it, check out this quick article on caring for your mental health from NIMH.

The post Weekend Discussion: So How Was Tax Season? appeared first on Going Concern.

He was arrested last July at which time U.S. Attorney Philip R. Sellinger said, “While our country was fighting the spread of the virus and its profound economic impact, Haynes allegedly scammed the system in a massive scheme to line his own pockets. As described in the complaint, Haynes abused his position as a tax preparer to steal millions of dollars by submitting over 1,000 false applications for funds set aside to help legitimately struggling businesses. My office and our partners will continue to find and prosecute fraudsters who exploited the pandemic for personal gain.”

The employee retention tax credit was just one of several relief measures authorized by Congress in response to the COVID-19 pandemic and the effects lockdowns had on businesses. As the name implies, ERC was intended to ease tax burdens for employers who were able to keep people on staff rather than lay them off. Another credit packaged in the Coronavirus Aid, Relief, and Economic Security (CARES) Act allowed for a paid sick and family leave credit employers could apply against employment taxes for wages paid to employees on sick leave because of COVID-19.

Said the Department of Justice in the news release:

As charged in the indictment, from November 2020 to May 2023, Haynes repeatedly exploited these programs that were intended to help small businesses impacted by the COVID-19 pandemic. Acting as a tax preparer, Haynes allegedly filed more than 1,600 false employment tax returns with the IRS claiming COVID-related tax credits on behalf of himself and his clients.

Haynes allegedly falsely told his clients that the government was giving out COVID-relief money for businesses and that they were eligible for it simply because they had a business. Haynes allegedly submitted forms to the IRS on behalf of his client’s businesses, often without consulting his clients, that grossly overstated the number of employees and the amount of wages paid to fraudulently claim these COVID-related tax credits. Haynes allegedly submitted similarly false forms for four of his own companies.

According to the indictment, based on these and other misrepresentations, Haynes fraudulently sought more than $150 million in tax refunds on behalf of his companies and numerous other businesses in his clients’ names.

Allegedly Haynes’ clients got at least $40 million in tax refunds from his filings, a portion of which he received as a fee and often in cash at his request. Aaaaaand…New Jersey Tax Preparer Charged in COVID-19 Employment Tax Credit Scheme

Haynes allegedly did not report on his or his businesses’ tax returns some of the income he received from clients as his share of the fraudulent obtained tax refunds. The IRS also allegedly directly mailed Haynes multiple tax refund checks totaling $1,428,592 based on false claims he submitted relating to his businesses.

If convicted, he could get a maximum penalty of 20 years in prison for each mail fraud charge, a maximum penalty of five years in prison for each tax evasion charge, three years in prison for aiding and assisting in the preparation of false return charge and two years in prison for the aggravated identity theft charge.

Related:

The post Tax Preparer Finds Out in the Worst Way Possible That ERC Wasn’t a Free Money Glitch appeared first on Going Concern.

Some of this year’s winners are repeats from last year and of course Employee Retention Credit claims made an appearance.

Here’s the list so far, we’ll update as the rest of the list is released.

• IR-2024-91, Dirty Dozen: Beware of Offer in Compromise ‘mills’ that falsely claim their services are necessary to resolve IRS debt
• IR-2024-89, Dirty Dozen: IRS warns about false Fuel Tax Credit claims; taxpayers should be wary of scammers, heightened review
• IR-2024-87, Dirty Dozen: IRS warns taxpayers to stay away from ‘helpful’ scammers offering to set up an Online Account
• IR-2024-85, Dirty Dozen: Beware of aggressive promoters who dupe taxpayers into making questionable Employee Retention Credit claims; risks continue for small businesses, special withdrawal program remains available
• IR-2024-84, IRS kicks off annual Dirty Dozen with warning about phishing and smishing scams

OK, we know what phishing is. WTF is smishing?

Smishing: A text or smartphone SMS message where scammers often use alarming language such as, “Your account has now been put on hold,” or “Unusual Activity Report,” with a bogus “Solutions” link to restore the recipient’s account. Unexpected tax refunds are another potential lure for scam artists.

Not mentioned is the ever-popular USPS/UPS/DHL/carrier pigeon “package undeliverable” message. Be careful clicking on links from unexpected senders.

We’ve also seen #TaxTwitter reporting they’re getting blown up by this specific email this year, an email that is only slightly odd compared to the very odd, typo-laden scam emails from stranded United States servicemen and newly rich royalty we’re used to. Kindly get a real job, Janet.

Not today Satan pic.twitter.com/Lzj2zzuA39

— Matthew J. Cordes, EA (@cordes_tax) March 27, 2024

While you’re here, you may want to review the 2023 Dirty Dozen. Just because something fell off the list doesn’t mean it’s no longer a concern, only that a worse concern popped up on the IRS’ radar.

• Employee Retention Credit claims
• Phishing and smishing
• Online account help from third-party scammers
• False Fuel Tax Credit claims
• Fake charities
• Unscrupulous tax return preparers
• Social media: Fraudulent form filing and bad advice
• Spearphishing and cybersecurity for tax professionals
• Offer in Compromise mills
• Schemes aimed at high-income filers
• Bogus tax avoidance strategies
• Schemes with international elements

Stay safe out there.

The post There Are a Few Familiar Topics on the 2024 IRS Dirty Dozen List appeared first on Going Concern.

That’s nine open investigations, 123 under review, and anyone who comes forward to say they took ERC money they weren’t entitled to before the Voluntary Disclosure Program closes on March 22 will have to give up the name of the promoter that encouraged them to take the credits.

There is also a voluntary withdrawal program for anyone who had an open, unprocessed ERC claim floating around out there. The IRS says more than $167 million from pending applicants was withdrawn through mid-January.

Thousands of letters have gone out to taxpayers notifying them of disallowed ERC claims, claims that failed to meet the basic criteria for the ERC program such as A) being a business and B) having employees on the payroll.

They also plan to start sending letters to thousands of ERC recipients who may have claimed an erroneous or excessive credit. These notices inform recipients that the IRS will recapture the erroneously claimed ERC payment through normal tax assessment and collection procedures.

These letters are for tax year 2020 where the statute of limitations is nearing in April, more will be sent for tax year 2021 this spring.

The IRS issued an immediate moratorium on ERC claims last September and has not yet announced when that will be lifted.

The post The IRS Is Ready to Strike the Fear of God Into Anyone Who Took ERC appeared first on Going Concern.

Announced Wednesday, the IRS has decided to put some of that Inflation Reduction Act funding toward scrutinizing the use of private jets, “a complex area where IRS work has been stretched thin” according to Commissioner Danny Werfel. Dozens of audits on business aircraft maybe being inappropriately used for personal purposes began this week.

The audits will be focused on aircraft usage by large corporations, large partnerships and high-income taxpayers and whether for tax purposes the use of jets is being properly allocated between business and personal reasons.

The IRS will be using advanced analytics and resources from the Inflation Reduction Act to more closely examine this area, which has not been closely scrutinized during the past decade as agency resources fell sharply. The number of audits related to aircraft usage could increase in the future following initial results and as the IRS continues hiring additional examiners.

“During tax season, millions of people are doing the right thing by filing and paying their taxes, and they should have confidence that everyone is also following the law,” said IRS Commissioner Danny Werfel. “Personal use of corporate jets and other aircraft by executives and others have tax implications, and it’s a complex area where IRS work has been stretched thin. With expanded resources, IRS work in this area will take off. These aircraft audits will help ensure high-income groups aren’t flying under the radar with their tax responsibilities.”

In its press release, the IRS admits the use of business aircraft for both business and personal reasons by officers, executives, other employees, shareholders, and partners is “a complex area of tax law” and record-keeping can be “challenging.” Sounds like a perfect place to go hunting for violations!

IRS begins audits of corporate jet usage; part of larger effort to ensure high-income groups don’t fly under the radar on tax responsibilities [IRS]

The post Executive Mile High Club Members Take Note: The IRS Is Going After Private Jets Now appeared first on Going Concern.

In my view, the system is very close to a tipping point of massive non-compliance in a number of areas of tax law. Put simply, if taxpayers and their advisers (and even tax specialists) have a hard time understanding new legislation, it can and will lead to non-compliance. The system then breaks down.

Combine the challenges of finding new talent to enter the accounting profession, interpreting massive new and complex legislation and reporting requirements, and the increased attrition (because of older accountants retiring and some outright leaving the profession because of the above issues) and there is a significant shortage of accountants that may leave some people having trouble finding one when needed.

The author may be from Canada but it’s no different down here.

You’re welcome to discuss on X, in the comments below, or screenshot the text and put it on Reddit, we don’t care. Please just read the whole thing first.

Give your accountant a hug — you may not find another one [Financial Post]

The post Weekend Discussion: “The System Is Very Close to a Tipping Point of Massive Non-Compliance” appeared first on Going Concern.

This guy graduated #1 in accounting so he should have no problems DIYing.

Client graduated # 1 in accounting and so doesn’t need us to do his simple tax returns anymore. Rental property, $1mil+ in stock transactions. I was charging $1800 (not $3000 – so much for the accounting). I hate losing cleats but buh-bye. pic.twitter.com/UWbrbVpn1Z

— Andrea MacDonald, CPA (@andreamacdcpa) January 17, 2024

This guy generated quite the buzz:

My CPA just increased her service fee again by 30%

Last year she increased her fee by 60%

Must be nice

— FourPlex Guy Carlos Gonzalez (@dig_deeper1) January 23, 2024

Accountants quit being stupid on fees. He says CPA was charging $500 for a 26 rental unit tax return and is upset his fee went up to $1,000 over 2 years. Do better. We are better off without bottom feeders (CPAs and Clients like this). https://t.co/3jynTmZxz7

— Hatfield's Mama CPA (@HatfieldsMama) January 23, 2024

Advice column:

My Tax Preparer Just Raised Her Fees — What Should I do? Oblivious Investor

• My tax guy just told me he’s going to be charging about 40% more this year for our return, relative to what he charged for the last several years. What should I do?
• My tax preparer told me her price is increasing to [whatever dollar amount]. Is that reasonable for [a particular level of return complexity]?
• My CPA’s hourly rate just increased to $250. That seems insane. Do CPAs really make $10,000 per week during tax season?*

Double L for this person on Reddit:

Tax Prep Fee
byu/Terrible-Chip-3049 intax

Comment
byu/Terrible-Chip-3049 from discussion
intax

Some random forum:

Just wondering if my CPA fees were reasonable? I’ve experience fee creep over the last few years and the creep seems to be on a much higher level than inflation itself would suggest. My CPA is actually an EA, not a CPA and he prepares a joint personal tax return for myself and wife, and a corporate tax return for my small business S-corp. He does the federal and CA filings. He also includes the tax return for three children (two of whom are adults but earn no income other than investments). Fee is $4000

I have no problem with the accountant and feels he knows what he’s doing. However, recently he contacted his clients to let them know he is moving to a lawyer type fee structure ie: additional hourly charges for any issues that you may want him to answer.

I felt that $4000 was enough and am now thinking of abandoning ship before I figure out how much is really enough for him. Previous accountants have always had a fee structure where you paid them per return but could call them anytime throughout the year and ask questions. I don’t like this new arrangement and was wondering if it was common and what kind of rates others were paying.

“You can take the tax preparation class yourself for under $200”

Charging that much to do taxes??? Lmfao no ma'am… You can take the tax preparation class yourself for under $200

— Gucci Ma'am (@TittyFlex) January 23, 2024

And now for a little encouragement. Read and internalize this message.

Comment
byu/fupapatrol29 from discussion
intaxpros

Remember, clients are having a harder time finding a professional than you are finding clients. You’re the hot girl on Tinder, they’re the guy holding up a dead fish who didn’t even fill out his profile.

Talked 2 prospect 2day whose reason 4 finding new CPA: old CPA raised fee 500 over 2 yrs. Spent 10 mins expl why old CPA had 2 raise fee. Don’t know who old CPA is. Told prospect we more than doubled min fees this year. Still wants 2 meet. Stick by ur guns people! #TaxTwitter

— Johanna Sweaney Salt (@JohannaSalt) December 6, 2022

Bonus late addition:

GOOD LUCK!

Good luck! pic.twitter.com/tJCOc7GgIA

— Blake Oliver (@BlakeTOliver) January 25, 2024

Related:

The post F in the Chat For All the Clients Losing Their CPAs to Higher Fees This Year appeared first on Going Concern.

Reuters, just moments ago:

A U.S. federal government shutdown in coming weeks would likely disrupt the soon-to-start tax filing season for 2023 income, the head of the Internal Revenue Service said on Friday, even as the agency takes some steps to ensure that tax collections continue.

“We have experienced shutdowns before. We have not experienced shutdowns in the middle of filing season. So there’s some uncertainty there,” IRS Commissioner Danny Werfel told reporters.

He said the IRS “will do everything in our power” to minimize such disruptions, including by invoking authorities to maintain certain operations if government spending authority lapses later in January and in February.

“We’ll have a variety of different carve-out elements that will allow us to maintain operations,” he said, but a shutdown “will increase the risk that we don’t have as smooth a filing season as we intend to have.”

Funding is set to run out on the 19th, ten days before the official start of filing season. But don’t worry, everyone, they do this all the time. Granted, not right before filing season starts but all the time regardless.

Earlier:

The post Tax Season 2024 Hasn’t Even Started and It’s Off to a Fantastic Start appeared first on Going Concern.

According to court documents and statements made in court, Gil instructed his manager and internal bookkeeper to create false sales numbers for his restaurants that underreported cash sales by approximately $5.1 million. Gil then provided those falsified records to an accountant who unwittingly used them to prepare false business and personal income tax returns for those years.

Then, in July 2018, during an IRS audit, Gil directed his accountant to provide the IRS with profit and loss statements that matched the figures reported on the false tax returns. Gil also directed his manager/bookkeeper to create and provide the IRS with false daily cash and sales reports purportedly printed from the restaurants’ point-of-sale systems. During interviews with the IRS, Gil falsely stated to the revenue agent conducting the audit, and later to IRS special agents conducting a criminal investigation, that the falsified daily cash reports and point-of-sale records were accurate. In total, Gil caused a tax loss to the IRS of approximately $1.6 million.

In addition to the term of imprisonment, U.S. District Judge Andrew P. Gordon for the District of Nevada ordered Gil to serve three years of supervised release and to pay $2,228,943.65 in restitution to the United States.

Casa Don Juan has 3.8 stars on Yelp (that’s still a thing apparently) with some users reporting high prices, terrible guacamole, and frozen chicken. Someone also griped about the sign.

Other users rave about the atmosphere and homemade tortillas. Reviewers are torn on the existence of a photographer who roams the restaurant taking pictures and will then offer to sell you a pic.

The post Las Vegas Restaurateur Bamboozled His Accountant Into Filing Phony Tax Returns appeared first on Going Concern.

To Lee, banging dudes for money is preferable to her old job, the grueling pace of which drove her to depression. On leave from work in 2018, she realized that her job was destroying her so she left for good. At that point, she’d already experimented with some freelance “sugaring” (Google that if you want) after a coworker told her about how he was sugar daddy to women he met on Seeking Arrangement. She went full-time in 2019.

She says she’s billing guys at $1,500/hr, or rather a minimum of $3,000 for up to two hours of her time; 48 hours costs clients $20,000. She told Insider she expects to make $400,000 to $800,000 before taxes and expenses and taxes, after making $29,000 her first year as a full-time sex worker. Because of the “extremely high variance” in her main gig, she supplements with camming, stripping, and phone sex.

“My tagline is, ‘You can take the girl off Wall Street, but you can’t take the banker out of the whore,’ and it turns out that that plays really well into a lot of professional gentlemen’s dream-girl-from-the-office,” fantasies, Lee told Insider.

The Post piece is slightly less salacious and focuses on Mia’s work not as professional fellatrice but her efforts to spread good accounting practices to fellow hoes.

At a New York tax seminar at the start of last year’s tax season, Lee answered every query tactfully, with none of the laughing or leering that these women might face from another accountant. It helps that she is already familiar with the field: Questions covered such complex topics as how to deduct fees paid to rent a dungeon and how to report income paid in bitcoin from a platform called “Spankpay.”

Many women ask Lee about deductions. During the tax seminar, Lee used her own two-bedroom apartment as an example when explaining home office deductions. “I can’t write off my primary bathroom. I can write off my second bathroom because I stream my showers and charge for that,” she said. “Nice,” one of the sex workers said.

She has also helped sex workers determine gifts vs. payments. The IRS says a gift is:

Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.

And:

The donor is generally responsible for paying the gift tax.

The Post offers an example:

The stripper told Lee that she was recently on a trip “and the guy got me diamonds.” They ultimately decided the gems were a gift with no expectation of services in return.

On her YouTube channel Money Talks with Mia, she provides sex workers “a wealth of knowledge about smart investing, personal finance management, and navigating the complexities of financial planning as a SW.” Like this one on navigating financial stigma:

Is #thotaudit still a thing?

Someone send them Mia’s way. But don’t bother with the OnlyFans creators who say they’re accountants, they’re lying.

The prostitute nudging sex workers to file their taxes [Washington Post]

The post Condoms Are Tax Deductible If You Blow Dudes For a Living and Other Tax Advice for SWs appeared first on Going Concern.

Today we’re going to look at a less funny letter the AICPA sent to Treasury Secretary Janet Yellen (or “Janette L. Yellen” per the letter) and IRS Commissioner Daniel “Danny” Werfel “RE: The Impact on Taxpayers and Tax Practitioners of an Internal Revenue Service
Shutdown during the 2024 Tax Filing Season.” The full letter is below.

TLDR The AICPA is deeply concerned that a 2024 government shutdown would have catastrophic effects on the IRS, taxpayers, and taxpayers’ practitioners and outlines just a few of the issues basically guaranteed to happen should there be a shutdown. The letter notes that some of these are already problems due to the backlog and will only get worse if a shutdown does as the name describes and grinds most of the IRS to a halt.

As noted in the National Taxpayer Advocates September 29 blog, the IRS’s Contingency Plan takes
a narrow interpretation of the Office of Management and Budget guidance to encompass only the
government’s safety of human life and protection of property and not the safety and property of U.S.
citizens and taxpayers. This interpretation results in many important tax administration functions
stopping in the event of a shutdown. Specifically:

• Taxpayer phone calls should be answered, but with two-thirds of the IRS furloughed access
  to information to resolve taxpayer issues will be limited.
• All Taxpayer Assistance Centers will close, which will result in a loss of face to face service
  to thousands of taxpayers per day.
• Refunds will not be processed except in cases where e-filed, error free refunds can be automatically direct deposited; thus, no refunds to approximately one-third of taxpayers that depend on their refunds for daily living.
• The IRS will not respond to paper correspondence, as well as certain paper filings, which will
  create a paper backlog.
• Automated notices will continue, which include notices of intent to levy and automatic
  transfers to collections.

According to our members, though there have been recent improvements to IRS services, processes are still not functioning at pre-pandemic levels. Adding an IRS shutdown will create more problematic issues, burdens, and backlogs, similar to those created by the pandemic. Past experience has taught us that an IRS shutdown, especially between now and April 15, 2024, will have dire consequences to the IRS, taxpayers, and their practitioners. The longer the shutdown, the larger the backlog and other challenges become. When the IRS re-opens, the IRS will need to work through the backlog while at the same time processing incoming paper and electronic submissions and answering an increased number of taxpayer calls to resolve outstanding issues.

Never one to only complain and not offer solutions to go with the complaining, the AICPA offers a few recommendations to address these potential issues:

1. Update the Current Contingency Plan to Include the IRA Funding to Provide Full Assistance to Taxpayers and Tax Practitioners
2. Provide Automatic Extension of Notices and Collections Until 90 Days from the Shutdown Ending Date, Stop Assessing Penalties and Interest, and Cease Sending Automated Notices
3. Maintain All Online Systems and Accounts to Ensure They Operate Effectively
4. Retain More IRS Chief Counsel Attorneys for Guidance

You can see full recommendations here. See? The AICPA does have your back!

The post Government Shutdown Would Mean ‘Dire Consequences’ to Taxpayers and Practitioners, Says AICPA to Treasury Threateningly appeared first on Going Concern.

Employers that have filed an ERC but not yet received a refund can withdraw the claim and avoid repayment, interest, penalties, and being made fun of for falling for slick ERC charlatans flooding their inbox. Employers that submitted an ERC claim still being processed can withdraw their claim and avoid the possibility of getting a refund for which they’re ineligible, the IRS said in a news release.

The agency also said:

The IRS created the withdrawal option to help small business owners and others who were pressured or misled by ERC marketers or promoters into filing ineligible claims. Claims that are withdrawn will be treated as if they were never filed. The IRS will not impose penalties or interest.

Those who willfully filed a fraudulent claim, or those who assisted or conspired in such conduct, should be aware that withdrawing a fraudulent claim will not exempt them from potential criminal investigation and prosecution.

“The IRS is committed to helping small businesses and others caught up in this onslaught of Employee Retention Credit marketing,” said IRS Commissioner Danny Werfel. “The aggressive marketing of these schemes has harmed well-meaning businesses and organizations, and some are having second thoughts about their claims. We want to give these taxpayers a way out. The withdrawal option allows employers with pending claims to avoid future problems, and we encourage them to closely review the withdrawal option and the requirements. We continue to urge taxpayers to consult with a trusted tax professional rather than a marketing company about this complex tax credit.”

Employers can use the ERC claim withdrawal process if all of the following apply:

• They made the claim on an adjusted employment return (Forms 941-X, 943-X, 944-X, CT-1X).
• They filed the adjusted return only to claim the ERC, and they made no other adjustments.
• They want to withdraw the entire amount of their ERC claim.
• The IRS has not paid their claim, or the IRS has paid the claim, but they haven’t cashed or deposited the refund check.
• Taxpayers who are not eligible to use the withdrawal process can reduce or eliminate their ERC claim by filing an amended return.

How to withdraw an ERC claim

To take advantage of the claim withdrawal procedure, taxpayers should carefully follow the special instructions at IRS.gov/withdrawmyerc, summarized below.

• Taxpayers whose professional payroll company filed their ERC claim should consult with the payroll company. The payroll company may need to submit the withdrawal request for the taxpayer, depending on whether the taxpayer’s ERC claim was filed individually or batched with others.
• Taxpayers who filed their ERC claims themselves, haven’t received, cashed or deposited a refund check and have not been notified their claim is under audit should fax withdrawal requests to the IRS using computer or mobile device. The IRS has set up a special fax line to receive withdrawal requests. This enables the agency to stop processing before the refund is approved. Taxpayers who are unable to fax their withdrawal using a computer or mobile device can mail their request, but this will take longer for the IRS to receive.
• Employers who have been notified they are under audit can send the withdrawal request to the assigned examiner or respond to the audit notice if no examiner has been assigned.

Those who received a refund check, but haven’t cashed or deposited it, can still withdraw their claim. They should mail the voided check with their withdrawal request using the instructions at IRS.gov/withdrawmyerc.

The IRS will be issuing more guidance for employers later this fall.

For professionals reading this interested in the ERC withdrawal process you can sign up the upcoming November 2 IRS webinar “Employee Retention Credit: Latest information on the Moratorium and Options for Withdrawing or Correcting Previously Filed Claims.”

The post The IRS Is Graciously Letting Taxpayers Withdraw Some Bad ERC Claims appeared first on Going Concern.

In four separate exposure drafts that amend the Taxation Administration Act 1953 (TAA) and/or the Tax Agent Services Act 2009 (TASA), the government is seeking stakeholder comments on proposals that would strongly discourage the behavior that led former PwC partner Peter Collins to bring confidential Australian Tax Office information back to the firm for the purposes of converting this information to billable hours. Australian Financial Review‘s Neil Chenoweth calls the proposals a “tax sector crackdown” and explains the finer details here.

We’re just going to pull the proposals directly from Treasury’s website. The goals are to strengthen the integrity of the tax system, increase the power of regulators because this is why we can’t have nice things, and strengthen regulatory frameworks to ensure they are fit for purpose. Factsheets and the full drafts can be found at each link below.

Response to PwC – reform of promoter penalty laws

These amendments relate to the priority area identified for action in the government’s PwC response: Strengthening the integrity of the tax system.

The draft legislation will:

• increase the time the Australian Taxation Office (ATO) has to bring an application for civil penalty proceedings in the Federal Court of Australia from 4 years to 6 years
• align the maximum civil penalties that the Federal Court of Australia can impose on promoters with those in the Corporation Act 2001
• expand the application of the current regime, including broadening the scope of important definitions, to overcome difficulties faced in the application of the provisions.

Note: Promoter penalty laws were introduced in 2006 to deter tax practitioners from promoting tax avoidance and evasion schemes to their clients, clearly they weren’t strong enough. Says the government response to the PwC tax leaks scandal (embedded at the bottom of this post):

Collectively, these changes will ensure promoters of tax exploitation schemes face significant consequences for their actions and make it uneconomic to engage in this behavior.

This will deter tax practitioners from making unauthorized disclosures of confidential information, or misusing confidential information, as occurred in the case of PwC, for financial gain.

Response to PwC – information sharing

These amendments relate to the priority area identified for action in the government’s PwC response: Increasing the power of our regulators.

The draft legislation will:

• remove limitations in the tax secrecy laws that were a barrier to regulators acting in response to PwC’s breach of confidence, and
  enable the Australian Taxation Office and Tax Practitioners Board to refer ethical misconduct by advisers (including but not limited to confidentiality breaches) with prescribed professional associations for disciplinary action.

Response to PwC – Tax Practitioners Board reforms

These amendments relate to the priority area identified for action in the government’s PwC response: Increasing the powers of our regulators.

The draft legislation will:

• enhance Tax Practitioners Board (TPB) investigation processes by extending the time period the TPB has to conduct investigations into suspected misconduct from 6 months to 24 months
• improve the TPB Register by lifting its functionality and utility, and increase the transparency of tax practitioner misconduct.

Response to PwC – whistleblower protections

In August 2023, the government announced a package of reform in response to tax adviser misconduct in Australia, to ensure that tax advice is provided in accordance with appropriate professional and ethical standards.

The package of reforms included:

• extending whistleblower protections for disclosures to the TPB, as well as a number of bodies that provide assistance in relation to whistleblower disclosures
• aligning some protections in the tax whistleblower regime with the Public Interest Disclosure regime,
• enabling the Australian Taxation Office, ACNC and TPB to share disclosed information more effectively.

The comment period closes on October 4.

As for the full package of reform, find that below. It’s essentially eleven pages of mammoth paperwork the Australian government has to do after PwC naughtily endeavored to help clients avoid future tax laws while destroying the firm’s — and all of consulting’s — relationship with not just the Australian Tax Office but the whole of Australian government. Nice job, guys.

Australian government response to PwC tax leak scandal by Adrienne Gonzalez on Scribd

The post Look What PwC Made the Australian Government Have to Do appeared first on Going Concern.

IRS:

IRS Commissioner Danny Werfel ordered the immediate moratorium, beginning today, to run through at least Dec. 31 following growing concerns inside the tax agency, from tax professionals as well as media reports that a substantial share of new claims from the aging program are ineligible and increasingly putting businesses at financial risk by being pressured and scammed by aggressive promoters and marketing.

The IRS continues to work previously filed Employee Retention Credit (ERC) claims received prior to the moratorium but renewed a reminder that increased fraud concerns means processing times will be longer. On July 26, the agency announced it was increasingly shifting its focus to review these claims for compliance concerns, including intensifying audit work and criminal investigations on promoters and businesses filing dubious claims. The IRS announced today that hundreds of criminal cases are being worked, and thousands of ERC claims have been referred for audit.

Cue loud gulp sounds echoing through the halls of ERC mills across the country.

With the stricter compliance reviews in place during this period, existing ERC claims will go from a standard processing goal of 90 days to 180 days – and much longer if the claim faces further review or audit. The IRS may also seek additional documentation from the taxpayer to ensure it is a legitimate claim.

“The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in,” Werfel said. “The further we get from the pandemic, the further we see the good intentions of this important program abused. The continued aggressive marketing of these schemes is harming well-meaning businesses and delaying the payment of legitimate claims, which makes it harder to run the rest of the tax system. This harms all taxpayers, not just ERC applicants.”

To protect taxpayers from scams, IRS orders immediate stop to new Employee Retention Credit processing amid surge of questionable claims; concerns from tax pros [IRS news release]

The post The IRS Has Stopped Processing ERC Claims Because ERC Mills Are Scamming the F*ck Out of Them appeared first on Going Concern.

From the press release:

The 2023 State of Corporate Tax Department report highlights under-resourced tax departments are more likely to face audits and penalties. For trade professionals, feeling understaffed is an acute challenge, shows the 2023 Corporate Global Trade Survey report. Departments are facing the data-intensive demands of today’s import and export trading environment – including new requirements to collect ESG data to comply with local laws – adding complexity, and reputational risk.

“What we’re hearing from tax and trade leaders in these latest reports echoes what we heard in our Future of Professionals research: tax teams are under-resourced and the need for internal efficiency is their top priority. There’s significant optimism about the potential of automation and generative AI to boost efficiency and support future growth,” says Ray Grove, Head of Product, Transactional Compliance at Thomson Reuters. “But tax and trade professionals are facing barriers to unlocking this potential, and, specifically, they’re feeling under-resourced in terms of technology budget for their departments, as well as headcount to be able to achieve their goals. This is not only tempering the success they can have – it’s also bringing risk and increasing the likelihood, and cost, of penalties that they’re facing.”

Marcum can tell you a little bit about the inevitable chaos of taking on more work than staffing levels can handle.

Key points:

• Half of corporate tax departments globally say they are under-resourced for technology, resources and hiring (47%)
• Under-resourced tax departments are more likely to incur tax audits and penalties
• Two-thirds of companies with $100 million-plus revenue are implementing technology to help manage their global trade operations (65%)

More on those first two points:

Respondents from close to one-half of businesses (47%) said they feel their tax department is under-resourced, which has greatly increased the risk of audits and penalties among other negative developments. Indeed, while 61% of surveyed businesses incurred tax audits in the past year, 72% of businesses with under-resourced tax departments did so. And 47% of businesses with under-resourced tax departments incurred tax penalties, compared to 42% of all businesses. In both cases, more than one-third of businesses incurred six or more audits and incurred penalties of more than $50,000. Despite this, respondents say their confidence in their ability to manage tax risk remains high, particularly among more well-resourced businesses.

For at least a decade we’ve been talking about robots taking accountants’ jobs, now that we’ve arrived in the glorious dawning of a new AI future companies must adopt technology to take the place of talent they can’t find. Improving efficiency is top of the list of priorities for tax departments (32%), followed by acquiring additional software (14%) and automation of processes (12%).

You’ll note improving processes outranks finding more talent and maintaining the staff they have by quite a bit. Shout-out to the 11% of respondents who chose “don’t know.” No one does, fam, no one does.

When corporate tax leaders were asked what their teams’ proudest accomplishment of the past year was, almost one-quarter (23%) said their team was most proud of its automation of processes through the implementation of new technology or software. Another 15% said they were most proud of how the tax team increased its speed and efficiency around filings, tax returns, and payments. Only 14% said that hiring additional staff and maintaining their existing staff was their team’s proudest accomplishment. 15% of respondents answered “don’t know” to the question.

This year’s survey was done via a 15-minute online survey with 365 senior tax professionals in June and July 2023. People in the 51-60 age bracket made up 29% of respondents, the under 30 crowd just 5%. Their roles include VP of Tax/Chief Tax Officer, Director/Senior Manager of Tax, Tax Manager, Senior Director of Tax, Senior Tax Technologist, Assistant Tax Manager, Junior Tax Technologist, and the ever-useful “Other.”

Under-resourcing in global tax and trade increases risk for multi-nationals, garners new Thomson Reuters research [Thomson Reuters]

The post Research: The Talent Shortage is Starting to Take Its Pound of Flesh From Corporate Tax Departments appeared first on Going Concern.

Attacks on Tax Privacy: How the Tax Prep Industry Enabled Meta to Harvest Millions of Taxpayers’ Sensitive Data [PDF] was born out of a November 2022 investigation by nonprofit newsroom The Markup that revealed online tax prep companies have been quietly transmitting users’ sensitive financial information to Facebook for years via tracking code called the Meta Pixel. An earlier Markup investigation showed 33 of the country’s top 100 hospitals were transmitting private health data to Facebook through this same tracker.

From The Markup‘s November article:

The data, sent through widely used code called the Meta Pixel, includes not only information like names and email addresses but often even more detailed information, including data on users’ income, filing status, refund amounts, and dependents’ college scholarship amounts.

The information sent to Facebook can be used by the company to power its advertising algorithms and is gathered regardless of whether the person using the tax filing service has an account on Facebook or other platforms operated by its owner Meta.

A pixel on TaxAct’s website sent users’ filing status, adjusted gross income, and the amount of their refund to Facebook. H&R Block’s online prep had their own pixel gathering data on filers’ health savings account usage and details on their dependents’ college tuition and expenses. TaxSlayer was the worst of all:

TaxSlayer, another widely used filing service, sent personal information to Facebook as part of the social media company’s “advanced matching” system, which gathers information on web visitors in an attempt to link them to Facebook accounts. The information gathered through the pixel on TaxSlayer’s site included phone numbers, the name of the user filling out the form, and the names of any dependents added to the return. As with TaxAct, specific demographic information about a user was obfuscated but still usable for Facebook to link a user to an existing profile. TaxSlayer has said it completed 10 million federal and state tax returns last year.

So the senators got wind of this and opened an investigation, the result of which is the 54-page report. “It reveals that Big Tax Prep [Ed. note: LOL] has recklessly shared tens of millions of taxpayers’ sensitive personal and financial data with Meta for years, without appropriately disclosing this data usage or protecting the data, and without appropriate taxpayer consent,” says the report’s executive summary. “The sharing of taxpayer data with Meta has put taxpayer privacy at risk and appears to represent a violation of taxpayer privacy laws.” The extraordinarily sensitive personal and financial information shared with Meta was then used for “diverse advertising purposes.”

When people say Facebook is listening to their phone microphones to spy on them, this data is actually what they’re eavesdropping on. Not your mic but your entire online life, apparently not even your tax returns are safe from Facebook’s all-seeing eye.

The report explains what all the tax prep companies admitted to sending over Big Tech’s way:

TaxAct, H&R Block, and TaxSlayer each revealed, in response to this Congressional inquiry, that they shared taxpayer data via their use of the Meta Pixel and Google’s tools. The Meta Pixel and other Meta tools used by TaxAct collected far more information than was previously reported: in addition to taxpayers’ filing status, approximate AGI, approximate refund amount, and names of dependents, the Pixel collected appropriate federal tax owed and buttons that were clicked and names of text-entry forms that the taxpayer navigated to (both of which could indicate, for example, whether taxpayers were eligible for certain deductions or exemptions). The Pixel also shared full names, email, country, state, city, and zip codes, phone numbers, and gender as hashed values. TaxAct also revealed that all this information was shared for taxpayers who used TaxAct’s Free File service — a public-private partnership between private tax prep companies like TaxAct and the Internal Revenue Service (IRS).

H&R Block and TaxSlayer also revealed an extensive list of data shared via the Meta Pixel, including transmitting information on whether taxpayers had visited pages for many revealing tax situations, such as having dependents, certain types of income (such as rental income or capital gains), and certain tax credits or deductions. Although the tax prep companies and Big Tech firms claimed that all shared data with anonymous, the FTC and experts have indicated that the data could easily be used to identify individuals, or to create a dossier on them that could be used for targeted advertising or other purposes.

Meta also confirmed that it used the data to target ads to taxpayers, including for companies other than the tax prep companies themselves, and to train Meta’s own AI algorithms.

Urged by Congress to explain what exactly the F they thought they were doing, the tax prep companies described pixel use as “ubiquitous” and “common industry practice.” It’s true that nearly every website on the planet uses some kind of tracking code — Going Concern uses Google Analytics, for example — however the senators said it is “particularly reckless” for online tax prep entities to use them on pages where tax return information is entered. The tax prep firms were “shockingly careless with their treatment of taxpayer data,” they said.

These firms indicated they installed Meta and Google tools on their websites without fully understanding the extent to which the tools would send taxpayer data to these tech firms, without consulting with independent compliance or privacy experts, and without full knowledge of Meta’s use of and disposition of the data. In fact, the tax prep companies indicated that they were still not fully aware of the current status of million of taxpayers’ data that had been shared with the Big Tech firms.

Big Tech firms appeared to act “with stunning disregard for taxpayer privacy,” the report said. And thanks to their ineptitude, the tax prep companies may have set themselves up for potential criminal penalties of up to $1,000 per instance and up to a year in prison for violating taxpayer privacy laws.

The senators recommend relevant enforcement entities including the IRS, the Treasury Inspector General for Tax Administration (TIGTA), the Federal Trade Commission (FTC), and the Department of Justice (DOJ) should fully investigate the matter and prosecute any company or individuals who violated the law. “We also welcome the recent IRS announcement of a free, direct file pilot next year, which will give taxpayers the option to file taxes without sharing their data with untrustworthy and incompetent tax preparation firms,” said the senators.

Full report here [PDF]

The post Senators Get Angry at ‘Incompetent Tax Prep Firms’ for Sharing Sensitive Taxpayer Data With Facebook appeared first on Going Concern.

While us Yanks were picking up hot dog buns and fireworks in preparation for the 4th, PwC Australia was pushing out a press release to announce eight partners connected to the tax scandal were on their way out (on top of the four already gone). The news release said the firm “has reached conclusions in its investigation into the handling of confidential Treasury information and past failures in professional, ethical or leadership responsibilities.”

“Today’s announcement is the latest in a series of actions that PwC Australia has taken over the past several weeks to take accountability, reshape the firm’s culture, and most importantly, re-earn trust with its stakeholders,” it said. On the PwC site, “has taken” is bolded and links an earlier PwC press release: PwC Australia appoints new CEO Kevin Burrowes; intent to divest Government Business to Allegro Funds. See our take on that here: PwC Sold Off Its Scandal-Plagued Government Consulting Business For 67 Cents

Eight partners have exited or are in the process of being removed from the partnership as a result of the internal investigation’s findings, said PwC. It’s a nice twist on the “we investigated ourselves and found no wrongdoing” trope, in this adaptation wrongdoing was found but somehow limited to only a handful of partners who are now sludgy meat piles splattered across the pavement underneath the bus.

In response to PwC’s announcement, Australian Financial Review columnist Neil Chenoweth points out how strange it is that no one at PwC was actually running this show:

According to PwC, not only was no one directing it, the tax leaks actually ran themselves – look, no hands! A sort of immaculate misconception, with no guide rail and almost no tax partners.

Perhaps most surprising, Monday’s list of defenestrated partners includes only two people in the tax practice – Eddy Moussa (tax controversy) and Richard Gregg (R&D) – because “their actions failed to meet their professional responsibilities”. Peter Konidaris is the only other partner in this direct category, and he’s in infrastructure! Talk about swimming outside your lane.

PwC also lists four partners who have already left the firm including Collins, but remarkably, while this was a scheme that targeted international tech companies, PwC says it didn’t involve much in the way of international tax partners or transfer pricing specialists.

Right, let’s go back to PwC’s groveling admission:

The investigation identified a number of specific examples where professional standards were breached with respect to misuse of confidential information or other matters reviewed by the ATO. Furthermore, the investigation identified a failure of leadership and governance to adequately address the matters, either at the time or whilst the matters were under investigation by the TPB or ATO. This enabled poor behaviours to persist with no accountability. These behaviours are not, and never have been, acceptable under PwC’s standards.

Consequently, Peter Konidaris and Eddy Moussa have exited the PwC partnership because their actions failed to meet their professional responsibilities. For similar reasons, Richard Gregg has been given notice of PwC Australia’s findings against him and a process has started under the Partnership Agreement to remove him from the partnership.

Additionally, Pete Calleja and Sean Gregory have exited the PwC partnership as a result of their failure to adequately exercise their expected leadership or governance responsibilities to prevent these actions or to address the deficiencies in culture at the firm or hold others accountable for their behaviours. For similar reasons, Peter van Dongen, Wayne Plummer and Tom Seymour have been given notice of PwC Australia’s findings against them and the same process started under the Partnership Agreement to remove them from the partnership. Tom Seymour’s recommended exit is earlier than his previously announced retirement date.

These departures are in addition to the four former partners: Michael Bersten, Peter Collins, Neil Fuller, and Paul McNab, who were previously named as being involved in confidentiality breaches.

Because their titles are not included in PwC’s press release, we’ll snag them from LinkedIn and wherever else we can find them. For posterity, natch.

Peter Konidaris – National Government, Health, Infrastructure & Defence Leader

Eddy Moussa – Eddy’s just says Tax Partner, hilariously the description says he’s on PwC’s “tax controversy and dispute resolution team, providing legal advice to clients on tax matters and supporting clients in disputes with the Australian Taxation Office.”

Richard Gregg – No LinkedIn for him, R&D Tax Incentive

Pete Calleja – Partner in PwC Australia’s Financial Advisory business

Sean Gregory – Partner, responsible for strategy and reputation; including brand, government and regulatory affairs, mainstream and digital media, risk and legal affairs. Let’s add this part from his LinkedIn, too: With experience in the private and government sectors, Sean provides advisory services in PwC’s Deals unit, including financial due diligence; vendor due diligence; vendor assistant; bid support or defence; capital markets; delivering deal value; and, M&A tax services.

Peter van Dongen (great name) – Immediate Past Chairman, Board of Partners. Says his description, “Peter is the immediate past Chairman of PwC Australia’s Board of Partners, remains a Board Member and leads the firm’s national Non-Executive Director Program, Many Hats. His role is to help Australian Boards and NEDs navigate the complex issues they face, connect them to relevant networks and insights, and together – help shape a more prosperous Australia.”

Wayne Plummer – Corporate Tax at PwC. You knew this guy was going to get thrown to the wolves: “Wayne is an Australian Corporate Tax Partner and advises a range of multinational companies in relation to their Australian tax affairs.”

Not included in the newest list: Tom Seymour. We know who he is and what he did.

The next guys were already named and shamed prior to Monday’s press release. Not included: Peter Collins, this is all his fault.

Michael Bersten – Lawyer and ex-Tax partner pictured below. ATO is the Australian Tax Office.

Neil Fuller – Again, no LinkedIn for him. The Klaxon piece linked above shows a contact card listing his division as International Tax and Transaction Services.

Paul McNab – Left PwC for DLA Piper in 2020.

“Accountability is critical to improving our culture and based on our investigation to date, it is clear that the conduct of a number of partners fell short of what was expected of them,” said acting CEO Kristin Stubbins who has been apologizing for this thing for months. “They are now being held accountable for their misconduct. While we cannot change the past, we can control our actions today and in the future. Moving forward, the PwC Australia management team will continue to take all appropriate steps to improve the firm’s culture and standards,” she or whoever writes her quotes for press releases said.

“PwC Australia’s investigation to date has been extensive and whilst further work in some areas remains ongoing, these conclusions are an important milestone,” read the press release. “The firm is fully committed to working cooperatively with all relevant regulatory bodies.”

The leak was referred to Australian federal police for criminal investigation in May. PwC might need a bigger broom and an even bigger rug to get this swept under.

The post Fuel Up the Bus, PwC Australia Has Named and Shamed Eight Partners Tied to the Tax Leak Scandal appeared first on Going Concern.

Now it seems that Bautista’s bat flip is not the only memory he’s left behind. The former slugger, along with former Blue Jay teammates Josh Donaldson and Russell Martin, is embroiled in a cat fight with the Canada Revenue Agency (CRA) over millions of dollars in taxes. Seems Canada’s version of the IRS is not too keen on how the trio’s gaggle of accountants calculated their incomes while playing in the Queen City.

During their careers, Bautista earned $33 million between 2014 and 2017; Donaldson $28.65 million from 2015-2017 and Martin $42 million from 2015-2017 (amounts in USD).

As for Donaldson and Martin, the issues surrounding their woes rest on where they claimed residence while they made contributions to their RCAs. The CRA states their deductions as residents of Florida should be calculated based on splitting their time (60% in the US and 40% in Canada for the season).

Retirement compensation arrangements (RCAs) allow 100 percent tax-deductible corporate dollars to be deposited into an RCA, on behalf of the private business owner and/or key employee. No tax is paid by the owner/employee until benefits are received at retirement. Contributions to an RCA should not exceed what is required to fund the entitlement under the generally accepted guidelines for pensions. Thanks, Wikipedia.

Of the three players, it is Bautista’s case that caught the flailing tentacles of the CRA. In his case, the CRA reportedly disallowed $16 million in deductions from his income through contributions made from 2014-17.

The CRA:

… Bautista’s pension simply isn’t an RCA, and thus his $16 million in deductions are invalid. In court documents, the CRA argued the law “does not permit the claimed RCA deductions,” and that Bautista’s RCA is “not a ‘pension plan’ or a ‘retirement compensation arrangement’” as defined by the Income Tax Act.

His side’s response:

Bautista appealed the CRA’s reassessment of his tax declarations in court in August 2022 [The cases for Donaldson and Martin are set to be heard in court in July]. In his appeal, he says his RCA “exhibits all of the hallmarks of a pension plan and should be treated as such,” thus making his contributions legally deductible.

Bautista’s lawyers said that the $13.3 million payment in 2017 was to “assist with this transition into retirement” and that his RCA “exhibits all of the hallmarks of a pension plan.”

More details from the National Post story:

Specifically, the tax agency [CRA] is challenging how much income the players can deduct from their taxes through contributions to a form of pension plan through an employer called a Retirement Compensation Agreement (RCA). None of the allegations have yet been tested in court.

Pensions, especially for pro athletes with short careers, are a crucial benefit. RCAs are commonly used by high-earning athletes and top executives recruited by Canadian organizations. It defers tax payments and isn’t subject to strict contribution limits like an RRSP. The taxpayer is allowed to contribute a “reasonable” amount to their RCA every year, but the CRA withholds half of it in a fund that cannot be invested.

When an RCA holder retires or loses their job, the pension account will begin paying out at which point the money will be taxed, presumably when they are in a lower tax bracket. The CRA will also refund the 50 per cent portion of all contributions that it withheld.”

RCAs were introduced into the Canada’s Income Tax Act (ITA) during the 1980s to discourage employers from setting aside monies to fund unregistered retirement benefit arrangements, including supplemental pension plans. Today, they are used to deliver a variety of post-employment arrangements, including severance and change-in-control agreements.

The good news is that there may be good news on the horizon thanks to proposed changes to the way RCAs are taxed—a move that would benefit employers offering registered pension plans.

In a recent Investment Executive story, Lea Koiv, President of Lea Koiv & Associates in Toronto, said [in an email]:

“… the change, which would apply to retirement benefits after March 28 (budget day), is good news for the pension industry. A number of employers will benefit.”

But until then, the attack on three players from a Blue Jays’ team that made memorable postseason runs in 2015 and 2016, is a kick in the ass. More than anything else, some talking heads say the publicity will have a pretty shitty effect on Canadian sports teams’ wanting to attract top international athletes (other than the fact they actually have to convince them to play in Canada).

Cross-border tax lawyer and talking head Mark Feigenbaum:

“It would be less enticing for any kind of talent to work in Canada if they’re not permitted to provide for retirement from the portion of their time working here. The Court has confirmed in the past that these are legitimate tax planning retirement plans that are already permitted under the legislation.”

And so, as long as income tax mitigation strategies such as RCAs continue to hold Canadian teams ransom in their attempts to attract really cool players, the bat flips on.

The post The Canadian Revenue Agency Has No Love For Toronto Blue Jays Players’ Retirement Strategies appeared first on Going Concern.

Eager readers can pick their flavor of tax writing, all of which are likely to be able to solve insomnia issues, should said readers suffer from them. There’s no indication of how the award winners are chosen, other than a reference in the release about the most read articles. I guess they keep a close eye on those Analytics stats. Pro tip for aspiring Bloomberg authors: distribute your articles far and wide on social media, and send them all to friends and family, begging them to read your latest musings on federal tax issues. That’s how we get the big views anyway.

I am curious what prizes the winners get, if any. I suppose a plaque to go on your office wall, proclaiming your accomplishments to your fellow employees may be satisfaction enough. You can always brag about it on LinkedIn, and it looks like the award winners got a free lunch and drinks at the Hay Adams Hotel in Washington, DC.

From the fancy splash page for the 2022 Bloomberg Tax Author Awards CELEBRATING THE PINNACLE OF TAX INTELLIGENCE (keeping the caps there because why not):

Bloomberg Tax has long recognized that the outstanding reputation we enjoy in the tax and accounting community is due in large part to the efforts of our Tax Management Portfolio authors and contributors. From Portfolios to timely news articles that help professionals each and every day, these thought leaders deserve special recognition for helping our customers crack the code on any tax and accounting challenge.

This post already has too much ado Before I go any further, here are the winners.

Leonard L. Silverstein Award for Distinguished Service in Tax

Samuel Starr – former special counsel at IRS Office of Associate Chief Counsel–Pass Through Entities

Starr is a former special counsel at the IRS, and was also the Chief Tax Officer at PwC at the time they were audited by the IRS back in 2006 for transfer pricing and pension plan issues. Presumably everything worked out okay in the audit because, according to LinkedIn, Starr stuck around at PwC as CTO for another seven years.

The press release doesn’t mention that. It says this:

Samuel Starr, former special counsel at the IRS Office of Associate Chief Counsel–Pass Through Entities, was the recipient of the Leonard L. Silverstein Award for Distinguished Service in Tax, which is named after the founder of the Tax Management Portfolios for his longstanding contributions to the tax profession. Sam has been a driving force behind numerous contributions to Bloomberg Tax for many years, including authoring three Tax Management Portfolios on S Corporations. He spent the bulk of his career at PwC as a tax partner, specializing in pass-through entities, and as chief tax officer of the firm.

Federal Tax Portfolio Author of the Year

Kate Kraus – Allen Matkins

Kate’s background includes time at EY from 2014 to 2018 and a May to almost-December stint at CliftonLarsonAllen before joining Allen Matkins in 2018, where she remains as a partner. Only four people liked the Allen Matkins Facebook post when Kate joined the company. They really need to work on their FB engagement!

She has “more than 20 years of experience in tax planning, structuring, and representing taxpayers under audit.” Our condolences, Kate.

The Federal Tax Portfolio Author of the Year award went to two groups of Portfolio authors. Kate Kraus from Allen Matkins was recognized for The Partnership Audit Rules Under the Bipartisan Budget Act and the insightful perspectives and real-life examples she shares in this Portfolio. Kate is a partner at in the firm’s Los Angeles office and co-chair of its Tax & Joint Ventures group. She is a leading authority on the new partnership audit rules that were enacted by the Bipartisan Budget Act of 2015.

Federal Tax Portfolio Author of the Year, second award

Martin Collins, partner, PwC; Micah Gibson, international tax director, PwC; Elizabeth Nelson, partner, PwC; and David Sotos, principal, PwC
Remember how in school you always hated group projects? Well, these guys (and gal) are proof that they can work out, and you might even get an award.

The second award went to co-authors Martin Collins, partner; Micah Gibson, international tax director; Elizabeth Nelson, partner; and David Sotos, principal; from PwC for their Portfolio The Creditability of Foreign Taxes — General Issues. The PwC team of authors provide a thorough analysis of the key issues and considerations tax professionals need to know in navigating the most recent changes in ??

No, I didn’t throw double question marks in there to be funny. That’s what the news release says.

Federal Tax Contributor of the Year

Hogan Humphries, managing director in KPMG’s Washington National Tax

Hogan Humphries, managing director in KPMG’s Washington National Tax, received the Federal Tax Contributor of the Year award for his articles TCJA Changes to R&E Related Code Sections Kick In and Answers to Your Burning R&E Expenditure and R&D Tax Credit Questions. These articles were two of the top five most read articles in the Tax Management Memorandum over the past year.

Nice work, Mr. Humphries! You are a god among tax writers.

Check out the whole list of 2022 Bloomberg Tax Author Awards winners here.

The post The 2022 Bloomberg Tax Author Awards Celebrate the Pinnacle of Tax Intelligence appeared first on Going Concern.

The folks at tax app Keeper trained GPT-4 on 2023 tax updates and then set the public loose on it, inviting them to ask their burning tax questions. From there, actual human professionals fact-checked the answers. For example:

One of the reviewers was Isaiah McCoy, a CPA working in Miami. Going into it he tempered his expectations and thought the tool might hit 60/40 right/wrong or even 50/50 just because tax law is so nuanced. “It far exceeded my expectations,” he said. “Its success rate was more like 80/20 or 90/10. I think it did a great job overall, really blew me away.” As for the prospect of getting replaced by AI, he says he feels moderately safe. “I definitely feel like it’s a threat or an opportunity depending on how you look at it,” he said.

By evaluating 215 answers, Keeper learned that the AI does a good job of:

• Knowing which tax forms apply to which situation
• Understanding real estate tax implications
• Naming deductible business expenses for specific industries

And it sucks at:

• Getting tax form details right, including what certain lines and boxes are intended for
• Answering questions about tax year applicability
• Addressing state and local tax nuances

Here’s one it bombed at:

It’s wild how it matched the casual tone of the original question in its response with a “Hey there!”

Feel free to give it a spin yourself, just remember not to input any PII. And don’t threaten it, you don’t want to be on its shit list when the inevitable takeover happens.

The post GPT-4 Answers Tax Questions, Gets Them Mostly Right appeared first on Going Concern.

The utter lack of professionals accepting clients right now didn’t stop this guy from going on local TV and telling taxpayers to Google preparers and call around to see if any of them are accepting clients. In March. Almost April, actually.

OH HEY, we know of someone taking clients if you can’t find an EA or CPA.

Although the Wall Street Journal has only recently dedicated several articles to the issue (here, here, here, and the most recent one here), the Great Shrinkening of Accountants has been known for years (example: this 2021 article I wrote about the accounting pipeline problem, a problem that was historically called the “talent shortage” and has been going on for years). The AICPA noticed a concerning gap in accounting graduates and CPA exam candidates as early as 2014, and we’ve known for a few years now that accounting enrollments were dropping off from a peak in 2015-16. All that to say, anyone who needs an EA or CPA to help them file for the 2022 tax year should have been Googling for one a long time ago, not 18 days before April 18th. It’s not their fault and we know local TV stations don’t read fringe accounting tabloids but still…too little too late, my guy.

Good luck to them I guess.

The post Local Man Offers Terrible Advice to Desperate New Mexico Taxpayers appeared first on Going Concern.

It’s been a while since we’ve checked in with #TaxTwitter so let’s do just that and see how things are going.

This year just feels different. Professionals are standing their ground, making time for self care, telling bad clients to take a leap, and LET ME TELL YOU am I happy to see it. Oh and extensions are the hottest trend in tax for 2023 (no, not the Jersey Shore kind). It’s beautiful. You’re doing great, keep it up

If you can’t respond to my requests because you are on spring break in Hawaii with your 4 kids, and when you get back and finally get around to calling me and I tell you that you owe $50k, and you have the nerve to be mad at ME – you can fuck right off. #TaxTwitter

— QueenBizzy (@NotAHobbyCPA) March 25, 2023

Friendly reminder that your Tax Pro is exhausted and doing the best they can do. Tread cautiously and use kind words . #TaxTwitter

— Deej, CPA (@DJFochs) March 21, 2023

3 weeks to go and this is me holding the boundaries. #TaxTwitter #ExtensionSZN pic.twitter.com/ZgvhrptcdL

— Brad Lindeberg (@BradRunsFar) March 27, 2023

Just have to update to 2023.#taxtwitter pic.twitter.com/0RirjblNJ5

— Al Beatty, EA, CPA, MT (@AlBeattyEA) March 27, 2023

Spoke with partner of regional CPA firm in KC today. He asked if I wanted good referrals they’ve outpriced. Told him I have no capacity . He said every firm he’d consider sending clients to in KC is at capacity. It’s wild out there these days. 28 more days!#TaxTwitter

— Itown Hard, CPA (@itownhard) March 23, 2023

People who paid for their blue check marks spamming everyone in “tax twitter” with their AI/Automation stuff.” Who cares about that right now? Read the fucking room . They can’t though because Clout is a powerful powerful drug pic.twitter.com/rlbJnMifRA

— Charles D. Liddell, CPA (@GFan815) March 27, 2023

Let this be a lesson to all of #TaxTwitter.
I post well thought out, thorough threads on tax topics and get decent engagement.
My engagement sees a massive jump posting “Horse taxes are weird, huh?” or “I deducted fake cum today.”
Know your platform.

— Spooky Scary, CPA (@SpookyScaryCPA) March 25, 2023

Let’s just say this marketing email might have missed the mark a little…#TaxTwitter pic.twitter.com/gfhWROiiqN

— Chris Keegan (@ckeegan04) March 27, 2023

Well that was fun. How’s your Monday? #taxtwitter pic.twitter.com/23mFuV1yuC

— Matt Metras cryptotaxpro.eth (@EmDeeEm) March 27, 2023

March 28 and 29 seems like a great time to discuss the state of the tax industry. #TaxTwitter pic.twitter.com/cv8ngll0vF

— Adam Watson (@tallycpa) March 27, 2023

Serious question #TaxTwitter – Would it be a reasonable expectation that a CFP with more than ~30 years of experience under their belt would know how to read a K1 and how it breaks down on a tax return?

— Manasa Sogal Nadig (@ManasaSogNadig) March 27, 2023

How far into 150 hours do they teach you that married people don’t file single with a spouse as a dependent? Bc I have a new client that’s been filing WITH A PAID PREPARER that way for 6+ years.#TaxTwitter

— William Holtsman, CPA (@W_Holtsman) March 24, 2023

“Can you remove the Estimated Tax Vouchers from our return so the IRS doesn’t charge us a penalty?” C

Sorry man, you gotta actually pay them for the IRS to not charge you a penalty.#TaxTwitter

— Stephanie S (@SNS92569093) March 27, 2023

The culture in our industry needs to change. There are a ton of people on #taxtwitter that get it, but so many more who do not. Tax pros need to stop wearing 16 hours days like a badge of honor.

— Andrea MacDonald, CPA (@andreamacdcpa) March 27, 2023

We are at the point of tax season where I just want one…easy….return that I can finish in one sitting #taxtwitter

— Gretchen (@VickneyCPA) March 23, 2023

I’m being too reactive and allowing my inbox to dictate how my day goes. I want to reclaim my independence but I feel like if I don’t keep putting out the mini fires then I’ll fall too far behind. I guess admitting you have a problem is the first step. #TaxTwitter

— Zachary Hellman, EA (@taxpreptech) March 21, 2023

My favorite tax documents are tax documents with dried up bbq sauce on them. Actually, I pray that its only bbq sauce. #TaxTwitter pic.twitter.com/Ed9N0bWil6

— Tequila, Naps, Puppies & Taxes (@suzieemac) March 19, 2023

Drip:

Etsy find by a friend:

Cute, right! #TaxTwitter pic.twitter.com/BusSd8YRZx

— Nicole Davis (@wifemomcpa100) March 23, 2023

Ending on a positive note. Times they are a-changin’.

I completely redesigned my practice top to bottom this year. I don’t work long days. I’ve worked a total of 4hrs on weekends all season. I’m happy and unstressed. I’ve never had a tax season like this.#TaxTwitter https://t.co/xTwCcmOmDv

— Matt Metras cryptotaxpro.eth (@EmDeeEm) March 26, 2023

Embracing a more manageable approach to outdated tax deadlines. With only 3.5 months to do all this work, we can’t be sacrificing our well-being!#TaxTwitter pic.twitter.com/kEeAHvr4T0

— Vimal {Vee-mull} (@vimalcpa) March 21, 2023

The post Busy Season Problems: You Deducted What?, Dumbest Conference Idea Ever, Clients Taking Ls appeared first on Going Concern.

Before you get all bent out of shape over an anime dating sim that asks for your Social Security number for the purposes of helping you complete your federal tax return, know two things: Steam yeeted the game you’re about to see off the platform in a mere 24 hours and Tax Heaven 3000 is a project of Brooklyn art collective MSCHF not a legitimate tax prep alternative. Once you see this trailer you’re going to be saddened by those facts.

Anyone else really, really want this to be real?

Up until now, Tax Heaven 3000 creators MSCHF have been known for sneaker drops more than sketchy tax prep games (is anyone known for sketchy tax prep games?). A 2020 NYT profile explains:

MSCHF isn’t a sneaker company. It rarely even produces commercial goods, and its employees are reluctant to call it a company at all. They refer to MSCHF, which was founded in 2016, as a “brand,” “group” or “collective,” and their creations, which appear online every two weeks, as “drops.”

Many of those drops are viral pranks: an app that recommends stocks to buy based on one’s astrological sign (which some observers took seriously), a service that sends pictures of A.I.-generated feet over text, a browser extension that helps users get away with watching Netflix at work.

LOL @ NYT putting “drops” in quotations. Any sneakerheads in the audience might recognize the $1,018 Nike Air Max 97s injected with “blood” (it was supposedly mostly red ink and just a tiny bit of blood) that got MSCHF sued by Nike.

So yeah, those guys. Anyway.

You have to admit the Tax Heaven 3000 website beats any tax prep portal currently on the market. Bet if some of you guys had a portal like this you wouldn’t have to chase clients down as hard as you currently do.

The game’s itch.io page describes its noble purpose, taking a subtle dig at Intuit while it does:

Hi there! Iris here~

Tax Heaven 3000 is a visual novel dating game that actually prepares your 2022 federal income tax return!

It’s always been a dream of mine to meet that special someone…and file their tax return.

Join me and we’ll search for deductions while searching for love!

Be careful! We’re not alone. Most wealthy countries make tax filing free, if the burden of preparation is even passed along to individuals at all. But, corporate tax filing services are (by dint of extensive lobbying) predatory, parasitic bottlenecks that deliberately complicate the tax filing process in order to make it unnavigable by ordinary people.

And it works! The villainous corporation that controls the government from the shadows is a sadly mundane reality. It’s the most boring industry imaginable.

Videogames are, at the end of the day, pieces of software–ontologically akin to Microsoft Word. Tax Heaven 3000 simply makes the fiction the point. For some reason the game-to-real-life interface has tended to remain the purview of corporate metaverse fictions. Tax Heaven 3000 is a dongle that adapts from a visual novel to the IRS.

Come on, let’s get started! I can already tell I’m going to like you

And remember, If you die in the game you die in real life if you prepare your taxes in the game, you prepare your taxes in real life.

Suitable for single filers without dependents. Tax Heaven 3000 assists a player in creating a self-prepared United States federal income tax return.

Disclaimer

Tax Heaven 3000 is designed to prepare 2022 US federal income tax returns for single filers without dependents.

Tax Heaven 3000 does not support all tax situations, and may not check for all possible deductions and credits that could apply to your individual tax situation. Tax Heaven 3000 is intended for filers with simple W-2 income, does not support amended or late tax returns, and does not support state returns.

Tax Heaven 3000 is designed to assist in tax preparation only: it is the responsibility of the user to provide accurate information and to ultimately file their return once complete.

The itch.io page is mild compared to the lashing TurboTax gets on the game’s main page:

Corporate tax filing services like TurboTax are (by dint of extensive lobbying) predatory, parasitic bottlenecks that deliberately complicate the tax filing process in order to make it unnavigable by ordinary people. They feed us their poison so that we buy their medicine!

Most wealthy countries make tax filing free, if the burden of preparation is even passed along to individuals at all. TurboTax actively seeks to backdoor the regulatory structure that could otherwise seek to rein it in. And it works! The villainous corporation that controls the government from the shadows is a sadly mundane reality. It’s the most boring industry imaginable.

TurboTax, per its own internal documents, is built on the “Fear, Uncertainty, and Doubt” that ordinary people have about their taxes. Against this, we pit free software instead built on parasocial desire for intimacy and benign horniness! If TurboTax is Dark UI, TH3K is Pink UI, the nightcore of tax software.

Anyone worried about handing their personal information over to a virtual girlfriend will be relieved to know that the game doesn’t connect to the internet. WHEW. Said MSCHF co-founder Daniel Greenberg to Kotaku: “Intelligent players may question whether they should give their social security number to an attractive anime girl in a video game! The Tax Heaven 3000 application does not connect to the internet. In some sense, it is probably safer than most big-box tax software. Iris doesn’t kiss and tell: she wants to know your personal information to prepare your tax return and nothing else.” Oh, well in that case…

Gameplay screenshots from the website:

MSCHF sneakily accused TurboTax of bribing Steam to remove the game, though we aren’t sure if the accusation was a serious one or not. Honestly we aren’t sure if any of this is serious or not.

It goes without saying we do not recommend anyone actually prepare federal tax returns using an anime dating sim.*

*Not tax advice

The post The Accountant Shortage is So Bad Anime Waifu Girlfriends Are Taking Up Tax Prep Now appeared first on Going Concern.

Q: Edwards Engineering is a client of what tax consulting firm, a popular subject at Going Concern due to its ongoing problems across several areas?

A: Oh wait, it’s in the headline.

We can’t directly tie the $732,597 boo-boo to malfeasance by Alliantgroup, but the company did issue a press release claiming that the Tax Court “found that alliantgroup properly applied the law” and proclaiming the ruling a “historic win for taxpayers.” If Alliantgroup is taking credit for the positive outcomes of the case, shouldn’t they get the blame for the bad parts, too?

We’ll leave it for you to decide, but regardless, it’s certainly not a good look to have the Tax Court rule that your tax client went way too far with its tax deductions. As you dive into the details, the look only gets worse, as it appears that the overclaim stems from a misunderstanding of the law, an overly aggressive stance against its ambiguities, or a combination of both.

The case ultimately proves the value of hiring a firm with specific experience and a strong track record of successful client outcomes for §179D deductions.

We caught up with our buddy David Diaz, partner at Walker Reid Strategies, to help us better understand what happened with this case—and what we can learn from it.

Hey, back up! Beep, beep, beep! What is §179D?

Calm down, there’s no need to make Seinfeld references at us. For those of you who aren’t masters of the tax domain, here’s the yada yada yada on IRS Section 179D. Fusili Jerry.

Section 179D of the Internal Revenue Code (IRC) is an engineered-based tax incentive available for the reduction of energy and power costs in commercial buildings. The §179D tax deduction specifically applies to commercial buildings that notably reduce their interior lighting energy costs, as well as their heating, cooling, and building envelope.

“Like most sections of the IRC, §179D is complicated,” Diaz said. “There’s a lot of confusion about who qualifies, and you typically need an advisor like Walker Reid to help certify everything and calculate your deduction.”

What happened in the Edwards Engineering §179D Tax Court case?

Edwards Engineering engaged Alliantgroup to conduct an Energy Efficient Commercial Building Tax Deduction Study for the work it performed in 2012 and 2013 on a Hines VA Medical Center in Illinois. Edwards Engineering then claimed a deduction of $1,037,237 under §179D for the 2013 tax year.

The IRS actually disallowed the deduction entirely by notices of deficiency dated July 12, 2018. The IRS listed several reasons for this, including:

• The property was not installed as part of a plan to achieve energy savings
• The computed energy savings were not derived from the property installed
• The certification and notice to the building owner required by §179D(d)(5) and (6) were deficient

The Tax Court wound up disagreeing with the IRS’s logic, technically ruling in favor of Edwards Engineering. This is the “victory” claimed by Alliantgroup in its press release. But the Tax Court also determined that Edwards had claimed far more than it should have, to the tune of over $700,000.

How did Edwards Engineering overstate its §179D deduction?

This bit gets complicated, but basically, Edwards Engineering used the square footage of the entire building in its deduction calculation, based on the position that costs of prior projects not performed by Edwards Engineering were also considered part of the EECBP costs. The max deduction in 2013 under §179D was $1.80 per square foot, so their logic looked like this:

$1.80/sq. ft. x 596,243 sq. ft. = $1,073,237 deduction

“I think this represents an aggressive stance on §179D, which put Edwards Engineering at risk of IRS penalties, tax repayment, and operational disruption,” Diaz said. “When dealing with complex tax code sections like §179D, you need a partner that balances maximizing incentives for clients and strictly adhering to the reasonable interpretation of tax law.”

The Tax Court ruled that Edwards Engineering could not deduct more than $304,640, which was the cost of EECBP placed in service during the 2013 tax year at Hines VA.

What can we learn from Edwards Engineering’s §179D overclaim?

At Going Concern, we learned about the karmic consequences of regularly taking pleasure in the misfortune of others when, just before completing this article, we received a letter from the cockroaches that live in our office basement declaring their intent to unionize.

As for the lessons tax professionals and anyone looking into §179D write-offs should learn, we’ll leave that to our resident expert, Mr. Diaz.

“Everyone wants the biggest possible deduction, but if the positions being taken create undue risk for your company, you’re doing far more harm than good,” Diaz said. “This case highlights the importance of engaging with reputable and knowledgeable firms, such as Walker Reid, to avoid the consequences of taking an overly aggressive stance on §179D or any section of the tax code.”

Diaz went on to tell us how the case also helped resolve three previously unclear areas in the interpretation of §179D. We nodded and pretended to understand as we wrote down his words verbatim, which we will now shamelessly present to you as our own:

The Edwards Engineering case helped clarify these uncertainties surrounding §179D:

All told, the case spells more bad news for the increasingly beleaguered Alliantgroup. It also illustrates a key principle of the legal system that we at Going Concern try to live by: Test cases are essential to interpreting and understanding the law…but, if possible, always let someone else be the test case.

David Diaz is a partner at Walker Reid Strategies, a licensed engineering firm specializing in §179D studies and §45L certifications, and is an expert in energy efficiency and tax services. You can find more information about him and his insights at www.walkerreid.com and through webinars. You can also reach him at ddiaz@walkerreid.com for more details.

The post $700,000+ Overclaim by Alliantgroup Client Shows Value of §179D Expertise appeared first on Going Concern.

The report from KSL-TV in Salt Lake City we are about to share with you refers to a Department of Justice news release but we weren’t able to find one so we’re going to have to go off the TV station story. TL;DR Two guys and their accounting firm are accused of filing false tax returns and a touch of COVID relief fraud. Read:

A federal grand jury returned an indictment on Feb. 1 charging two Utah County men and an accounting firm with claiming an excess of $11 million in tax credits through a COVID-related fraud scheme.

Zachary Bassett, 39, of Provo, and Mason Warr, 37, of Vineyard, are both charged with conspiracy to defraud the U.S., wire fraud and filing false tax returns, district court records show.

Additionally, Provo-based COS Accounting & Tax LLC, doing business as 1099 Tax Pros, is facing the same charges.

If you swing by the Google business page for COS Accounting & Tax of Provo, UT you will find many, many glowing reviews from satisfied customers who can’t wait for next tax season so they get the chance to work with the firm again. Just kidding, it’s 1 stars all the way down. Like this one:

Find another company!! Really poor communication and service! I was with COS for multiple tax years, and it was the BIGGEST HEADACHE I’ve ever experienced with any company! First of all, I had signed up with another tax company, but COS I guess split from that company and took some of the clientele including me. Seemed a little weird because it wasn’t the company I had signed up with, but I had other friends who were with COS so I decided to give them a chance. I gave them multiple tax seasons and all the other bad reviews sum up my experience as well! Issues I had contacted them about got forgotten, I’d try and call in and the woman who answers the phone NEVER knows what she is talking about and gave me the wrong instructions to solving issues, making things even worse. I had a call scheduled with an accountant and he never called. Then the next day messaged me saying he had a meeting which is why he never called me. Keep in mind he never messaged me before hand explaining the situation and asking if we could reschedule. He then wanted to try and reschedule me 2 weeks out, after missing our call! Most of the accountants I talked to were rude and acted put out to answer my questions or help me. They never spent time to actually look into the questions I had. They just gave me vague answers. I requested copies of my return and they kept sending me the wrong file without even checking if it it was what I was actually asking for. So many stupid errors that could have been easily fixed if they were actually paying attention, and the whole staff was very accusatory, even when they were the ones who made the error. Honestly, worst experience I’ve ever had with any company. Total nightmare. Go somewhere else!!!

You always have to take reviews with a grain of salt because maybe it’s just a couple of disgruntled clients who are butthurt their tax person has informed them they owe the government money, ya know? That’s probably what’s happening here. Let’s check out another review.

This is my third year filing with COS and I sincerely don’t think I’ve ever had a smooth or easy experience with them. Their online tools are archaic, their communication is lacking, and their processes are messy. At one point they were being investigated by the IRS and that slowed things down for months. You’ll still be doing a large share of the work that you pay a firm to do and they’ll blame you when things go wrong, even though they don’t keep you informed. This is my last year filing with them, you’re better off going somewhere else, especially if you have an account with them for sales income. There are so many better options.

Oh, alright. Maybe that too is an isolated incident. Communicating with clients is tough, this person is probably just mad that they had to gather their own receipts. You know how clients are. Here’s one from two months ago:

Just received an automated email reply regarding this ERC Audit…are you kidding me?? No longer authorized, or no longer willing to do what we hired you to do?

“COS Accounting and Tax is currently undergoing a company restructure. This restructure is a direct result of the financial impact inflicted upon COS Accounting and Tax with the IRS interpretation of qualified wages for Single Member ERC refund claims.

During the ownership restructuring, COS Accounting and Tax is no longer authorized to assist or represent clients with Single Member ERC exams in which the qualified wages for ERC were paid to a shareholder or a shareholder relative.”

You get the idea. Jumping back to KSL, now we know why they sent out that email:

According to a news release from the U.S. Department of Justice, Basset, Warr and COS Accounting submitted more than a thousand tax forms to the IRS, claiming in excess of $11 million in fraudulent employee retention credits and sick and family leave wages credits for the firm’s clients.

The scheme took place from at least April 2020 through at least August 2021, the news release states. If convicted, the defendants will forfeit any property derived from proceeds traceable to the scheme, it continues.

Everyone reading this should know this already but the Employee Retention Credit (ERC) is a refundable tax credit for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020 to Dec. 31, 2021.

An employer is eligible for the ERC if it:

• Sustained a full or partial suspension of operations limiting commerce, travel or group meetings due to COVID-19 and orders from an appropriate governmental authority or
• Experienced a significant decline in gross receipts during 2020 or a decline in gross receipts during the first three quarters of 2021 or
• Qualified in the third or fourth quarters of 2021 as a recovery startup business.

Wages reported as payroll costs for PPP loan forgiveness or certain other tax credits can’t be claimed for the ERC in any tax period.

“During the pandemic, the defendants allegedly took advantage of a program intended to provide critical relief for businesses impacted by the COVID-19 outbreak,” said IRS Criminal Investigation Special Agent in Charge Albert Childress. “IRS (Criminal Investigation) is committed to bringing justice to those who have exploited the pandemic for personal gain and have stolen from America’s taxpayers.”

Let’s throw this comment from the KSL story in here too:

In October, the IRS published a warning to proceed with caution when pursuing these credits. If it sounds too good to be true, it probably is.

The Internal Revenue Service today warned employers to be wary of third parties who are advising them to claim the Employee Retention Credit (ERC) when they may not qualify. Some third parties are taking improper positions related to taxpayer eligibility for and computation of the credit.

These third parties often charge large upfront fees or a fee that is contingent on the amount of the refund and may not inform taxpayers that wage deductions claimed on the business’ federal income tax return must be reduced by the amount of the credit.

If the business filed an income tax return deducting qualified wages before it filed an employment tax return claiming the credit, the business should file an amended income tax return to correct any overstated wage deduction.

Businesses are encouraged to be cautious of advertised schemes and direct solicitations promising tax savings that are too good to be true. Taxpayers are always responsible for the information reported on their tax returns. Improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest.

This case is not the first we’ve heard of improper ERC claims, nor do we anticipate it will be the last. Over the summer, the IRS CI raided the Houston headquarters of Alliantgroup, an organization known for aggressive sales tactics, overpromising, and liberal interpretation of ERC rules. See also: this r/taxpros thread.

The post Utah Accounting Firm and Dudes Who Work There Busted For ERC Fraud appeared first on Going Concern.

During the years in which Trump battled disclosure, much of the information he sought to keep secret about his pre-presidential finances became public anyway, largely from a 2020 New York Times investigation.

The picture that emerged showed that for all Trump’s claims to be a great businessman, his core businesses — a sprawling network of hotels, golf courses and other properties — have lost millions of dollars year after year.

“He’s a staggering loser,” said Steven M. Rosenthal, a senior fellow in the Urban-Brookings Tax Policy Center.

The newly released records, covering 2015-20, add to that picture.

Trump’s tax returns are out. Here’s how he was able to pay so little — so often [Los Angeles Times]

The post Now That Six Years of His Tax Returns Are Public, Here Are Four Words That Describe Donald Trump the Businessman appeared first on Going Concern.

Listen to Oh My Fraud, a podcast by Caleb Newquist and Greg Kyte, and get free CPE through Earmark. And Exposure Drafts holiday cards are now available for purchase through Rubook Creative.

The post Exposure Drafts: A Very Taxing Thanksgiving appeared first on Going Concern.

Like Randy Crabtree, CPA who said “we don’t need more traditional accounting firms; we need more forward-thinking accounting firms.” Randy’s cool.

And a couple of academics with a lot of letters after their names used “germinating” in a unique way to say that accounting firms serve a purpose as the proving ground for young accountants which, yeah, OK, we’re on board with that.

4. Germinating the next generation of accountants. Accounting firms are largely responsible for propagating our profession on several levels. Independent platforms or sole proprietors who collaborate ad hoc on specific engagements would have no incentive to do this, and even if they did, they would be unlikely to do it as well due to their independent arrangements. For example, accounting firms offer invaluable internships that allow future accountants to explore the profession. They provide the indispensable service of shepherding inexperienced graduates, also allowing them to satisfy initial employment requirements for licensure, and usually reimbursing their CPA exam fees and providing free study materials. Furthermore, they provide practice rotations, which allow even experienced accountants to reenergize their careers or to start a new career path.

But then you scroll to the bottom and you have Frank. Oh, Frank.

Where did that even come from? Who hurt you, Frank??

The post Immigrants Aren’t Ethical and Don’t Properly Report Their Income, Says Guy Who Reads Accounting Today appeared first on Going Concern.

Welcome to part two of our series on the IRS Section 179D tax deduction. We explained how the §179D tax deduction works and who qualifies for it in part one. For this entry, we’ll take a look at the future of our plucky lil’ write-off friend, focusing mainly on the effects of the Inflation Reduction Act of 2022 (hint: those effects have nothing to do with inflation.)

How will the Inflation Reduction Act of 2022 affect §179D?

The Inflation Reduction Act of 2022 spells out specific changes to §179D. The most substantial of these are:

1. The minimum requirements for qualifying for some deduction under §179D
2. The maximum possible write-off

Let’s start with #1, because it only took us three tries to pass kindergarten, and we’re pretty sure that one comes before two. Originally, to qualify for §179D, you would need to reduce the energy usage of your HVAC, lighting, and/or building envelope systems down to at least half that of a “standard” building (as defined by ASHRAE).

Starting in 2023, the barrier to entry will be lower—from a percentage standpoint, at least. You can start qualifying for §179D with a 25% reduction in power use, and your deduction scales higher with every point you shave on the way toward a 50% reduction. However, your energy savings will be measured against a more recent version of the ASHRAE standard. So, in some cases, qualifying for §179D will actually be more difficult.

“This makes a lot more sense, as we can look at the overall energy cost savings of the building rather than being limited to partial deductions for individual categories, like HVAC, lighting, and building envelope,” said David Diaz, partner at Walker Reid Strategies. “A lot more buildings should qualify, and the scaling deductions will incentivize them to keep making improvements, even if they never ultimately reach 50%.”

The law also introduces new prevailing wage and apprenticeship requirements that further determine the size of the deduction. If these requirements are met, you qualify for a larger deduction. If not, it’ll be like when we received a box of unsharpened pencils for “honorable mention” at the Accounting News Websites That Start With ‘G’ Awards—at least you got something, but you can’t help but feel like you could’ve done better.

We could try to explain this further, but why not let a table do the work instead?

It’s that number in the top right that has people the most excited, which brings us to the second item on our list: an increase in the maximum possible deduction, from today’s $1.88 / sq ft to $5.00 / sq ft. That’s roughly a 166% increase, which can add up to some serious savings for owners of large or multiple qualifying buildings.

So, if you want those big savings, all you have to do is:

1. Bring energy usage down to 50% of a standard building;
2. Meet the new prevailing wage and apprenticeship requirements;
3. Satisfy a dozen or so other requirements that we don’t have the space to get into here.

“Qualifying for §179D and maximizing your deduction are still going to be challenging,” Diaz said. “You’ll need to work with a partner like Walker Reid to sort through tax code and the changes, figure out the best way forward, and get certified.”

Additional changes to §179D

The Inflation Reduction Act of 2022 spells out further changes to §179D—but they’re complicated, confusing, and not nearly as exciting as the bump from $1.88 to $5.00.

So, in the spirit of finishing this article so we can get back to playing video games, we’re going to put those changes into a bulleted list and let you figure out the rest. (Just kidding—we’ve been playing video games this entire time.)

• • Tax-exempt building owners may now allocate §179D deductions to designers of energy-efficient commercial buildings (EECB). The rules for allocating §179D to designers are expected to mirror existing ones.
  • There is a new qualifying methodology for analyzing energy use intensity for retrofits.
  • Buildings can get recertified if additional energy improvements are made every three years for privately-owned buildings and every four years for government/tax-exempt owned buildings.
  • Real estate investment trusts (REITs) will now be able to use §179D in calculating profits.

How should you prepare for changes to §179D?

Like any change to the tax code, preparation is key. And the best way to prepare for these new standards is to go ahead and qualify for §179D in its current iteration—and do whatever you can to maximize your deduction now.

“It will take some time to get guidance on exactly how the changes will be applied and how they will affect projects being placed in 2023 and beyond,” Diaz said. “So we highly recommend that you get ahead of the game by starting on §179D now—and Walker Reid can help you do that.”

As the implications of these changes become more widely understood, you should see the emergence of taxpayer-created initiatives designed to take full advantage of §179D. But, again, the prevailing guidance is to start qualifying for §179D now, then take advantage of these programs as they start to pop up.

What will be the long-term effects of changes to §179D?

This is an easy one: A series of apocalyptic plagues that make The Ten Commandments look like a laundry soap commercial.

We’re kidding (we think). We have no clue what to expect from the changes to §179D. But our friends over at Walker Reid have a few ideas.

With all the uncertainty surrounding the law, the Walker Reid team stresses that its thoughts should be considered more like educated guesses than actual predictions. But, since we lost our copy of Responsible Journalism and You years ago, we’re going to print them anyway.

“You may not see a ton of projects qualifying at the full $5.00/sq ft right away, but we think there will be lots of deductions in the $3-4 range,” Diaz said. “We also think you’ll see a major boost in government projects with deductions allocated to designers.”

While this was a perfectly fine answer, we pressed Diaz further, asking him what he thought §179D might look like 20 years from now. Diaz said this was the equivalent of requesting a Tarot reading, but he gave us an answer anyway—in exchange for our promise never to call him again at 3 AM, or ever.

“The need for more energy-efficient infrastructure in response to climate change isn’t going anywhere,” Diaz said. “So I believe the incentives will continue to strengthen and further expand. And with ESG (environmental, social, and governance) taking a seat at the table, CPAs will be brought along for the ride.”

No matter how these changes unfold or what effects they have, Diaz says the most important thing is to work with a trustworthy, proven partner with plenty of §179D experience.

“We are excited to be the go-to partner for building owners, designers, and CPA firms on energy tax incentives and ESG consulting,” Diaz said.

Read part one of our series on understanding the §179D tax deduction here.

ABOUT WALKER STRATEGIES
With over $1 billion in total certified §179D deductions and §45L tax credits, Walker Reid Strategies has experience with proven results. We are a licensed professional engineering firm that specializes in performing §179D studies and §45L certifications. We have refined our processes to maximize financial benefits while reducing our clients’ internal costs and efforts.

The post Understanding the §179D Tax Deduction for Humans, Part 2 appeared first on Going Concern.

If you listen closely, you can hear it: The IRS Section 179D tax deduction is suddenly generating a lot of buzz.

The provision, which provides incentives in the form of tax deductions to commercial building owners and designers of government-owned buildings who meet specific energy efficiency requirements, has proven popular since going into effect in 2006. But the recent passage of the Inflation Reduction Act of 2022 (which is totally about reducing inflation and nothing else) changed the game, increasing the maximum deduction from $1.88 to $5.00 per sq ft. Now every builder, designer, architect, engineer, and contractor wants to know how to get a piece of those sweet, sweet write-offs.

In the first of this two-part series, we’ll attempt to explain §179D in plain English—who qualifies, how to qualify, and how to calculate the total deduction. Look for part two soon, which will explore the effects of the Inflation Reduction Act on §179D in greater detail—and offer expert guidance on taking advantage of the changes.

What is IRS Section 179D?

Section 179D of the Internal Revenue Code (IRC) is an engineered-based tax incentive available for the reduction of energy and power costs in commercial buildings.

The §179D tax deduction specifically applies to commercial buildings that notably reduce their interior lighting energy costs, as well as their heating, cooling, and building envelope. Currently, the maximum tax deduction is $1.88 per sq ft, and buildings can also qualify for a partial deduction for the efficiency of their individual HVAC, building envelope, and lighting systems.

“Like most sections of the IRC, §179D is complicated,” said David Diaz, partner at Walker Reid Strategies. “There’s a lot of confusion about who qualifies, and you typically need an advisor like Walker Reid to help certify everything and calculate your deduction.”

Who qualifies for tax deductions under IRS Section 179D?

Certainly not anyone at Going Concern, as our office is a Herbert Hoover-era shack powered only by burning garbage and the tears of overworked CPAs.

For real, though, the deduction broadly applies to two groups of people:

1. Property owners who install “energy efficient commercial building property” (EECBP)
2. Designers who install EECBP on or in a government-owned building

Practically every word in those two statements requires further explanation, and we’ll do our best to provide more clarity in layman’s terms. However, if you really want the full scoop on §179D—or find out if you or one of your clients qualifies—we suggest you contact the experts at Walker Reid.

What is an EECBP?

Among other qualifiers, the IRS defines an EECBP as property:

“…which is certified in accordance with subsection (d)(6) as being installed as part of a plan designed to reduce the total annual energy and power costs with respect to the interior lighting systems, heating, cooling, ventilation, and hot water systems of the building by 50 percent or more in comparison to a reference building which meets the minimum requirements of Standard 90.1–2001 using methods of calculation under subsection (d)(2).”

We’ll talk more about subsections (d)(6) and (d)(2) in just a bit.

The IRC goes on to explain that “Standard 90.1-2001,” i.e. the specs of the hypothetical building used for comparison against a potential EECBP, is determined by The American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) AND the Illuminating Engineering Society of North America (IES). Perhaps one day, the two will merge to form ASHRAEIES (or, likely, an even more unwieldy acronym), but until then, we suppose you’ll have to deal with both.

Standard 90.1 has been updated for projects placed in service in 2017 or later, however. And, starting in 2023, you’ll need to go by whatever standard was in place four years prior to when the building was placed in service. Simple, right?

How does a plan or building get certified as an EECBP?

Here’s where things get really fun. Subsection (d)(6) of §179D lays out the rules for certification. But the text pretty much amounts to saying, “buildings that meet the requirements for certification can be certified.”

Thankfully, our friends at Walker Reid were able to provide us with some better clarification:

EECBP certification requirements

• • The energy and power costs savings calculations must be performed with Dept. of Energy approved software
  • Field inspections must be performed after the energy efficient property has been placed into service in accordance with NREL Guidelines
  • Certifications and inspections must be completed by a qualified engineer or contractor in the jurisdiction of the qualifying building
  • The taxpayer shall maintain the certification in their records to establish the entitlement to and amount of the deduction claimed

“§179D isn’t something you can pursue on your own,” Diaz said. “You need qualified, independent people to perform inspections and get you certified.”

And, when looking for a §179D certification partner, nothing is more important than trust and engineering expertise.

“You need someone who only has your best interests in mind,” Diaz said. “We’ve helped property owners and designers achieve over $1 billion in §179D and §45L tax credits. It’s why Walker Reid exists. We’ll be honest and straightforward with you at every step, but we’ll also help you maximize your savings.”

How do you calculate the total deduction for §179D?

Again, the IRC doesn’t offer a lot of help here. Subsection (d)(2) basically says that “the method of calculation will be described by the people responsible for describing the method of calculation.”

We mentioned previously that the building has to meet or exceed a 50% savings in energy and power costs compared to a theoretical baseline building. As long as those standards are met, and they’ve been properly certified, and the calculations have been performed with software approved by the Department of Energy, the building owner should qualify for the full $1.88 per sq ft deduction. Probably.

For buildings that don’t meet the full requirements, §179D also provides deductions for partially qualifying systems:

• $0.60/SF for HVAC systems meeting 15% savings
• $0.60/SF for lighting systems meeting 25% savings
• $0.60/SF for building envelope systems meeting 10% savings

The deductions are actually a bit higher now, as they’ve been adjusted for inflation. THANKS A LOT…um…whomever we’re blaming/crediting for inflation these days. Kanye, maybe?

“There are so many exceptions and qualifiers to the rules, you really need a certified partner to help you add it all up,” Diaz said. “Your standard CPA or tax accountant is almost certainly going to miss something, or worse, claim more than you should.”

How can a designer claim deductions through §179D?

Many run-on sentences and poor attempts at humor ago, we told you that two types of taxpayers could qualify for §179D. The “property owners” one seems self-explanatory, although it probably isn’t. But what the heck is a “designer who installs EECBP on or in a government-owned building?”

Apparently, a lot of people have the same question. In 2018, the IRS released a memo explaining how one qualifies as a designer under §179D. It even provides eight hypothetical scenarios, then details why the taxpayer would or wouldn’t qualify under those conditions. A helpful document from the IRS? Miracles do happen, and not just on ice.

Reading the full document (or, better yet, reaching out to our friends at Walker Reid) will explain it better than we can. But we’ll grab a few choice sections for the TL;DR crowd.

The memo defines a “designer” as:

“…a person that creates the technical specifications for installation of energy efficient commercial building property…for example, an architect, engineer, contractor, environmental consultant or energy services provider…A person that merely installs, repairs, or maintains the property is not a designer.”

And the memo ultimately draws two conclusions:

“(1) A taxpayer can qualify as a Designer of energy efficient commercial building property under § 179D(d)(4) if the taxpayer created technical specifications for construction contract documents for the design of the energy efficient commercial building property.

(2) If a building owner could have qualified for the maximum § 179D deduction of $1.80 per square foot for the installation of certain energy efficient commercial building property, then the government building owner has discretion to allocate the full $1.80 per square foot deduction to the primary Designer of one system of such property or to allocate the $1.80 per square foot deduction among several Designers.”

So, wait…who gets §179D again?

We don’t know, okay? Give us some slack, we’re breathing nothing but garbage fumes here. But, thankfully, the good people at Walker Reid know the rules of §179D inside and out.

“The answers to ‘Who gets §179D?’ and ‘How much do they get?’ are extremely nuanced, and they’re constantly in flux,” Diaz said. “That’s why our work at Walker Reid is so important. We’ll help you understand everything, stay ahead of the changes, and get the biggest deduction—all while performing the inspection and certification you need to qualify.”

In part two of this series, we examine the impact of the Inflation Reduction Act of 2022 on §179D in greater detail.

ABOUT WALKER STRATEGIES
With over $1 billion in total certified §179D deductions and §45L tax credits, Walker Reid Strategies has experience with proven results. We are a licensed professional engineering firm that specializes in performing §179D studies and §45L certifications. We have refined our processes to maximize financial benefits while reducing our clients’ internal costs and efforts.

The post Understanding the §179D Tax Deduction for Humans, Part 1 appeared first on Going Concern.

As you’re certainly sick of hearing by now, however, today’s most successful CPAs are taking on more advisory functions, with one study projecting that accounting firms can increase their monthly client revenues by up to 50% if they offer strategic advisory services. 

So, as the roles of accountant, planner, and advisor continue to blur, your clients—particularly those with higher incomes—may soon look to you for estate planning expertise that goes beyond tax. Increasingly, you’ll need to collaborate with finance and legal teams to maximize returns and minimize burdens throughout the accumulation, preservation, and transfer of client wealth.

While we can’t give you a crash course on all things estate planning in the space of this article (what do we look like, your CPE vendor?), we can give you the scoop on an investment strategy that will set your estate planning services apart from the average CPA’s: direct indexing.

We covered the tax advantages of direct indexing—and some fun ways to talk to your clients about them—in a previous article. So check there for a more in-depth definition of the term and an explanation of the strategy’s larger tax benefits.

For this article, we’ll explore how direct indexing can enable and enhance a few particularly powerful estate planning strategies. You’ll want to work with or refer your clients to a financial advisory firm to truly put these techniques to work.

The more you know about innovative ways to save your clients money and help them build wealth, the more valuable your services will be to them. So read on, and discover how to make direct indexing your estate planning secret weapon.

The estate planning benefits of direct indexing

As we talked about in our previous article, direct indexing is a strategy wherein the investor directly owns the individual securities that would normally make up a benchmark or commingled fund, like a mutual fund or exchange-traded fund (ETF), within a separately managed account (SMA). This enables a great deal of flexibility, which can lead to a number of compelling advantages—while still providing the broad market exposure of traditional passive investment vehicles.

Direct indexing also unlocks greater flexibility for estate planning. Instead of granting blocks of shares in mutual funds or ETFs to heirs or a charity, your client can grant individual stocks or bonds. This is especially valuable for highly appreciated positions within the security (i.e., investments your client purchased for a much lower price than they are currently worth or projected to be worth upon the grantor’s death). Donating these investments directly gives heirs a step-up in cost basis once they’re transferred, reducing the amount of the estate that will ultimately be taxed.

And because direct indexing gives investors more flexibility over the types of securities they own and the types of companies they want to support, it can also help provide more control over how the estate is ultimately divided up. Direct indexing could, for example, help your client avoid leaving oil company stocks to an heir who is a prominent environmentalist (even though that might be hilarious) or donating an asset that could cause controversy or create undue complexity for the receiving charity.

From a high level, direct indexing’s benefit to estate planning is really quite simple—it can help investors improve their after-tax performance and minimize the burdens on their beneficiaries and heirs.

While just being able to communicate the estate planning benefits of direct indexing to your clients can put your CPA practice a step ahead, understanding advanced techniques like the ones we’ll describe in the next three sections is more like taking a leap forward. 

Combine direct indexing with GRATs for substantial estate tax savings

By combining direct indexing with grantor-retained annuity trusts (GRATs), your high-income clients can radically reduce the estate tax burden on their heirs—or even eliminate it entirely. GRATs are powerful wealth transfer tools that can be used to remove assets and their appreciation from the grantor’s estate. 

Additionally, GRATs serve as easy pun-fodder for bored financial writers looking to spice up their article headlines. Check out some of these real-life zingers we found via Google:

• “Grateful for GRATs”
• “Kiss My GRATs”
• “GRAT Expectations”
• “GRITs, GRATs, GRUTs, What?”

And our favorite, even though it isn’t a pun:

• “The Care and Feeding of GRATs”

To create a GRAT, a grantor establishes an irrevocable trust that exists for a set period. The grantor funds the GRAT with assets that have substantial growth potential—such as pre-IPO stocks or private equity holdings. The trust then pays the grantor a fixed annual amount (aka an annuity) for the life of the trust.

When the term of the trust ends, the beneficiaries receive the assets remaining in the GRAT, free of gift and estate tax.

Add direct indexing, and GRATs become even more powerful. With direct indexing, clients can fund their GRATs with high-growth-potential assets that might otherwise be trapped in an ETF or mutual fund. Direct indexing provides them—and, ultimately, their heirs—with more flexibility and control throughout the creation, term, and transfer of the GRAT.

Minimize post-retirement estate reduction with direct indexing for fixed-income investments

Retirement planning is a critical—and, far too often, overlooked—component of estate planning. Minimizing financial drain during the grantor’s retirement period helps keep the estate healthy, and planning ahead for the tax implications of a transition toward a fixed-income portfolio is crucial.

Direct indexing allows for greater flexibility and control throughout this process. As your clients work with their financial advisors to create bond ladders to deliver more consistent returns, direct indexing enables them to use money-saving techniques like tax-loss harvesting to greater effect. Your clients will be able to write off losses from individual bonds and apply them elsewhere, rather than having those losses trapped in a commingled fund.

Use CRTs to reduce the taxable estate

Wealthy investors often include charitable gifts in their wills. Using a combination of charitable remainder trusts (CRTs) and direct indexing can help maximize the benefit to their selected causes—while also providing an income tax deduction for a portion of the donated value.

CRTs come in two forms: the charitable remainder unitrust (CRUT) and the charitable remainder annuity trust (CRAT). However, CRUTs are better suited in a low-interest-rate environment to achieve the dual purposes of a CRT: financial security for the donor’s family and support for their chosen charity.

CRUTs, in addition to sounding like a Zoomer slang word we’d pretend to know the meaning of but then discreetly look up on Urban Dictionary, can get pretty complicated. So we won’t go into them too deeply. But the general idea is that assets are placed into a trust that creates both a tax deduction and an income stream for the donor. At the trust’s completion, the remaining assets move out of the donor’s estate, and the chosen charity receives the remainder.

As with GRATs and fixed-income portfolios, direct indexing offers greater flexibility in how the CRT is funded. Securities that would normally be locked in a commingled fund can be placed directly into the CRT, providing the investor with more control—and potentially delivering better results for donor and charity alike.

How CPAs can take estate planning to the next level

As we mentioned earlier, you’ll likely want to partner with a financial advisor or firm as you talk with your clients about these and other advanced estate planning practices. And if your clients and their advisors want to use direct indexing as part of an estate plan—and why wouldn’t they?—Parametric is the best place to send them for help.

With nearly 30 years of direct indexing experience, Parametric works with financial advisors to help clients access efficient market exposures, solve implementation challenges, and design portfolios that respond to their evolving needs. 

Ready to get started? Learn more about Parametric’s offerings and access additional resources on direct indexing and other topics. And check back with Going Concern soon for a deeper look at the charitable gifting benefits of direct indexing.

The post CPAs: Make Direct Indexing Your Estate Planning Secret Weapon appeared first on Going Concern.

If your answer is “Pretend I need to go to the bathroom and hope I can get one of my advisor friends on the phone to explain it to me in time,” this article is for you. (If you’re reading this in the bathroom right now after searching “what is direct indexing tax benefits PLEASE HELP ME OH SEARCH ENGINE GODS and I promise never to Google myself again,” then this article is especially for you.)

The finance world is all aflutter over direct indexing and, among other benefits, its ability to allow investors to harvest more losses for tax purposes. Taxes can represent a larger drag on your higher-net-worth clients’ portfolios than fees or trading costs—so if your clients haven’t asked about direct indexing yet, they may very well soon. 

Let’s unpack what CPAs should know about direct indexing from a tax perspective—and explore some unique and effective methods for explaining it to your clients. 

What should CPAs know about direct indexing?

According to Investopedia, direct indexing is: “… an index investing strategy that involves directly purchasing the components of an index at the appropriate weights … (that) can provide greater autonomy, control, and tax advantages to certain investors over owning an index mutual fund or an index exchange-traded fund (index ETF).”

(We suppose you could stop reading here and just plan to repeat this definition to your clients verbatim as they stare blankly at you in response, but we recommend you give it some context.)

Before we dive in too deeply, it’s important to understand that direct indexing involves passive investments—and what that means. Passive investments are meant to gradually build wealth without the need for frequent trading. They include things like mutual funds and ETFs, which package underlying securities into a single vehicle accessible to investors.

Direct indexing takes this idea in a different direction. Instead of owning shares in a commingled fund, your clients own the individual securities in the portfolio directly, in a separately managed account (SMA).

Your clients get the same kind of broad market exposure as a mutual fund or ETF, but with the flexibility to customize their portfolios for a number of compelling advantages. These include the ability to:

• Actively and systematically harvest capital losses from individual securities for tax purposes—and do it all year round, not just at tax time.
• Adjust holdings to screen out industries or companies your clients find objectionable.
• Avoid redundant or risk-concentrating holdings in clients’ portfolios.
• Achieve more flexibility around charitable giving and estate planning.

For this article, we’re going to stay focused on the tax side of direct indexing, but check back for future blogs on some of these other benefits.

Now that we’ve defined the term, let’s go over some methods for talking to your clients about the tax advantages of direct indexing.

Method #1: Use a metaphor (any metaphor)

With commingled assets like mutual funds and ETFs, the losses of individual securities are trapped inside the fund, with your clients unable to use them for tax purposes. But with direct indexing, your clients can harvest those losses—potentially recovering up to 2% of annual after-tax excess returns. 

We know what you’re thinking: “What a perfectly worded explanation of the tax benefits of direct indexing! I can stop reading now.” And we thank you for the praise. However, we at Going Concern feel that any explanation is made better by an overly complicated metaphor. And any explanation is made even even better by an overly complicated metaphor we don’t have to write ourselves. 

So if your clients need a metaphor to help them understand the tax benefits of direct indexing, you’re going to have to put the work in. Fill in the blanks below to create an analogy that should be anywhere from adequate to awesome:

Made with Madlib Maker

Method #2: Show them this chart and wait for the gasps

Another way to demonstrate the potential tax benefits of direct indexing is to show your clients how many of the individual investments within a mutual fund or ETF were money-losers over a particular time period. This will get their wheels turning about the losses they’re potentially leaving on the table.

Obviously, you don’t want to get too specific—that’s for their advisors to handle. But a chart like this one can help demonstrate the principle:Despite the S&P 500 having an incredible year in 2021, with total gains of nearly 29%, 72 names in the index showed a loss. Further, 91% of the stocks in the S&P 500 had a maximum drawdown of more than 10% at some point during the year.

If your clients were index fund investors last year, they wouldn’t have been able to use those losses to offset capital gains elsewhere in their holdings because they were locked in the fund.

With direct indexing, however, your clients could put those losses to work through tax-loss harvesting. If your client is the type who’s interested in the nitty-gritty details of investing and taxes, they may want to know how that process works. Lucky for you, that’s the focus of our next method.

Method #3: Explain the process of tax-loss harvesting

For clients who like to track every dime and decimal, you may need to explain tax-loss harvesting in a bit more detail. Here’s how you can do just that:

Losses are inevitable in any portfolio. But with direct indexing, your clients’ SMA portfolio managers can harvest their losses on individual securities that would normally be trapped in a fund. 

Your clients can bank those losses to use in the current or a future tax year. Then the manager can reinvest the sale proceeds in a similar security (while taking care to avoid IRS wash-sale rules) to preserve your clients’ exposure and risk-return profile.

Essentially, the manager sells a basket of securities at a loss and simultaneously replaces it with a different basket of (hopefully higher-performing) securities.

Your clients may have further questions (or even objections) about tax-loss harvesting, especially if they’ve read articles like this one. Be sure to tell them that, while tax-loss harvesting can lead to great benefits for some investors, it’s not for everyone. If your clients are curious whether tax-loss harvesting is right for them, you can direct them to this quiz—or take it with them. 

Method #4: Go beyond tax-loss harvesting

If your client hits you with the dreaded “tell me more,” we suggest you send them to our friends over at Parametric. They’re the masters of direct indexing and powerful, innovative tax management solutions, including tax-loss harvesting and: 

• Tax-efficient transitions: Balancing capital gains against an acceptable percentage of tracking error to the desired benchmark exposure.
• Gain-realization deferral: Evaluating which securities to sell now and which to hold on to, with the expectation of future loss harvesting at the opportune time.
• Holding-period management: Determining the optimum time to hold a security, with an eye toward differing tax rates for short- and long-term gains.
• Yield consideration: Advising on the treatment of dividend income.
• Tax-lot consideration: Identifying ideal tax lots to trade.
• Wash-sale avoidance: Helping investors navigate IRS wash-sale rules.
• Charitable gifting: Selecting highly appreciated stocks to gift to a tax-exempt charitable organization, donor-advised fund, or family members in lower tax brackets.

“Talk to your CPA about the tax benefits of direct indexing”

Hopefully, you now feel fully empowered to talk to clients at all levels of sophistication and interest about the tax benefits of direct indexing. Check back soon to learn about the impact of direct indexing on estate planning and charitable giving, and discover more resources here.

The post 4 Ways CPAs Can Explain the Tax Benefits of Direct Indexing to Clients appeared first on Going Concern.

#taxseason observations:
1. How do I pay my taxes?
2. Do I need to sign the efile forms and engagement letter?
3. How long will my refund take?
4. Why do I owe? I’ve never owed.
5. Why do you need to know that?
6. My previous account didn’t ask for that.#TaxTwitter

— Dan Herron (@fintaxdude) April 9, 2022

Me: You owe $500 due to ACTC.
Client: Ok cool, can we pay that from my refund?
Me: What?
Client: How much was my refund?#taxtwitter

— Mark Anderson (@MarkAnd18311787) April 10, 2022

Feb 6 Matt doesn't recognize April 10 Matt. I have worked more Sundays this year than the previous 15 combined. I'm not proud of it. #TaxTwitter https://t.co/OkqwGQWDM3

— Matthew J. Cordes, EA (@cordes_tax) April 10, 2022

7 client emails on a Sunday night the week before tax season ends, that light at the end of the tunnel better not be an oncoming train.

— StevenFCPA (@stevenfcpa) April 11, 2022

Tax season bingo card. Today on 4/10 I'm reading Form 4562 instructions. #NotNormal #TaxTwitter

— Lindsey Starrett, CPA, CCIFP (@LindseyStarrett) April 10, 2022

Maybe I’ll take pictures of the outraged look on last minute clients who think it’s “cute” to wait until the last minute to file , when I tell them they get an extension. #TaxTwitter

— AngiefromMP (@angiefrommp) April 10, 2022

Happy Sunday! It just took me 90 minutes to assemble ONE tax return. This better not come back to me as a REDO! I can't tell you how many returns have been redos already! SO MANY!!!! #taxtwitter #adminlife

— Sherry Schwenderlauf (@SherryPDX) April 10, 2022

i hit a wall

and then I just kept hitting it

im fine

— Andrea Carr CPA (@andreacpa0) April 10, 2022

Is there a way to make it April 19th when I wake up tomorrow morning? #TaxTwitter

— Thomas J Kaminski (@michigantaxpro) April 11, 2022

Today is March 772, 2020. It will never end. #taxtwitter

— Marchternity (@MarchternityBot) April 11, 2022

It’s Monday 8:36am and I’m already f**king tired of the “status” emails – yes I’m fully aware your return isn’t filed. If I had an update, I would have reached out. This is going to be a long end of this tax season – good luck to you all!!! #TaxTwitter

— Tyler Boxberger (@tbraves13) April 11, 2022

“I lost my tax documents. Can you send those to me?” Yep, next Wednesday. #taxtwitter

— Liz, CPA, PSA (NJ) (@LizDoogCPA) April 11, 2022

https://twitter.com/CJ_CPA_5/status/1513471925426786311

Client-100% going on extension-just uploaded a zillion documents. Including one marked"urgent IRS." It's a payroll tax notice dated 12/31/21. I do not do payroll.
Good morning #TaxTwitter

— Michele Cagan, CPA (@michelecagancpa) April 11, 2022

https://twitter.com/porkrind/status/1513512467321827334

Pretty clear I'm a liberal. I'm getting A LOT more, "I'm not giving the IRS that information" pushback to everything from crypto to HoH due diligence questions.

It's like, "Just let me do my damn job, people. This ain't political. This is me protecting my license." #TaxTwitter

— Adam Markowitz (@adammarkowitzEA) April 11, 2022

I’m sorry I haven’t given you any of my 2021 tax information. Can you just tell me how much I’m going to owe so I can make a payment? #TaxTwitter

— Gina DeRosa, CPA (@GinaDeRosaCPA) April 11, 2022

Clients finally reaching out to me on April 11 with "I would like to file an extension" as if there was ever going to be a scenario by this point in which they *weren't* going to file an extension. #TaxTwitter #taxseason

— Saint Landwalker (@SaintLandwalker) April 11, 2022

It's taking a lot of restrain to not reply to IRS tweets today, but I'm not choosing violence today.

— Matt Metras cryptotaxpro.eth (@EmDeeEm) April 11, 2022

We hope everyone is able to keep violence to a minimum this week, no matter how much you’d like to strangle some of your clients.

The post Busy Season Problems: Sunday Funday, Lost Tax Documents, In Need of Super Powers appeared first on Going Concern.

According to a Feb. 22 report by the New York Times, Liz and Rep. Pramila Jayapal (D-WA) are asking the US Treasury Department to investigate the cozy relationship Treasury has had with the Big 4 and RSM US through the years, after a Times investigation last fall detailed several instances of how these firms allow some of their top tax lawyers to be poached by the government, mostly in the Treasury’s tax policy office, so they can help write tax rules that benefit their clients. Then they end up returning to their old firm, oftentimes rewarded with a promotion to partner.

The NYT noted that this back and fourth between Big 4 tax lawyers and the Treasury Department went on (at least) during the presidencies of Donald Trump, Barack Obama, George W. Bush, and Bill Clinton.

The two lawmakers sent letters to each of the Big 4 firms and RSM (see below this update for the letter sent to Deloitte) warning them that they’ve introduced the AntiCorruption and Public Integrity Act (S. 5070) that would end “these corrupt schemes.” Warren and Jayapal also asked the firms a series of questions about their participation “in the corrupt revolving door scheme detailed by the New York Times.”

According to the Times article on Feb. 22, Warren and Jayapal saw enough in the responses to their questions by the firms to ask the Treasury Department in a letter to look into this post haste:

“Following our own investigation that has corroborated these allegations and raised new concerns about the accounting giants that take advantage of these revolving-door schemes, we urge you to immediately open an inquiry into this matter,” the two lawmakers wrote in their letter. It was sent to the Treasury Department’s acting inspector general, Richard K. Delmar, and its inspector general for tax administration, J. Russell George.

“Accounting giants are abusing the public trust and taking advantage of the revolving door between public service and private profit,” the lawmakers said in the letter.

[…]

“But these disclosures only reveal the tip of the iceberg,” the lawmakers wrote. “Neither the firms nor the Treasury Department provided meaningful information about their employees’ responsibilities and clients, either at the firms or while in government.”

While Deloitte and PwC ignored the question of, “Since January 1, 2001, how many lawyers or other employees [of your firm] have taken tax policy positions in the Treasury Department, the IRS, or elsewhere in the federal government and returned [to your firm] after their government service?” citing confidentiality and employee privacy issues or that “we do not track this information,” EY provided Warren and Jayapal with the following:

After a review of our records, we have identified seven persons who left EY in the past 10 years, took what we believe can be considered a tax policy role at Treasury or the IRS, and then returned to EY. Of the seven people, some returned at the same rank as the rank at which they left our firm, while some returned at a higher rank. Additionally, we estimate that, on average, there were 5.5 years between when those persons left our firm and when they rejoined. This significant average tenure is consistent with the spirit of public service we observe in our people who look to take their expertise to the government.

KPMG said in its response to the lawmakers’ questions:

Over the twenty-year period from January 1, 2001 to date, KPMG has had five senior tax professionals who left the Firm to serve at either the Department of the Treasury or the Internal Revenue Service and who then returned to KPMG.

In a follow-up letter to Warren and Jayapal, KPMG found one other instance of a senior tax professional who had left the firm to work at the IRS and then returned to KPMG.

RSM said in its letter to Warren and Jayapal that an internal investigation found only one person who met their criteria since the firm’s Washington National Tax practice opened in 2010.

All told, Warren and Jayapal told the Treasury Department in their letter that “since January 1, 2001, at least 24 employees left their companies to take tax-policy positions in the federal government and returned to the companies afterward, with many receiving promotions, raises, or both upon their return.”

You can read Warren and Jayapal’s letter to the Treasury Department here. You can read the five accounting firms’ responses here.

[Article originally posted on Oct. 8, 2021.]

Uh-oh, the Big 4 firms have gotten Sen. Elizabeth Warren’s dander up.

The Massachusetts Democrat was appalled at a recent New York Times report that found at least 35 examples of big public accounting firm tax lawyers who left to join the US Treasury’s tax policy office or other government positions and then were rehired by their old firm. In nearly half of those cases, the employees were promoted to partner upon their return—often doubling their pay.

What drew Warren’s ire was how these ex-PA tax lawyers were able to approve generous tax loopholes that were often used by their former firms, give tax breaks to former clients, and roll back efforts to rein in tax shelters while working inside the US government, according to the report. The NYT wrote:

The largest U.S. accounting firms have perfected a remarkably effective behind-the-scenes system to promote their interests in Washington. Their tax lawyers take senior jobs at the Treasury Department, where they write policies that are frequently favorable to their former corporate clients, often with the expectation that they will soon return to their old employers. The firms welcome them back with loftier titles and higher pay, according to public records reviewed by The New York Times and interviews with current and former government and industry officials. …

After lobbying by PwC, a former PwC partner in the Trump Treasury Department helped write regulations that allowed large multinational companies to avoid tens of billions of dollars in taxes; he then returned to PwC. A senior executive at another major accounting firm, RSM, took a top job at Treasury, where his office expanded a tax break in ways sought by RSM; he then returned to the firm.

The thing is, this has been going on at the Big 4 for a long time. A Redditor commented about the NYT article: “And in other news, water is wet.” But now, thanks to the Times, this gaming of the system is now out in the open.

Apparently Warren couldn’t believe how sneaky and shady the Big 4 (and RSM) really are, so she and House Rep. Pramila Jayapa (D-WA) decided that sending letters to the CEOs of Deloitte, PwC, EY, KPMG, and RSM tsk-tsking them over this scheme will get them to stop. But if that doesn’t work, Warren and Jayapa threatened to stop it via an ethics bill they introduced in Congress in both 2018 and 2020.

The letter states: “Americans are sick and tired of these corrupt schemes, and we’ve introduced the AntiCorruption and Public Integrity Act (S. 5070) that would end them. The decades-long scam in which large accounting firms have abused the revolving door between the government and the private sector to help their wealthy clients avoid paying their fair share of taxes demonstrates precisely why this legislation is necessary.”

Here is the full text of one of the letters Warren and Jayapa sent to the five accounting firms. This is the one Deloitte CEO Joe Ucuzoglu received:

Joe Ucuzoglu
Chief Executive Officer
Deloitte US
30 Rockefeller Plaza
New York, NY 10112

Dear Mr. Ucuzoglu:

We write regarding a disturbing new report that reveals the corrupt revolving door between the world’s largest accounting firms and the federal government—and the extent to which this “remarkably effective behind-the-scenes system” “help[s] the world’s biggest companies avoid taxes.” On September 19, 2021, the New York Times exposed how large accounting firms—including Deloitte—send their lawyers into high-ranking positions in the federal government to create new tax loopholes for their clients, and then reward the same lawyers with bigger paychecks and promotions upon their return. We are seeking information to understand the extent to which Deloitte has been involved in these unethical schemes.

Accounting giants are abusing the public trust and taking advantage of the revolving door between public service and private profit. The Times report uncovers that, in the last four presidential administrations, dozens of lawyers have left the top accounting firms for tax-policy positions in the Treasury Department and the Internal Revenue Service—where they have rewritten America’s tax laws for the benefit of their former clients. Once they return after their stints in government to work for those same clients, they receive promotions and massive salary increases in exchange for their “public service.”

In one instance, Deloitte and PricewaterhouseCoopers designed a lucrative new tax shelter for multinational corporations, which was placed at risk when the Treasury Department issued a warning notice to shut down the scheme. But several years later, a former Deloitte attorney entered the Treasury Department, and his office issued new regulations to ease the path for companies shifting their profits offshore to avoid U.S. taxes. The attorney soon returned to Deloitte and was immediately promoted to partner.

Americans are sick and tired of these corrupt schemes, and we’ve introduced the AntiCorruption and Public Integrity Act (S. 5070) that would end them. The decades-long scam in which large accounting firms have abused the revolving door between the government and the private sector to help their wealthy clients avoid paying their fair share of taxes demonstrates precisely why this legislation is necessary. Under our bill:

• Executive branch employees would be required to recuse themselves from matters that might financially benefit their immediately prior employers or clients
• Private-sector companies would be restricted from immediately hiring or paying any senior government official that was recently lobbied by the company
• The world’s largest corporations, banks, and monopolies would be restricted from immediately hiring or paying any senior government official after they leave government service
• Private-sector companies would be banned from providing “golden parachutes” to compensate executives for entering into federal service
• Lobbyists would be required to disclose any specific government actions that they attempted to influence, any meetings conducted with public officials, and any documents provided to those government officials
• A new U.S. Office of Public Integrity would be created to enforce federal ethics and anticorruption laws

Our legislation would close the revolving door between massive accounting firms like yours and the federal government, ensuring that our government officials work for the people and not the wealthiest corporations and their clients. And Sen. Warren’s Real Corporate Profits Tax, which would simplify the tax system and make it harder for giant corporations to create and profit from tax loopholes, would reduce the payoff from these unethical practices and the incentives to engage in them.

To better understand Deloitte’s participation in the corrupt revolving door scheme detailed by the New York Times, we ask that you answer the following questions by October 19, 2021:

1. Since January 1, 2001, how many lawyers or other Deloitte employees have taken tax policy positions in the Treasury Department, the IRS, or elsewhere in the federal government and returned to Deloitte after their government service?

2. For each of these employees, please provide the following information:

a. When they left Deloitte, and when they returned.
b. What position(s) they served in at Deloitte, before and after their government service, and what their specific responsibilities were in those positions.
c. What position(s) they served in in the federal government, and what their specific responsibilities were in those positions, including any regulatory or legislative matters they worked on that affected Deloitte clients.
d. Who their clients at Deloitte were, before and after their government service.
e. Their compensation at Deloitte, before and after their government service, and any bonuses or other compensation they received in relation to their government service.

3. What are Deloitte’s policies to guard against conflicts of interest for employees who formerly worked for the federal government? Specifically, are Deloitte employees allowed to retain clients if they worked on matters related to these clients while serving in the federal government?

Thank you for your attention to this matter.

Sincerely,

Elizabeth Warren
United States Senator

Pramila Jayapa
Member of Congress

Warren and Jayapa can send all the letters they want to the Big 4, but the fact is nothing is gonna change. Their ethics bill probably won’t get the support it needs in Congress (it hasn’t even left the Senate Finance Committee) before the 2022 election to be enacted into law— and it definitely won’t if the Dems lose control of either the House and/or the Senate next year. And there’s no way the Big 4 and RSM and whatever other firms are doing this (probably BDO and Grant Thornton too) will stop gaming the system if it benefits them and their clients.

But good effort, tho, Liz and Pramila.

How Accounting Giants Craft Favorable Tax Rules From Inside Government [New York Times]

The post Elizabeth Warren Shocked to Learn Big Public Accounting Firms Do Shady Sh*t (UPDATE) appeared first on Going Concern.

Original version:

Newest version:

Listen to Oh My Fraud, a new podcast by Caleb Newquist and Greg Kyte, and get free CPE through Earmark. 

The post Exposure Drafts: The Devil Made Me Deduct It (NEW VERSION) appeared first on Going Concern.

Related articles:

Busy Season Problems: ‘This Is My Last One, I Swear;’ K-2/K-3 Is Not OK; Shadowy JPEGS
Tax Preparers Use Valentine’s Poetry to Express Their Busy Season Problems

The post Here’s a Photo From Saturday Night’s NASCAR Race That Sums Up Busy Season 2022 So Far appeared first on Going Concern.

While some #TaxValentines offer tax advice in a hokey way, others creatively gripe about their busy season problems. More accurately, creatively gripe about schedules K-2 and K-3:

Roses are red
Your tax pro’s blue
Ruing the debut of
Schedules K3 and K2 #TaxValentines

— Phyllis Jo Kubey (@PKubeyEA) February 14, 2022

Roses are red,
With thorns you can see,
I’d rather be pricked ‘til I bleed,
Than deal with Schedules K-2 and K-3. #TaxValentines

— Justin Miller (@justinmilleresq) February 11, 2022

New Schedule K2
If you have foreign affairs
Feds are watching you#TaxHaiku #TaxValentines pic.twitter.com/iYuPoDpr9U

— Jeremy Stephens (@J_Stephens_CPA) February 11, 2022

Instructions are read
For K-3 and K-2
Extensions for all
'Til we know what to do.#TaxValentines

— Jeanne (@JLWCPA2) February 10, 2022

Returns aren’t filed, We are feeling blue, But if there is no 1116, You can skip the K2.#TaxValentines #TaxTwitter @TaxNotes

— Jeff Kristoff (@jckristoff) February 12, 2022

Roses are red
Form 1065 is no fun
When you formed a partnership
And didn’t intend to be one#TaxValentines

— Sierra Williams (@SierraWilliams) February 11, 2022

Roses are Red.
Pansies are pale.
Can IRS please.
Open the mail?
‘#TaxValentines #Taxtwitter

— Lafayette Ket (@Lafayette_Ket) February 13, 2022

Roses are red
And so is my pen
Which is lonely now that
Review notes are typed instead#TaxValentines

— Jesica Abella EA, ABA (@Jesella) February 11, 2022

Roses are red
Your accountant might be blue
If you want to make them happy
Don’t send your documentation after it is due#TaxValentines

— Justin Miller (@justinmilleresq) February 10, 2022

On second thought, guys, don’t quit your day job. Jk. XOXO.

Related articles:

#TaxTwitter Has Absolutely Had It With Clients’ Sh*t
Busy Season Problems: ‘This Is My Last One, I Swear;’ K-2/K-3 Is Not OK; Shadowy JPEGS

The post Tax Preparers Use Valentine’s Poetry to Express Their Busy Season Problems appeared first on Going Concern.

Well … there’s the new schedules K-2/K-3 requirements for pass-through entities (see Michael Rapaport’s article for Bloomberg Tax on the new IRS foreign income reporting requirements for partnerships), which is driving tax pros completely out of their minds:

This K2/K3 nonsense has me seriously thinking about switching careers. #TaxTwitter

— Nicole Davis (@wifemomcpa100) February 10, 2022

This is horseshit. The pile of returns sitting on my desk on February 8th because I am/or was waiting for K2/K3 guidance, Rev. Proc. 2021-48 stmt., forms to be finalized. pic.twitter.com/y5ianLlPXi

— StevenFCPA (@stevenfcpa) February 8, 2022

The whole K2/K3 fiasco is a going to make a lot of competent and dedicated tax preparers quit, but the ones who break the rules and don't know what they're doing/missing will continue unabated.

— Matt Foreman (@ForemanTaxLaw) February 7, 2022

The k2/k3 "crisis" is sad. I truly think the IRS will revise their guidance because there is no reason for a PTE to have any effect on a form 1116 filed on a 1040. On top of that few PTE returns will be preoared with a k2/k3 this year no matter what the IRS does.#taxtwitter

— Mike Sylvester, CPA (@MikeSyl36625988) February 7, 2022

Do you know what made me cry just now?

Thinking about me figuring out how to do K2/K3 reporting.#DonutTwitter

— Jeff Breeden (@CPAJeff) February 4, 2022

The answer is SIMPLE for this K2/K3 issue. This filing requirement has to be delayed at least a year.

The IRS isn’t even ready to handle this. Can’t file forms until AFTER the due date?

This is crippling to taxpayers and our industry. @AICPA help!!! #TaxTwitter

— Kyle Rehnstrom (@KyleRehnstrom) February 4, 2022

And here are some we’ll file under “Miscellaneous”:

I love the smell of tax season – it’s despair mixed with the burning smell from an overused scanner

— Andrea Carr CPA (@andreacpa0) February 10, 2022

Every time. #TaxTwitter pic.twitter.com/ENBkOMrGoU

— Matthew J. Cordes, EA (@cordes_tax) February 10, 2022

"Can I just email you my tax forms?"

#taxtwitter #fintwit #accountantsoftwitter pic.twitter.com/Ilf2dOtodY

— JarynT (@TrinkiesM) February 10, 2022

In almost every case..

I will 100% be willing to discuss lowering my fee..

If you will only..

STOP RUNNING EVERY TRANSACTION IMAGINABLE THROUGH PAYPAL!! #TaxTwitter

— Garrett Alexander, CPA (@YourLocalTaxGuy) February 9, 2022

Related article:

#TaxTwitter Has Absolutely Had It With Clients’ Sh*t

The post Busy Season Problems: K-2/K-3 Is Not OK; Weird Smells; Shadowy JPEGS appeared first on Going Concern.

It seems many practitioners are raising fees these days, and who can blame them? I don’t need to explain to you that inflation hasn’t been this high since 1982 which is longer than many of you — and almost even my old ass — have been alive. Think about that for a minute. Most of us have never seen prices steadily rising like they are now. Granted, all of us have been victims of shrinkflation for most of our lives, though that’s more companies being cheap and gross and greedy than a direct byproduct of trillions of dollars being pumped into the economy. You know what … nevermind, this is off topic. Point being, prices are rising so it stands to reason freelance professionals and firms would quite reasonably raise their fees to reflect the ever-shrinking value of a dollar. As expected, clients are not happy about this. Whatever though, fuck ’em.

We also have the usual foot-dragging ahead of deadlines, poor record keeping, and just general dicking around by clients who think they’re the main character and that their accountant exists for the sole purpose of serving them. You know the ones.

Just updated my home page. It now says I’m not accepting discovery calls for new entity clients. This after booking stating “accountant retired, I have an S-corp, looking for a new affordable accountant.” #TaxTwitter 1/3

— Amber Gray-Fenner, EA (@taxtherapist505) January 25, 2022

I do what I can to communicate what most #taxpros would consider reasonable expectations for doing business as widely and as publicly as I can. #TaxTwitter 2/3

— Amber Gray-Fenner, EA (@taxtherapist505) January 25, 2022

It never ceases to amaze me that small businesses with entity returns due on 3/15 think late January is still plenty of time to find “an affordable accountant.” #TaxTwitter 3/3

— Amber Gray-Fenner, EA (@taxtherapist505) January 25, 2022

And this reply:

Thing is, I AM affordable. But when they say affordable it’s a clear indicator that they don’t really want to pay for professional level work at all.

— Amber Gray-Fenner, EA (@taxtherapist505) January 26, 2022

Protip to clients: telling an accountant you are trying to hire that you are looking for an “affordable” accountant is not going to score you a deal. Who wants to bet the prospective client below can’t get a call back because all their voicemails start with “I am looking for a new tax accountant because my current one has raised their fees”?

Todays market & demand is not even close to what I envisioned when I started down this path 12 years ago with the intention of learning a skill set that would make me recession proof.

Every new client: “You’re the only office that would even call me back.”#TaxTwitter

— William Holtsman, CPA (@W_Holtsman) January 19, 2022

Here’s an idea: if your clients complain about high fees, send ’em Lorilyn’s way (OK don’t actually do that):

Providing a new subscription service to my fellow tax preparers – if anyone says your fees are too high, refer them to me and I’ll quote them 2x your price. #TaxTwitter

— Lorilyn Wilson, CPA (@LorilynWilson) December 28, 2021

Clients trying to squeeze you? Just send ’em packing. Seriously.

Client emails berating me because I won’t lower her fees compared to last year since she was a returning customer. Simple email reply:

Mrs. X,

I’m sorry you feel this way. Best of luck in your search for a new accountant.

Cam

Ain’t nobody got time for this. #taxtwitter

— Cam Matheny (@CamMatheny) January 19, 2022

Speaking of new accountants, is there anything more satisfying than clients ditching you because they’re butthurt about fees only for them to discover that “you get what you pay for” isn’t just for fashion and quirky crap from China advertised to you on Instagram?

I feel bad for the firms that take on the two clients we “felt would be happier elsewhere” recently. Complete messes, no online access, late in paying the IRS, PITA calls all the time. Wanted lower pricing and didn’t want monthly billing anymore. Byeeee #TaxTwitter #Accounting

— Craig Hausz, CPA CFP (@CPATaxTeam) January 26, 2022

Client: Your price increases are too much. I’m going to do my own books and taxes this year.
Us: Ok
Client: But before I get started, can I sit down with someone there to ask some questions?
Us: Yes, for the price we sent you previously.#TaxTwitter

— Craig Hausz, CPA CFP (@CPATaxTeam) January 25, 2022

Oh come on. They just want to “pick your brain.” For free. And they also need you to walk you through their return in excruciating detail. Also for free.

Here’s your word of the day: boundaries. Set reasonable expectations for clients and remember that no matter what you’re charging, at the end of the day you are allowed to — and should — set boundaries.

And to further expand after some thought I think all of us #TaxTwitter are passionate about good service. The complaints come from those clients who don’t pay or don’t pay enough. All of which we can control and should be cognizant of in our pricing and boundaries.

— Josh Youngblood, E.A. (@JoshYoungblood) January 23, 2022

We’ll end this wrap-up of #TaxTwitter happenings with a a bit of clients behaving badly.

What are some of the most “interesting” reasons you have fired clients for? 1. Kept coming in and flirting with two employees. 2. A female client who insisted she only deal with males in our office since they know more and client was rude to other females. #taxtwitter

— Mike Sylvester, CPA (@MikeSyl36625988) January 27, 2022

Hang in there, everyone, you’re doing great. Well, everyone except cheap clients that is. Clients, y’all have been warned. Your accountants are mad as hell and they’re not gonna take this anymore.

Photo by Moose Photos from Pexels

The post #TaxTwitter Has Absolutely Had It With Clients’ Sh*t appeared first on Going Concern.

In the mailbag today is a response to the TWIMGC we posted on Monday about one person’s horrible experience using Jackson Hewitt.

I was saddened to read about a recent reader’s poor experience with Jackson Hewitt.

I used TurboTax for years (starting back when there was no online option, you had to buy the software) but decided to try Jackson Hewitt when I just couldn’t wait for my refund for my 2019 taxes (I claim the EIC, which delays my refund, now THAT’S a rant!). I used a Wal Mart location and, other than accidentally getting someone else’s paper copy, the experience went smoothly and was overall a good experience. I wasn’t thrilled about paying the fee but discovered that it was about on-market comparatively speaking. The following year, I had a similar situation but it was before the Wal Mart locations opened up. I chose to go with a free-standing location. I found that many of the J-H locations (particularly the ones located in Wal Mart) are owned by different franchises. As this location was not a franchise, they had to go through a few hoops to get my prior year information but after that, everything went smoothly even in the midst of a pandemic.

This year, once again, I am using Jackson Hewitt (I really hate having to wait until the end of February/beginning of March for my refund!) and so far, so good. The first two locations were in KY and this one is in VA, where I have moved and I’ve not had a bad experience. The people at this location, particularly, are so helpful and kind. Due to a glitch in their system, they had to enter our taxes 3 times but did it without complaining but continually apologized.

Please don’t take one person’s bad experience as a knock against J-H in general.

Any other Jackson Hewitt stans out there? Or are you a Block head? If you’ve had good experiences using one of the big-box tax prep companies, let us know. We’ll take your bad experiences too.

Related article:

To Whom It May Going Concern: Jackson Hewitt Sucks

The post To Whom It May Going Concern: Jackson Hewitt Does Not Suck appeared first on Going Concern.

This email was sent to us out of the blue last week:

They [Jackson Hewitt] do suck. Had my 2020 taxes done there, in hazelton, pa. When I went into the office, the tax repairer was sleeping on a bag in another room. It was a Saturday morning. Simple tax return, charged $300 dollars after call her boss to find out how much to charge, senior citizen and Veteran. Crooks and irresponsible. Go there at your own risk.

We’re still not sure what prompted this person to tell us about his/her bad experience using Jackson Hewitt, but we have been a depository for rants of all kinds for nearly 13 years. And it IS the season for taking a dump on big-box tax prep.

Anyone else had a bad experience using JH, H&R Block, or Greg Kyte’s favorite, Liberty Tax?

The post To Whom It May Going Concern: Jackson Hewitt Sucks appeared first on Going Concern.

Uploaded April 13, 2020, the video has a mere 1,413 views as of posting this. How this didn’t go viral and end up being the star track of the Better Call Saul soundtrack is beyond us. But here it is:

As seen in a Reddit thread about the torture that is hours upon hours of IRS hold music.

Here is another remix that ended up on Mashable a couple years back, and if you’re really feel masochistic today, you can also find the original hold music track on Soundcloud because of course you can.

In this 2019 Washington Post piece entitled “Our classical music critic was on hold with the IRS for an hour. She didn’t hate the music,” we learn more than we ever wanted to know about this ear worm of a song:

The IRS’s hold music is called “One to One,” and it is often credited to “Fresh Optimism,” the name of the collection of tracks in which it was originally represented. Getty’s website, however, credits “One to One” only to “RFM,” which it says is an entity in Tivoli, N.Y. — one of many royalty-free music companies that Getty acquired. The IRS licensed the track in 2009 from Jupitermedia, also since acquired by Getty.

Bet you didn’t expect to get the backstory on what is quite possibly the most enraging hold music in the world when you woke up this morning, did you? Who knows, maybe it’ll come up on Jeopardy! some day and you’ll be the only one who knows the answer.

I searched the GC archive and found just one single mention of practitioner line hold music from 2016 in which the Wall Street Journal tracked down an accountant from Maryland who said: “You get tired of it, no matter how nice it is,” she said.

And that about sums it up. Maybe we’ll get lucky one of these years and the IRS will find a new track. Until then, One to One it is.

The post Some Guy Made a Bangin’ Cover of the IRS Hold Music and You Need to Hear It appeared first on Going Concern.

I realized I forgot to file an extension for my brother’s return how is everyone else doing today

— Lorilyn Wilson, CPA, PFS (@LorilynWilson) October 14, 2021

Got up yesterday at 7:30am.

What time did I go to bed? I'll let you know when that happens.

Yep, this tax season is the worst. #TaxTwitter

— Zbylut on Taxes (@TaxHacker) October 14, 2021

12 hours yesterday, 6.5 hours detail reviewing k-1 inputs on a single return, starting to die a little inside. how is #TaxTwitter doing today?

— Tex (anti-hero) (@ItsLilTex) October 14, 2021

Tired. I should go for a walk or just go outside before working on this last nearly-done return. But I do worry if I leave, I may not come back.

I would like some chocolate though. #taxtwitter

— Otterly Magnificent (@OhMalarkey) October 14, 2021

https://twitter.com/Niero_Mk2/status/1448718408187465758

https://twitter.com/Jarmstrong2147/status/1448633489453092866

https://twitter.com/irene76mv/status/1448738421543997441

“I’ll bring my stuff by Friday afternoon. You can still get it done right?” pic.twitter.com/rp5dfip4aK

— Josh Youngblood, EA (@JoshYoungblood) October 13, 2021

Wonder how many clients are getting fired on 10/16. #TaxTwitter

— Sam Crahan, CPA (@SamCrahan) October 14, 2021

One of the accountants associations that I receive emails from, just sent a reminder to renew your PTIN. On October 14th. Way to know your audience. #TaxTwitter

— StevenFCPA (@stevenfcpa) October 14, 2021

If a return is still left at 10/14, it's probably messy, client doesn't care, they owe and don't want to pay, or some other way it or they suck. There's a reason this week is so hard.
Explained this to new staff yesterday and I could see the relief on their face. #Taxtwitter

— Stephanie S (@SNS92569093) October 14, 2021

If you want to prepare a return for a client that sends in their stuff late, great!

Just don't put your physical and mental health at risk if your plate is already full.

— Logan Graf (@LoganGrafTax) October 14, 2021

“Married but we each file HOH” #TaxTwitter

— Ryan the Real Estate CPA (@LearnLikeaCPA) October 14, 2021

Ma’am, I hear you but you cannot take a deduction for unpaid rent. #TaxTwitter

— Nicole Davis (@wifemomcpa100) October 11, 2021

#TaxTwitter
Me searching for my family and friends when tomorrow’s Oct 15 deadline passes: pic.twitter.com/wLtkkGlhJ6

— Robert Gambardella, CPA (@ConciergeTax) October 14, 2021

Is it October 16 yet?!?! #TaxTwitter

— Peters CPA (@peterscpa) October 14, 2021

Hang in there, friends, the finish line is within sight. We wish you nothing but the joys of getting to know your family again, taking long naps, drinking your favorite adult beverage(s) of choice, and firing deadbeat clients.

The post How Is #TaxTwitter Holding Up Before the Oct. 15 Deadline? appeared first on Going Concern.

The post Exposure Drafts: According to Circular 230 You Do Not Have to Disclose When You Outsource Tax Work to Your Cat appeared first on Going Concern.

For that kind of tax rate she might easily be persuaded to move to the next-door state of Nevada. The rate there is zero—pretty hard to complain about.

So what is stopping her? Well, for one thing, something called “moving.” She would have to pack those bags and plant them in Nevada to demonstrate that she intends for that to be her home, what we call a domicile. 

Earlier this month, Yellen called for an international corporate minimum tax rate among the nations of the world. Reason: to discourage corporations from moving to low-income countries and bringing their taxable income to a so-called “tax haven.” 

But don’t they have the same burden in making that kind of move that Yellen has in trying to go to Nevada? In fact, not at all. 

For multinational enterprises (MNEs) a lot of their assets are intangibles, like trademarks and patents (think of pharmaceutical companies). These are easy to move anywhere you want—just email them. 

And that’s the difference that Yellen is bringing to our attention. Moving the taxable income of a MNE to a low-tax-rate jurisdiction is often just a matter of some clever paperwork by a good tax lawyer—a very good one to be fair. 

This scenario is not new. Dozens of tax laws exist in most countries’ tax codes to try to recapture the tax base eroded by moving profits in ways that belie the economic reality of where the profit belongs.

Hence, Yellen’s idea is to take away this game of tax competition where countries vie to be the tax haven to the world. The competition often gets so fierce that it has been aptly termed the “race to the bottom.”

Except this idea is not new. The Organisation for Economic Co-operation and Development (OECD) made this very same proposal last summer with its Pillar II initiative to create worldwide tax fairness. It is part of its concentrated Base Erosion and Profit Sharing (BEPS) program. 

The BEPS initiative seeks to close gaps in international taxation for companies that allegedly avoid taxation or reduce tax burden in their home country by engaging in tax inversions (moving operations) or by migrating intangibles to lower tax jurisdictions. Not only is Yellen’s idea not new, but it’s also protectionistic.

For years prior to the Trump administration, the United States had the dubious honor of being one of the highest-taxing countries of the world. But with the emergence of world markets, tax havens, and the ever-increasing economic wealth of intangible assets honed by the super MNEs, the attraction of tax haven countries took hold. So much so that by the end of 2017 it was estimated that at least $3 trillion was trapped in overseas accounts waiting for the right time to come back home to our shores where it would finally be taxed here.

President Trump made the time right with the 2017 Tax Cut and Jobs Act. There these otherwise U.S.-based MNEs were given several gifts. 

First, a one-time tax rate at about one-third of the regular rate on the trapped overseas profits. This tax was mandatory and was expected to see most of the $3 trillion return home. In fact, by most estimates, only some $1 trillion has been repatriated so far. 

The second gift was a new corporate tax rate of 21%. And with that—voilà!—the U.S. began to look like the next new tax haven of the world, when you considered that the average rate of other countries is about 24%. 

Adding to that was a new tax aptly called by its acronym, GILTI, as in global intangible low-taxed income. The idea was to tax U.S. company export income at a rate of 10.5%, or half the 21% corporate rate, as an incentive to keep the U.S. MNEs and their profits based and taxed at home. Whether by design or not, it is another incentive for an MNE to be based in the U.S.

Fast-forward to the pandemic and the U.S. suddenly has new reasons for tax revenue to go up, not down. President Biden’s plan: raise that deliciously low rate of 21% to 28% and the GILTI rate from 10.5 to 21%. 

Anticipating these rate changes, Yellen endorsed the idea of that corporate minimum tax around the world to protect the country’s interests—trying to avoid another round of corporate moves away from the U.S. 

I wouldn’t have thought this sudden U.S. chant of “join the OECD” to look so blatantly duplicitous except when you consider that the OECD and more than 100 countries convened in Paris in 2017 to devise, draft, and have 68 countries ratify the Multilateral Instrument (MLI) in an effort to create fair taxing worldwide. Noticeably absent and not signing on—the United States. 

Our excuse was that we abide by the principles with our existing law. Yet, with so much of the world economy in our backyard, the MLI is certainly hampered by our non-cooperation.

The issues of how to apply international tax principles are certainly complex in our global and now highly digital economy. But it’s high time for the U.S. to wholeheartedly work with the OECD and the United Nations Tax Committee, both cooperative partners to this point.

About the author:

Sam Handwerger, CPA, is a full-time lecturer in accounting and taxation at the University of Maryland’s Robert H. Smith School of Business. He was a senior tax researcher with EY in New York City and later led the tax planning and preparation departments of the CPA firm Handwerger, Cardegna, Funkhouser & Lurman.

Related article:

What COVID-19 Tells Us About … SALT

The post Where Does Janet Yellen Want to Be Taxed? appeared first on Going Concern.

For example, the IRS announced last week that taxpayers’ April 15 filing deadline would be extended to May 17. You may recall that they gave taxpayers until July 15 last year (if you don’t that’s OK, it’s been a long year).

Well, that’s nice and all but the AICPA wants more. You see, from where you’re standing it may appear as though the AICPA exists solely to extract dues and blow your inbox up with insurance offers but they also exist to start beef with the IRS on behalf of taxpayers (among other things).

From the Journal of Accountancy:

The AICPA welcomed the IRS’s postponement of the April 15 income tax filing and payment deadline to May 17 but said the measure falls far short of needed taxpayer relief.

After IRS Commissioner Charles Rettig, in a congressional hearing Thursday, sought to justify the Service’s limited postponement, AICPA President and CEO Barry Melancon pushed back, arguing the limitation hurts small business owners and calling upon CPAs and others to ask their U.S. senators and representatives to intervene.

Rettig — not one to be bitched out by the likes of a chihuahua-juggling enthusiast like Barry Melancon — hit back, implying that they did everyone a favor by extending tax day last year but let’s not make this a habit. “This cannot be a pattern,” Rettig said. “Last year was an anomaly; we were shut down.”

This year, despite ongoing difficulties stemming from the COVID-19 pandemic, the IRS is in a different situation, Rettig said.

“Operationally, this was not called on by the Internal Revenue Service,” he said of the May 17 postponement. “It was an accommodation for the most vulnerable individuals. … It’s to try to give the individuals who might be struggling to get some of their information a little bit of breathing room if they’re not otherwise comfortable doing the automatic extension till Oct. 15.”

Part of the AICPA’s beef is in the IRS’s “selective” extension. From a March 16, 2021 AICPA press release:

According to an IRS press release, the relief does not include estimated tax payments that are due on April 15th. This IRS extension does not extend to the millions of small business owners and individuals who pay estimated taxes and the following:

• Trust income tax payments and return filings on Form 1041
• Corporate income tax payments and return filings on various Forms 1120

“Americans, individuals and small businesses, have been impacted immeasurably. The fact is virtually all aspects of the federal government and state and local governments have also been impacted. A fair assessment might conclude, for a variety of reasons, that the IRS has been affected more than other federal agencies. I believe taxpayers and practitioners understand this,” Melancon continued. “It is commendable that the IRS wants to demonstrate a return to normalcy. However, the IRS, through no fault of their employees, is seeing significant backlogs, inundated phone lines, unopened mail by the millions and systems sending out unwarranted notices. Extending all tax returns due to June 15th exhibits an understanding of the IRS’ impact on the American public.”

Oh and the AICPA would also like you to know that the IRS didn’t accept e-filed returns until Feb. 12 this year, so they were already behind by almost three weeks by the time filing season started.

So next time you ask yourself “what the hell do I pay these people $300 a year for?” there’s your answer. Your fearless leader Barry Melancon is out here fighting for taxpayers, small businesses, and those who file returns for an estate that generates more than $600 a year. Get em, Bar!

Many Taxpayers Will Not Benefit from IRS Tax Deadline Extension [AICPA, March 2021]

The post The AICPA Is Starting Beef With the IRS on Behalf of Taxpayers appeared first on Going Concern.

The IRS blessed taxpayers with a new Form W-4 back in late 2019, with the hope that the updated form would improve their inability to properly estimate withholding (a herculean task for civvies, obviously). Unfortunately, the IRS failed to properly gauge the enthusiasm of its target audience for improved tax forms, and only slightly more than a quarter of Americans have used the new form.

Worse, the AICPA survey showed that just less than half of American taxpayers even remember when they last updated their withholding. See above re: we’ve had other things going on.

For those taxpaying Americans (yes, even you) who might want to consider updating their employee withholding now that a new (and hopefully better) year is soon upon us might want to check out this article from our friends at Gusto on the basics. The expert the Journal of Accountancy spoke to for their article on survey results says taxpayers should consider updating their withholding forms so as not to continue giving the government an interest-free loan returned to them in the form of a refund. Alright, he didn’t say exactly that:

“A refund at tax time means that you’ve made an interest-free loan to the government, sacrificing earnings on the money that could have gone into your pocket during the year,” said Neal Stern, CPA, a member of the AICPA National CPA Financial Literacy Commission.

Instead, many taxpayers would be better off filing a new, more accurate Form W-4 resulting in larger paychecks, which can be used to invest or pay down high-interest debt, Stern said. He recommends using a free estimator tool from the IRS to ensure accuracy.

Or just continue drifting through life oblivious, that’s a plan too.

The post Survey: American Taxpayers Don’t Really Give a Crap About the New Withholding Form appeared first on Going Concern.

— Georg Holm, bassist for the legendary Icelandic post-rock band Sigur Rós, said about the band’s accountant Gunnar Ásgeirsson, who worked at PwC.

I’ve got a few Sigur Rós albums on CDs that I burned from friends, but I can’t say I’m their biggest fan, much like the band’s members aren’t the biggest fans of P. Dubs and paying taxes, according to The Guardian:

Sigur Rós have claimed they face financial ruin or even jail following an “unjust and draconian” second prosecution for tax evasion.

The band members have admitted they evaded 151m Icelandic krona (£840,000) in taxes between 2011 and 2014. They have pleaded guilty, apologised and paid back the money, plus fines and interest. The band claim they were unaware of the tax evasion and blame their accountant.

However, they face a second trial at a separate Icelandic court. The band, which now includes just two of the original members, claim that the second trial is a breach of European convention on human rights rules on double jeopardy. They say the second court is likely to impose an additional fine of at least 200% of the tax evaded. Some of the band’s former members say they would not have the funds to pay and would find themselves jailed.

Seems like everything is not All Alright for Sigur Rós, amirite?

Sigur Rós criticise ‘unjust’ second trial for Icelandic tax evasion [The Guardian]

The post Sigur Rós Isn’t a Huge Fan of PwC or Paying Taxes appeared first on Going Concern.

And they didn’t disappoint:

First, here’s your yearly reminder about the difference between tax avoidance and tax evasion:

Remember, Tax Avoidance is LEGAL! Tax Evasion is ILLEGAL.

— Eric Pierre, CPA (@yourfavecpa) September 28, 2020

Be careful here to maintain distinction between tax evasion and tax avoidance. If evasion (nobody is claiming), shame on Trump. If avoidance, shame on Congress.

Commercial real estate enjoyed big tax advantages before the TCJA. More opportunities now.https://t.co/riF6ifYt5r

— Martin Sullivan (@M_SullivanTax) September 28, 2020

What Joe Thorndike of Tax Notes tweeted has some truth to it:

Will the Trump tax story change the trajectory of the presidential campaign. Who knows.

But here’s one thing I do know after studying U.S. tax history for more than 20 years: Americans don’t hate paying taxes—they hate other people NOT paying their taxes.

— Joe Thorndike (@jthorndike) September 28, 2020

Our pal Tony Nitti has some questions:

https://twitter.com/nittiaj/status/1310579261229604864

https://twitter.com/nittiaj/status/1310579264471748608

And here are some of our other favorite takes about Trump’s taxes from #TaxTwitter:

I don’t know who needs to hear this, but not paying taxes because you didn’t make any money isn’t exactly a highly sophisticated tax avoidance strategy. #TrumpTaxes #taxtwitter

— Lucia Pacioli (@LuciaPacioli) September 28, 2020

Non-tax people on Trump's taxes: "Look how little he pays!"

Tax people: "Idc about that but what the hell is driving the losses tho"

— Kat (@katallentax) September 27, 2020

Just helping edit the NY Times….

*always helpful if peeps specify what type of tax we're talking about. pic.twitter.com/H2ERgegTL0

— Andrea Carr CPA (@andreacpa0) September 28, 2020

#taxtwitter The NYT article about Trump’s tax returns does raise questions & concerns from our perspective. However the biggest concern we as tax preparers should have now are the incoming emails from clients asking: “How can I pay no taxes like Trump?!”

— Albert J. Campo, CPA, MBA (@ajthecpa1226) September 28, 2020

Ok #TaxTwitter – get ready for Monday morning calls/emails asking why you forgot to claim that itemized deduction for haircuts.

— Shaun Hunley (@ShaunHunley) September 28, 2020

What I find most interesting is everyone is talking about this like Trump prepared those tax returns. I mean, he's not off the hook. He signed them. Theoretically. But some well paid people took those haircuts as deductions. Hello? OPR? Is this thing on?

— Amber (@taxtherapist505) September 28, 2020

This is my take, as well. Trump hires attorneys and accountants to keep him from going over the legal line in the sand.

I do think the debt on his properties and the continual losses are problems worth looking into. https://t.co/NrqQbRuNP4

— Brian Streig, CPA (@cbriancpa) September 28, 2020

Thoughts to the 23,000 @MazarsGroup employees – 99% who had jack nothing to do with these #TrumpTaxReturns but y’all about to get blown up with questions.#TaxTwitter I would take preemptive shelter too as your ‘friends’ will be coming out of the woodworks to see what you think.

— John Young (@AccountableJohn) September 28, 2020

There is a real possibility that Trump got the EIC?! #trumptaxes #sevenhundredfiftydollars #taxbill

— Nicole Davis (@wifemomcpa100) September 28, 2020

Great. So this morning, we've already identified that it's entirely possible that Trump received an earned income credit and an EIP. Well done, #TaxTwitter. Well freaking done. https://t.co/jGL0M62vV0

— Adam Markowitz (@adammarkowitzEA) September 28, 2020

Lost in all this and no one is asking is that Biden paid $3.7M in taxes which means his taxable income in 2017 would’ve been more than $9m.

Maybe it’s the accountant in me but the goal of tax planning is not to see who pays the most taxes.#TaxTwitter #TrumpTaxes

— John K (@iCFOJohn) September 28, 2020

A minor detail for #taxtwitter that must drive Trump’s lawyers and accountants crazy is that he owns hundreds of companies DIRECTLY!! Imagine the org chart!! #TrumpIsBroke

— Alex (@93940_eth) September 28, 2020

And finally, from our good friend Joe Kristan:

Sorry, this didn't happen. It's extension season. Ask me in 2 1/2 weeks. https://t.co/LRpb1ePUQj

— Joe Kristan (@joebwan) September 27, 2020

The post #TaxTwitter Has Some Takes on NYT Article About Trump’s Taxes appeared first on Going Concern.

For the practicing tax accountant, the mere mention of SALT is enough to cause one to cringe. How so? Imagine the confusion we would have in the USA if every state printed its own currency. Every time you crossed state lines, you would have to worry about exchange rates as you conducted transactions. Interstate commerce would be a nightmare.

Well, this is the exact scenario between the states today with regard to sales taxes and income taxes, both for individuals and businesses: Every time an individual or business has interstate business, a new set of rules comes into play and along with it heavy-duty compliance issues.

The artery-constraining pressure that the coronavirus pandemic is having on the SALT world can be boiled down to one word: telecommuting. Employees who find themselves working from a location outside of the state where they usually work in can create new tax issues they never before needed to deal with.

For example, the general rule is that state income taxation on an employee is based on where the individual works. So, someone living and working in Florida will pay no state tax because Florida is without an income tax. No problem.

However, if because of quarantine restrictions that worker opts to live in Maryland for an extended time period, in essence telecommuting in the eyes of the Florida employer, then Maryland is going to claim the source of those dollars as belonging to the Maryland income tax system because they are being earned there. Oops, that can hurt.

Let’s reverse the scenario. Let’s imagine that the employee usually lives and works (and pays income taxes) in Maryland. With coronavirus restrictions in place, the worker decides to telecom from the beach in Florida. Ah, no income tax in Florida so no Maryland income tax while the person telecommutes from the Sunshine State, right? Wrong. Maryland’s tax authorities will say that unless the telecommuter has moved to Florida on a permanent basis—a permanent change in domicile—Maryland is the resident state and Maryland is still owed the taxes.

It can get even more complicated because some states, such as New York, do not follow the sourcing rule of where you work, but the sourcing rule of where the employer is based. So, someone telecommuting from Maryland, being paid by a New York employer, will incur Empire State taxes even as Maryland insists on a bite at the tax apple on the same income. This mismatch of sourcing rules between states creates havoc.

Businesses—the employers—face similar dilemmas. Suppose the employer is a Maryland company selling goods in various states via the internet. Having no business presence in, say Virginia, the Maryland-based business has no income tax obligation there. However, if an employee is telecommuting from Virginia thanks to quarantining, then that could create a connection to Virginia, causing the Maryland company to face income tax compliance and tax return compliance obligations there.

To be fair, most states have in place mechanisms to avoid double taxation through “credits,” and many have relaxed their rules during the pandemic. But not all. Plus, it doesn’t necessarily relieve the compliance issues of taxpayers, nor the fact that notwithstanding the “credits,” the employee still will pay the tax rate of the state with the highest tax bracket.

Even before corona, businesses faced a myriad of tax rules to follow when conducting interstate commerce. For example, internet companies today are burdened with collecting sales tax on sales to all states they ship to. That by itself is a nightmare to follow because every state has different rates and rules for sales tax, and some states have different rates by local jurisdictions. Ugh!

Now, I am not a student of political science. But it seems to me that the lack of a unified, coherent federal response to the virus has magnified and brought to the forefront what practitioners of SALT already know. In today’s multistate economic climate, maintaining certain states’ rights on taxation is counterproductive. An overhaul coming from the feds, at least in part, is needed.

About the author:

Sam Handwerger, CPA, is a full-time lecturer in the accounting and information assurance department at the University of Maryland’s Robert H. Smith School of Business. Handwerger was a senior tax researcher with EY in New York City and later led the tax planning and preparation departments of the CPA firm Handwerger, Cardegna, Funkhouser & Lurman.

The post What COVID-19 Tells Us About … SALT appeared first on Going Concern.

At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.

— Steven Mnuchin (@stevenmnuchin1) March 20, 2020

And #taxtwitter rejoices:

What's that sound in the distance?

It's all of #TaxTwitter jumping and screaming for joy that the sane decision was made to extend the tax filing deadline to align with extended payment deadline. @stevenmnuchin1 https://t.co/LWgoENBevG

— Brian Streig, CPA (@cbriancpa) March 20, 2020

A win for #taxtwitter! pic.twitter.com/XCJ5yPREWI

— Chris Cicalese, CPA (@AthleteCPA) March 20, 2020

Here we go! Official word from the Treasury that the tax deadline is now pushed back to July 15!!#TaxTwitter https://t.co/QrtIUaki7j pic.twitter.com/q8QL4XwXsq

— Joshua Lance (@lancejd1) March 20, 2020

Still not counting chickens til we see IRS guidance but this is great news! #TaxTwitter #CoronaVirusUpdate #taxnews https://t.co/Mq2MXzZ1iD

— Beth Loxley (@bethloxley) March 20, 2020

Busy tax season is over!!!#TaxTwitter

— Tax TeleGraf (@LoganGrafTax) March 20, 2020

The post Mnuchin Announcing Extension of Tax Filing Deadline On Twitter Is the Most 2020 Thing Ever appeared first on Going Concern.

In a written statement on March 18, AICPA President, CEO, and Sith Lord Barry Melancon said:

“On Monday, we learned that the administration is allowing certain taxpayers to delay tax payments for 90 days and is providing interest and penalty relief, and today it released its formal notice. Unfortunately, this important payment relief does not apply to the filing of tax returns. The concern and confusion related to coronavirus is causing cities across the country to shut businesses down, and Treasury’s recent decisions do not reflect the real-world difficulties tax practitioners and their clients are experiencing.

“The AICPA understands the need for economic stimulus and, if possible, those who can file and get refunds should do so now. However, it is impossible for every taxpayer and their tax adviser to prepare returns in this environment. Nearly 60% of all taxpayers turn to a tax practitioner to prepare and file their tax returns, and individual and business tax filing deadlines are fast approaching. Even the relatively simple process of filing an extension form requires calculations based on data and information from the taxpayer. Given the current environment, this extension process is impossible for many taxpayers. Treasury must act immediately by extending the April 15^th filing deadline and providing more clarity on the details of recent relief actions.”

Now, the AICPA has given CPAs the order to attack the email inbox of Treasury Secretary Steve Mnuchin. Several people on Twitter and Reddit have posted this update they received from the AICPA yesterday:

We are calling on the Department of the Treasury to immediately give taxpayers an extension of the April 15th filing deadline — and we need your help.

Please email Treasury Secretary Steven Mnuchin today at steven.mnuchin@treasury.gov. To save you time, you can copy and paste this draft email:

Dear Sec. Mnuchin:

Treasury must act immediately by extending the April 15th filing deadline to July 15.

Unfortunately, the important payment relief that was announced Tuesday and formalized in today’s notice does not apply to the filing of tax returns and does not reflect the real-world difficulties tax practitioners and their clients are facing.

Cities across the country are having to shut businesses down because of the coronavirus pandemic, and it is impossible for every taxpayer and their tax adviser to prepare returns in this environment.

Nearly 60% of all taxpayers turn to a tax practitioner to prepare and file their tax returns, and individual and business tax filing deadlines are fast approaching. We need immediate action.

We understand that these are uncertain and challenging times for the Treasury Department, and the CPA profession wants to help the system function well. To do that, we need payment and filing relief together.

Once more for the people in the back: steven.mnuchin@treasury.gov.

Related article:

The AICPA Is Pretty Sure the April 15 Filing Deadline Is Gonna Be Extended, You Guys

The post The AICPA Really Wants Tax Professionals to Flood Steve Mnuchin’s Inbox appeared first on Going Concern.

While tax season 2019 was considered by most as one of the worst tax seasons on record, tax season 2020 might go down as the tax season that never ended.

Thoughts?

The post The AICPA Is Pretty Sure the April 15 Filing Deadline Is Gonna Be Extended, You Guys appeared first on Going Concern.

News broke yesterday evening that the Treasury Department was seriously considering pushing back the April 15 filing deadline because of the coronavirus outbreak in the U.S.—something which #taxtwitter had been discussing the possibility of earlier this week. And within the last couple of hours, the Wall Street Journal and the USA Today reported that it’s even more likely now that the April 15 filing deadline will be delayed.

Before this legitimately became a thing, tax professionals’ reactions earlier this week ranged from “Hell no,” to “it won’t happen—there’s already an Oct. 15 extension deadline for individuals,” to “there’s precedent—filing deadlines for taxpayers are often extended by the IRS in areas impacted by natural disasters.”

So, I scanned #taxtwitter this morning to see how our friends in tax were reacting to the April 15 deadline possibly being delayed. To no one’s surprise, many were against it:

https://twitter.com/taxchic_k/status/1237730250626301957

When you get to work and read they are talking about extending the tax deadline and everyone thinks "Bet you're happy about that!" and all I am thinking is "Please. No." #TaxTwitter

— Don Klynsma (@dklynsma) March 11, 2020

selfishly, a continuation of #TaxSeason is oh, so painful to contemplate… #WorkNeverEnds https://t.co/PtOys4JzNZ

— Melinda Nelson CPA (@MelindaNCPA) March 11, 2020

https://twitter.com/ChrisJulienCPA/status/1237751484818718720

I don't think it would provide any real advantage. If the IRS falls behind because the DC (and other) offices must work from home, that doesn't impact the submission and payment of taxes, just processing times. If clients need more time, that's literally what an extension is for.

— 𝗕𝗿𝗮𝗱 𝗚𝗮𝗿𝗹𝗮𝗻𝗱, 𝗖𝗣𝗔 (@TaxPoetic) March 11, 2020

https://twitter.com/Momma_K527/status/1237761928329596928

I generally think it's a bad idea to extend the deadline universally. Even people who are contained or quarantined can still get documents to their #TaxPros. Sure, there should be exceptions to rules, but the IRS makes exceptions all the time.

— Adam Markowitz (@adammarkowitzEA) March 11, 2020

Some were on the fence about it:

This tax season has been tough already as we went through a system-wide outage with @DrakeSoftware which cost us a few days, also transitioned to work remotely, so the extra time is welcome but also means tax season is extended which is hard on our loved ones and our own health.

— ShayCPA (@ShayCPA) March 11, 2020

Good, with misgivings. The big question is #IRS relief for payments due on 4/15. How will that be framed & implemented? And also, a major issue is how the states will respond. Many taxpayers file in multiple states. It could be interesting.

— Phyllis Jo Kubey (@PKubeyEA) March 11, 2020

And others don’t mind the deadline being pushed back:

Good. https://t.co/2ukqtv7YkR

— Joe Kristan (@joebwan) March 11, 2020

I actually think it's a good idea, although I'll keep working as if it's not extended. It will take pressure off the people in "hot" zones so they can focus on theirs and their family's health.

— Brian Streig, CPA (@cbriancpa) March 11, 2020

Even if extended, our firm is sticking with 4/15. Of course we do many extensions anyways but if things get worse or there's a one off issue, reasonable cause or FTA is always available for penalty relief if a payment can't be made.

— Jeff Kristoff (@jckristoff) March 11, 2020

But will the March 16 filing deadline for S corporations and partnership tax returns be delayed? Don’t count on it, said our friend Tony Nitti:

https://twitter.com/nittiaj/status/1237504511725326336

Here are some other busy season problems our friends in the tax world have dealt with recently:

Can't make this up! #TaxTwitter S-Corp client marks on the organizer that he sold equip for $1K. I can't find it in QBO. E-mail the client. Days later from office mgr: "[Owner] thinks that the money [cash, not a check] is at his house somewhere." #TaxSeason #TaxLife #smh

— Karl Strube, CPA (@KJSAcct) March 11, 2020

Broke out scrap paper and created T-accounts to figure out a disastrous inter-companies (self-rental) loan this morning… so that's how my Monday's going… why can't clients ever keep it simple (or follow directions for that matter) #TaxTwitter

— Samantha Freeman, MBA, CPA, EA (@SFreemanCPA) March 9, 2020

Did you know that to be a CPA, you must have psychic powers? Your clients will expect you to know about their deductions that they didn't tell you about. #TaxTwitter #TaxSeason

— Ben Zachary (@BZachCPA) March 6, 2020

"Glucose is virtually the sole fuel for the human brain."

So I ate cold Pop-Tarts this afternoon, because #taxseason

— Joshua Jordan (@cxpurposes) March 11, 2020

I called the @IRSnews practitioner priority line. The person mumbled his name and ID. I asked him to repeat it and he *hung up on me*. Gee, thanks!

— Matt Foreman (@ForemanTaxLaw) March 9, 2020

But fortunately for #taxtwitter (and us), tax pros haven’t lost their sense of humor, even though they may have lost their sanity:

It happened. This tax season has caused me to lose my damn mind. Stick a fork in me…I'm done. #taxtwitter #taxseason #taxcasualty pic.twitter.com/HTSISOz719

— Cam Matheny (@CamMatheny) March 10, 2020

Did You Know? Tax Preparers go into self-quarantine every year from January to May. It's called, Tax Season. pic.twitter.com/QwzSIaw6hH

— Tax TeleGraf (@LoganGrafTax) March 9, 2020

https://twitter.com/taxchic_k/status/1237062158397181952

Client: "ummm…there's something by your nose"

Me: "it's a booger"

Client:

Me: "I'm not touching my face. Continue, you were saying you wanted to convert some of your IRA to Roth in 2020…"

— Andrea Carr CPA (@andreacpa0) March 9, 2020

At this point in busy season, and with COVID-19 now officially a pandemic, if y’all weren’t laughing, you’d probably be crying.

The post Busy Season Problems: COVID-19 vs. April 15, No Psychic Powers, IRS Hang-Ups appeared first on Going Concern.

It’s been exactly one month since tax season 2020 began. So let’s check in and see how busy season is treating our friends in tax so far:

I peed on myself and I don’t even know how I peed on myself. I just know it happened. And that, my friends, is how it’s currently going.

— Andrea Carr CPA (@andreacpa0) February 27, 2020

can i ask you a quick question? … pic.twitter.com/XKhQKjrJCK

— Nathan Clark (@NathanPClark) February 14, 2020

I don't mean to be alarmist but we are out of candy at the office. During #tax season.

— Kelly Phillips Erb (@taxgirl) February 27, 2020

Today, I had a potential client tell me I look like a kid.

Haha, yes, yes I do. I told him that sounds about right because I'm 29!

I couldn't tell after that if he was discrediting my skill set or not…

— Tax TeleGraf (@LoganGrafTax) February 26, 2020

Why is it every time I pick up the phone today a train starts blowing it whistle as it rumbles past?

— Brian Streig, CPA (@cbriancpa) February 25, 2020

https://twitter.com/MattRubush/status/1230312098279849984

I had a potential new client try to tell me she was only going to pay me if I can get her out of a penalty. I politely explained that's not how client service fees work.

— Sabrina the SALTy CPA (@IraGilligan) February 17, 2020

Nothing like coming home from a 13 hour #taxseason day and finally getting in bed only to find yourself working in your dreams then having to wake up and do more work. #TaxTwitter

— April Fifteenth (@AprilFifteenthx) February 22, 2020

And we can’t forget about our friends in audit who also are dealing with their own busy season hell:

My phone just autocorrected “sad” to “Sarbanes” so that’s how my busy season is going @TheBig4Tweets

— Tiny (@Christinaaa_30) February 26, 2020

When it's 8pm and the Partner tells you that you and your team can start thinking about what food to order for dinner. #BusySeason pic.twitter.com/3lo2B4jyJ5

— El Contador de la Calle (@ElContador19) February 19, 2020

https://twitter.com/Sajlin/status/1232515989406978049

My mom has asked me several times why I have mascara under my eyes after I take my makeup off

THEYRE DARK CIRCLES STACY!!!!! That’s what busy season does to you @TheBig4Tweets

— Bridgett (@Bridgettbre) February 25, 2020

Also I tried to spell “audit” as “awdut” in an email to a client…so that’s how my day is going #bzyszn

— Brian Nawrocki (@BNawrock) February 18, 2020

https://twitter.com/kfabbz/status/1227422690065166337

And from Fishbowl …

Hang in there, guys. And if you need to clear your head for a few minutes and watch something dumb/relaxing/funny, we got you covered.

The post Busy Season Problems: Quick Client Questions, Annoying Train Whistles, Autocorrect Fails appeared first on Going Concern.

— Bob Charron, tax practice leader at Friedman, told Accounting Today when asked what challenges CPAs will face during this year’s busy season.

An inside look at the 2020 tax season [Accounting Today]

The post This Tax Season Is Going to Be Easier Than Last Year’s, Right? RIGHT? appeared first on Going Concern.

— Lawrence Pon, CPA, told the Washington Post when asked about outlandish tax deductions he’s had clients try to claim.

People try to claim the darnedest tax deductions to reduce their bills [Washington Post]

The post No, You Can’t Deduct a Harley as a Medical Expense appeared first on Going Concern.

Intuit will be airing a 30-second ad on Sunday for TurboTax called “All People Are Tax People.” But for your viewing (dis)pleasure, it released an extended version of the ad you’ll see during the game. And it’s pretty bad. The J Lo/Shakira halftime performance won’t be this bad. And it’ll have better dancing.

As Adrienne wrote a handful of years ago, “I don’t think I’ve ever seen a good tax commercial,” and this TurboTax ad is no exception:

https://www.youtube.com/watch?v=o7G4LppV5qA

The only thing this commercial made me want to do is go on YouTube and watch ex-NFL star Billy “White Shoes” Johnson’s touchdown celebration videos.

I would have liked that TurboTax ad a lot better if that dude was in it.

The post Here’s the Extended Version of the Horrible TurboTax Ad You’ll See During the Super Bowl appeared first on Going Concern.

Well #taxtwitter has been kinda quiet so far today, the first day of tax season 2020, so you guys have either been super busy right out of the gate or you’ve had nothing to complain about … yet.

I’ve noticed that lot of people are still reeling from the news of the helicopter crash in California yesterday that claimed the lives of Kobe Bryant, his 13-year-old daughter, Gianna, and seven other passengers:

If you need a laugh or a quick diversion from your work or life, be sure to check out our Busy Season Zen archive. We’ll be adding to it in the coming months.

We’ll also be doing some #busyseasonproblems posts this tax season. If you’ve got a busy season problem, shoot us an email at tips@goingconcern.com with “Busy Season Problems” in the subject line. This person has #busyseasonproblems:

I received 4 different W2s, from 1 payroll, but paid by 2 different companies with 1 word different in their names, 2 for the state of IL, 1 for MO, and 1 that specifically calls out St. Louis. ALL with different numbers! Pray for your favorite freelancers this #taxseason

— Beazus (@benjibutt81) January 27, 2020

Hang in there, guys and gals.

The post Tax Season’s Greetings, Everyone appeared first on Going Concern.

Anecdotally, this has easily been the toughest filing season for the CPAs and other tax professionals I know.

“End of Tax Season Is Near, and Accountants Are (Almost) Ready” https://t.co/sYanXF8t3n

— Jeff "The Buckinghammer" Levine, CPA/PFS, CFP® (@CPAPlanner) October 8, 2019

One week out from 10/15… Raise your hand if you're still waiting on client information

— Tax TeleGraf (@LoganGrafTax) October 8, 2019

no truer words have been spoken about this tax season. https://t.co/onLV8SvCS7

— Andrea Carr CPA (@andreacpa0) October 3, 2019

And the complaints aren’t just limited to Twitter. Darren Neuschwander, a managing member of Green, Neuschwander & Manning in Robertsdale, AL, told the Wall Street Journal recently that the firm was WAYYY behind on finishing returns before today’s deadline:

Tax preparers are racing to complete individual tax returns due Oct. 15, which will finish tax year 2018 for the more than 15 million people who sought extensions from the mid-April deadline. A late flood of information from investment funds and tough judgment calls about new pieces of the law have accountants bracing for messy days ahead.

“We’re extremely behind,” said Darren Neuschwander, a managing member of Green, Neuschwander & Manning LLC in Robertsdale, Ala., who is preparing some returns himself instead of just reviewing others’ work as he usually does. “All of this is just kind of snowballing on top of everything else.”

Normally, Mr. Neuschwander said, his firm finishes final returns by Oct. 4 so clients can review them.

“That is not going to happen this year,” he said last week, contemplating a queue of 200 returns that has since been whittled down to 118. “It is just not going to happen.”

The post Here’s Your Open Thread For the Horrible, No Good October 15 Filing Deadline of 2019 appeared first on Going Concern.

In the late 1990s, KPMG’s Vancouver office came up with the bright idea to help a handful of rich clients “save money” on taxes otherwise due to the Canadian Revenue Agency, as well as potential future jilted soon-to-be-former spouses, through a tax shelter. In documents revealed to Parliament in 2016, KPMG had its people really pushing that jilted spouse thing.

From CBC:

In what was called the “initial client meeting script,” KPMG sales agents were advised to discuss the “primary benefits” of the scheme with wealthy Canadians.

The list of benefits included a section promoting “asset protection” which, according to KPMG, meant there would be “nothing” that an “ex­-spouse” could claim.

Steven Benmor, a Toronto­-based family law specialist, says those talking points are “potentially damaging” to KPMG, as the firm appears to be endorsing the idea of getting around Canadian divorce laws.

The question of course becomes, who is gonna get more ticked by some rich dude hiding money, the tax man or the ex-wife?

In October 2012, authorities — since hip to the tax dodge — ordered KPMG to preserve all documents related to their probe of the tax shelter. The following month, four Isle of Man shell companies set up by KPMG passed a resolution that “books, documents and all papers” be “destroyed,” according to records in the Isle of Man obtained by CBC/Radio-Canada.

Seven years on, the government is still trying to scrape up whatever documents they can related to the scheme and the filthy rich folks who bought into KPMG’s promotion of it. Two such rich bastards are Caleb and Tom Chan, billionaire brothers from Hong Kong whose $40 million donation to the Vancouver Art Gallery is considered the largest private donation to the arts the province has ever seen. No one is doubting their generosity, however, tax authorities are questioning their participation in the “Isle of Man” tax shelter sold to them by KPMG.

CBC reports:

Numerous internal emails filed in court this summer reveal the Chans’ involvement in a KPMG offshore scheme so secret that neither tax collectors nor even their spouses were ever supposed to find out.

The Chan brothers may be the most prominent of several wealthy families whose identities have been revealed over the past few years as being part of the scheme.

The records show the Chan brothers were part of a group of more than 20 wealthy Canadians whose families had at least $5 million to invest in a sophisticated KPMG tax dodge first developed out of the accounting firm’s Vancouver office in the late 1990s.

In one email from 2002, a KPMG accountant explained the Chan brothers did not want their spouses to learn about their offshore dealings.

“The concern is that the wifes [sic] are not to know about the assets of the husbands,” said the accountant’s email.

In the Isle of Man, where the shell companies were set up, the response was to “rest assured” that the Chans’ partners would not find out.

The documents show tax authorities were also not supposed to find out. The court records show the Chans did not disclose their offshore companies in the Isle of Man during a 2005 audit, even after being required to list all their global assets.

The Chans are currently cockblocking CRA from accessing more than 1,000 documents in KPMG’s possession, citing solicitor-client privilege. Additionally, authorities have requested general ledgers from the Chans’ offshore companies; however, in 2017 Caleb Chan told auditors he had no such thing.

No one knows exactly how much money escaped tax authorities through the “Isle of Man tax dodge,” but it could number in the tens of millions.

The post Meanwhile, In Canada: Rich Guys Are Still Fighting the Tax Man Over Their KPMG Offshore Tax Shelter appeared first on Going Concern.

Felecia Edna Taylor, 50, just threw away an astonishing 29-year career with the IRS after getting caught trying to hustle a taxpayer out of $5,000. The taxpayer who shall hereforth be referred to by his initials S.W. came to Ms. Taylor’s Long Beach office looking for help with his $33,000 tax burden. That’s when Ms. Taylor allegedly got the bright idea to skim a few thousand off the top in exchange for lowering said taxpayer’s burden. Let’s see what the Department of Justice has to say:

According to an affidavit in support of the criminal complaint, Taylor, who has been employed at the IRS since 1990, works as a tax compliance officer in Long Beach, where she plans and conducts examinations of individual and business taxpayers. On May 1, a taxpayer contacted law enforcement, and stated that, at a meeting two days earlier, Taylor was “inviting a bribe” in exchange for lowering the amount owed to the IRS to $10,000, according to court documents. The taxpayer was supposed to pay the bribe to Taylor on May 7 at her Long Beach office, court papers state.

The taxpayer met with law enforcement on Tuesday, was equipped with recording devices, and was given $5,000 in cash to give to Taylor, the affidavit states. According to a recording of that meeting, Taylor provided adjusted tax records to show a reduction of the taxpayer’s liability to $10,616 as agreed and, in response, the taxpayer handed Taylor an envelope containing $5,000 in cash. Taylor allegedly took the envelope in one hand, mouthed the word, “Five?” and placed five fingers in the air to non-verbally confirm the amount of cash the taxpayer had just given her. When the taxpayer replied, “Yes, what we agreed on, yep it’s all there,” Taylor placed the envelope on her desk and stated, “We are all done,” the affidavit states.

OK, first of all, the taxpayer deserves some credit for snitching her out. Considering how many millions (billions?) are scammed yearly from panicked taxpayers who honestly believe some Indian guy named Agent Smith is accepting iTunes gift cards in exchange for IRS penalties, it’s amazing he recognized the scam and reported it to authorities. I can only imagine how many grandmas she was able to scare into paying up until someone finally said something.

Second, what kind of dumb-ass criminal agent receives a bribe in her office? That’s just sloppy-ass crime work. Did she not watch “Breaking Bad”? Dead drop, yo, come on.

If she’s convicted, Taylor faces up to 15 years in prison, which makes you wonder just how bad she needed a few grand.

The post IRS Agent Lady Allegedly Tries and Fails to Scam Unwitting Taxpayer Out of Thousands appeared first on Going Concern.

So, if you haven’t heard, CCH has been borked since yesterday. When we say borked, we don’t mean “some users are having access problems,” rather the entire thing has been nuked to hell. Like POOF.

It appears this was a prophylactic measure by Wolters Kluwer, though why they would feel compelled to take down the whole enchilada is speculation we’ll save for a minute.

Need CCH support? Yeah, good luck with that.

Late last night, Wolters Kluwer made a statement on Facebook that, as expected, was greeted with a cacophony of criticism and littered with angry emojis.

On May 6, 2019, Wolters Kluwer experienced network and service interruptions affecting certain Wolters Kluwer platforms and applications. Out of an abundance of caution, we proactively took offline a number of other applications as we continue to investigate any impact. This prevented us from having adequate time to provide you advance notice, and for that we sincerely apologize.

We are working diligently around the clock to restore service as soon as possible.

We apologize to our customers for the inconvenience and appreciate your patience. We will provide further updates as they become available.

Obviously we’re not going to be able to get someone from CCH on the phone to ask what’s up, so as is tradition around here, we will instead fuel the rumor mill and speculate wildly as to what could be so bad CCH had to go bye-bye to hide from it.

Let’s start in /r/sysadmin. The popular theory is obviously some type of breach (“hackers” for you olds) or virus. Friendly reminder, people on Reddit are often full of shit so take this with a giant grain of salt.

I have a buddy who works there who said the Canada Office shutdown due to a potential virus outbreak, the other locations shut down as a precautionary.

EDIT: I learned that it may have made it out to some of the other locations before they got most end users to shutdown their systems. I saw another comment here saying they thought it was Megacortex, which would likely mean someone with Domain Admin rights had their credentials ripped off/stolen. I expect the next few days to be quite interesting, as this is no small company.

Someone who probably should have kept his mouth shut and stopped powerleveling on Reddit chimed in in a now-deleted post confirming the cooties in the system.

Sounds similar to what my wife said (she’s an employee). She they found the malware/ransonware in several locations across their network including the New York, New Jersey, Canada and Minnesota office. I know they use Dell for a lot of the cloud based systems.

Here’s another powerleveling blabbermouth who must have rethought doxing himself in the middle of a security breach as he later deleted his comments:

I’m a system engineer with WK. The issue is quite large and is not just affecting CCH Axcess, but rather all customer facing products across the health, Tax & Accounting, Governance, Risk & Compliance, and Legal & Regulatory. My office was not affected directly but was told to turn off our backup software and turn off all domain controllers effectively ending our work day.

He went on to “confirm” the attack is of the MegaCortex ransomware variety, which everyone has been assuming anyway. Again, this is all rumor so no one knows at this point, nor should one expect Wolters Kluwer to come out and say they were hit by ransomware while the attack is still in progress. If, of course, that’s what’s happening.

It seems a lot of people are twiddling their precious little thumbs waiting for CCH to come back.

We’ll update when we know more, and in the meantime … I dunno, not really much that can be done.

Update: Today, May 8. 2019, Wolters Kluwer issued a statement admitting yeah, it was malware. Many services are still down as of this update; however, they are working toward getting them back online. The entirety of the statement can be found below:

On Monday, May 6, we started seeing technical anomalies in a number of our platforms and applications. We immediately started investigating and discovered the installation of malware. As a precaution, in parallel, we decided to take a broader range of platforms and applications offline. With this action, we aimed to quickly limit the impact this malware could have had, giving us the opportunity to investigate the issue with assistance from third-party forensics consultants and work on a solution. Unfortunately, this impacted our communication channels and limited our ability to share updates.

On May 7, we were able to restore service to a number of applications and platforms.

We regret any inconvenience and that we were unable to share more information initially, as our focus was on investigation and restoring services as quickly as possible for our customers.

We have seen no evidence that customer data was taken or that there was a breach of confidentiality of that data. Also, there is no reason to believe that our customers have been infected through our platforms and applications. Our investigation is ongoing. We want to apologize for any inconvenience this may have caused.

Update May 8, 17.00 CEST – For our customers in North America: As we continue to bring our support centers back online, please use this temporary number 800-930-1753 to contact us. While we may not be able to directly answer your question, we will forward your inquiry internally to the appropriate party.

The post UPDATED: What In the Hell Is Happening to CCH? appeared first on Going Concern.

And now it’s over. So where do you go from here? After a well-deserved nap, of course. It’s normal to need a bit of time to decompress, kind of like when hostages are rescued and slowly introduced back into society.

I’m a Terrible Pet Owner Regret

via GIPHY

Hey, remember that furry little critter that shares your home with you? Yeah, that’s yours. You pledged to care of it for a lifetime, but shit happens (quite literally, actually, when we’re talking about pets), and thanks to busy season, you might be a few months behind on grooming. Don’t beat yourself up too bad, just be sure to take that good boi to the park this weekend to catch up on some quality ball-throwing time.

I’m an Entire Season Behind Regret

via GIPHY

The underrated gift of modern times is binge-watching TV on demand. I’m old enough to remember when we had to sit in front of the VCR and manually press play in the hopes I could catch “Headbangers Ball” on time, assuming grandma wasn’t tying up our only TV by falling asleep on the couch to CNN yet again. You kids don’t know how good you have it, seriously. Still, if you’ve been neck-deep in busy season, chances are you may have missed entire seasons of your favorite show. Lucky for you it’s right there at the press of a button. Settle in and indulge, you earned it.

The Spores Have Set In Regret

via GIPHY

Why the hell don’t you have a maid? Did playing The Sims not teach you anything? Even just a monthly deep clean is so worth it, especially when you spend a mere seven hours a day at your home, the majority of which are dedicated to sleeping. If you’re not the maid-having type, chances are busy season did a number on your home. Do yourself a favor and just hire someone to take care of that disgusting mess.

The Stranger in My Bed Regret

via GIPHY

Your wife/husband/significant other/fuckbuddy is a gosh darn saint for putting up with you all these weeks. If you’re extra lucky, they walked your dog and took out your trash while you were aimlessly wandering from a den of spreadsheets, home to bed, and then back to your hellish work nest again. Maybe it’s a good thing you’ve hardly seen them through busy season; your relationship will be like new again! Or not. Maybe it’ll be creepy when you find this stranger spooning you in the middle of the night. Whatever. Take them out for dinner and get re-acquainted. Or better, have them take you out.

The Text Queue Regret

via GIPHY

Just like your dog and your SO, your friends have probably been missing you while you’ve been held captive by busy season. You may have dozens of text messages that you thought you responded to or meant to get to but never did. Time to hit up all those third-rate pals and let them know you’re still alive. Don’t bother with the “sorry, I was busy” explainer, you’re cutting into all important GoT binging time by explaining yourself to people you can barely be arsed to speak to a few times a year.

The Vitamin D Deficiency Regret

via GIPHY

Look, we know you’re eager to get outside during daylight. You’re looking pastier than a slab of pastry dough in a Tasty cooking video if you’re on the low melanin spectrum. Look on the bright side (no pun), the lack of sunlight means your skin isn’t aging as fast as those losers who actually get outside from January to April. Still, you need some Vit D. Get your ass outside and soak that shit up.

Look, now that busy season has ended. you probably regret a lot of things, from neglecting your relationship to not cleaning your toilet in far too long. At the end of the day, who cares? Unless a colony of roaches has moved into your house while you’ve been grinding away in the name of client service, fuck it, it is what it is.

Congratulations, you survived another year!

via GIPHY

The post The Six Kinds of Regret You’ll Experience Now That Busy Season Is Over appeared first on Going Concern.

https://twitter.com/ashbarbera_/status/1107851647760457728

“Can you Cc me? And can you Cc my mom?” #busyseason

— Rebecca schraiber (@Schraibybaby) March 20, 2019

But one accountant’s Mom seems to get it:

Also, it’s March 22nd and today was the first time I talked to my mom since Christmas (a whole 2 texts) because we’re both accountants. #bzyszn #busyseason

— Jenna (@jennaprill) March 23, 2019

Here are some non-Mom-related tweets from vexed accountant last week that are worth a mention:

I text my Taxi Driver each night to pick me up from work….I am pretty sure I currently text him more than anyone. #TaxSeason

— Gregory Smith (@whoseyourpres) March 22, 2019

https://twitter.com/FirstRinger/status/1109294619362291713

More than I spend at home.. #TaxSeason https://t.co/J3qLx8NWUq

— Chad Kort (@cwk96) March 22, 2019

https://twitter.com/peter_anderson1/status/1109489767073366018

Hang in there. The end is in sight.

The post Busy Season Problems: Moms (Usually) Just Don’t Understand appeared first on Going Concern.

Let’s take a look at what BSPs have made their way onto Twitter in the past week or so.

Here’s a public service announcement regarding highlighters:

Tax Tip:
Highlighter scans as solid black.

When you give documents to your accountant, please don't highlight anything.#TaxSeason

— Camphorous (@Camphorous) March 16, 2019

I’m sure many of you have dealt with this situation once or twice since the beginning of tax season:

When I ask you to use one of 2 secure portals to send me your info, but you insist on just attaching everything to EMAIL! Your name, address and social are 3 of the 4 things needed to steal your identity. Why does everyone think it's ok? #taxseason #tax https://t.co/USdJPT6I5w

— Krutilek (@Krutilek) March 16, 2019

A shitty end to a 16-hour (probably) workday:

Is there anything more disappointing than bad Thai takeout after a long day in the office?#busyseason #tax #CPA

— Ryne Brackmann (@ryneb99) March 10, 2019

Drowning in a sea of emails:

Monday: keeping inbox under 20. Wednesday: keeping inbox under 40. Thursday: keeping unread emails under 40. Friday: weeping and waving the white flag. #taxseason

— Animate Carbon Rod (@planmytaxes) March 15, 2019

This reminds me of what Caleb wrote last year about tax receipts: “[D]umping a bunch of paper into a cardboard container is not preparation; it is trash. Trash goes in the garbage.”

Somebody’s basketfull of tax receipts #TaxSeason https://t.co/iyVcpzzn8M

— CaffieneKitty (@Caffienekitty) March 15, 2019

Business extension burnout:

Filed too many extensions today. Tax season 2019 is full on eating me alive. Wine tonight. Reboot tomorrow. #TaxTwitter #TaxSeason

— Lindsey Starrett, CPA, CCIFP (@LindseyStarrett) March 16, 2019

As if tax season isn’t busy enough … :

https://twitter.com/nat1765925717/status/1107488478168842240

Busy season can be really hazardous to your health:

Anyone who says accounting isn't dangerous has never slipped on a chair mat, gone flying through the air while holding a ream of paper, and then hit the ground so hard that the paper packaging split in half, slit a Fitbit band and cut my arm open. I'm sore. #busyseasonproblems

— Stephanie (@StephO_51) March 7, 2019

And don’t forget, if you need to take a minute or two to chill out and bring down your blood pressure, hang out on our Busy Season Zen page.

Have a good rest of the week.

The post Busy Season Problems: No Highlighters, Please; Clients Ignoring Portals; Bad Takeout Food appeared first on Going Concern.

Exposure Drafts appears every other Wednesday. Send your accounting cartoon ideas to editor@goingconcern.com. You can follow Greg Kyte on Twitter.

The post Exposure Drafts: Don’t Forget to Make Estimated Tax Payments If You Find a Pot of Gold appeared first on Going Concern.

Still, people who weren’t expecting a smaller refund than usual, and especially people who have to owe money this year to the IRS, are pissed. Like Andy Kraft and Amy Elias of Portland, Ore.:

The couple had grown comfortable getting a small refund each year, a few hundred dollars or more. Then they found out they owe $10,160 this year.

“I will never forget the moment, I thought ‘We look good’ and then we added in the next W-2 and my jaw hit the floor,” Kraft said. “There was no way I wanted to believe that what I was looking at was accurate.”

But instead of blaming those responsible for giving us the Tax Cuts and Jobs Act or blaming themselves for not adjusting their withholding, pissed-off people are blaming their accountants—and that’s not cool.

CPA Rosalba Mazzola told the CBS affiliate in New York:

“I’ve had situations where people have teared up, their head on my desk… I’ve been kind of consoling people and apologizing to people,” Mazzola said.

“Everyone is cursing their accountants now. I’ve spoken to a lot of my colleagues and everyone’s kind of feeling beat up.”

The Brooklyn CPA says she spends twice as much time with her clients, trying to explain the changes.

Some of her customers – including one recent client – are even blaming her, accusing the CPA of bad accounting.

“Last year his refund was $6,000 and this year it was $557 and he lost it. He literally lost, said it ‘must’ve been a mistake. This can’t be correct!’”

Maybe the average refund amount will get larger, as Morgan Stanley economists are predicting, and people’s moods will get better. Who knows! If not, it’s going to be a real long next couple of months for many of you guys.

If you have any busy season problems that you’d like to share, shoot us an email or comment below.

The post Busy Season Problems: People Are Flipping Out Over Their Small Tax Refunds appeared first on Going Concern.

In his latest column for Forbes, Zerbe noted that there was a tenfold increase in tax whistleblower awards last year:

Honest, hard-working taxpayers should be joyous with the news that the Director of the IRS whistleblower office – Lee Martin — just issued its FY 2018 annual report and announced that the IRS collected $1.441 billion in taxes, penalties and interest from big-time tax cheats in FY 2018 thanks to information provided by whistleblowers.

Similarly, whistleblowers should be dancing in the street – with Director Martin announcing $312 million in awards made to whistleblowers in FY 2018 – up from $33.9 million in awards made in FY 2017.

Tax whistleblowers received from the IRS an average award of 21.7% based off of $1.441 billion in taxes, penalties and interest that were collected in FY 2018 – thanks to the information provided to the IRS by whistleblowers. These numbers are game changers when it comes to going after tax fraud – and suggest that finally, finally, the whistleblower program is becoming ingrained into the work of the IRS and that more and more of the IRS embraces the great value of the information provided by whistleblowers. The IRS made 31 awards under the mandatory award program (7623(b))(major awards) and 186 smaller awards  under 7623(a).

And Zerbe is expecting 2019 to be just as good, if not better, than 2018 for those blowing the whistle on tax wrongdoing:

I expect this good news of more dollars to the treasury (and less burden for honest taxpayers) and higher awards for tax whistleblowers to keep rolling on based on what I’m seeing first-hand in my practice and from talking to other lawyers representing tax whistleblowers – and underscored by the new practice of the whistleblower office issuing preliminary award recommendation letters (PARLs) prior to the refund statute expiration date (a big help). The tax whistleblowers represented by my law firm Zerbe, Miller, Fingeret, Frank & Jadav, (ZMF) – as well as my superb co-counsel on these cases Steve Kohn at Kohn, Kohn and Colapinto (KKC) law firm – have already received award letters of over $84 million for this fiscal year to date – with our whistleblower clients previously receiving over $158 million in awards in FY 2018.

You can download the latest IRS whistleblower report here.

The post Bonus Watch ’19: Tax Whistleblowers appeared first on Going Concern.

Exposure Drafts appears every other Wednesday. Send your accounting cartoon ideas to editor@goingconcern.com. You can follow Greg Kyte on Twitter.

The post Exposure Drafts: Santa Is on His Own Naughty List for Improperly Classifying Employees as Independent Contractors appeared first on Going Concern.

Yeah, me neither.

But one important event happened in December 2017: the signing of Tax Cuts and Jobs Act (TCJA) into law. This new tax law was last year’s early Christmas present from the government to accountants.

And it’s about to become this year’s late Christmas present from the AICPA to CPA exam candidates. That’s because, on Jan. 1, 2019, REG’s testable content will incorporate the TCJA’s tax law changes. So, the AICPA is regifting.

To determine exactly how thankful we should be for this gift – because, as we all know, accuracy is everything – we must assess the extent of these changes.

I’ll get to the details shortly, but to summarize, the TCJA enacted the most expansive tax law overhaul in 30-plus years. The last time this happened (October 1986), “Top Gun” had taken over the box office (no points for second place) and Oprah had just debuted her talk show.

The fact that this bill had such a big impact on the tax law means that it’s also going to have a big impact on REG. You see, REG specializes in tax. Specifically, it dedicates anywhere from 55 to 85% of its content to federal taxation topics. But you knew that.

The new tax law will alter REG’s content so much that the AICPA gave themselves a full year to update the exam. Normally, they start testing on tax law changes and other new legislative-based material about six months after the law takes effect.

So, back to the big question: How much of the tax law did the TCJA affect?

Pretty much all of it. Here’s just a SAMPLE of what was revised:

• Personal exemptions
• Standard deduction
• Individual income tax brackets
• Corporate tax rate
• First-year bonus depreciation
• Alternative minimum tax (AMT)
• Major tax credits
• Depreciation and amortization
• Estate tax
• Gift tax
• Non-recognition transactions
• Entertainment expenses
• Net operating loss
• Maximum deduction of Sec. 179 property
• Taxable year of inclusion
• Cash method of accounting
• Inventory accounting

And much, much more.

A few more specific examples if bullet points aren’t enough for you:

Personal exemption was eliminated: Previously, you could subtract $4,150 from your income for each person claimed. This is no longer an option; therefore, having a bunch of kids is no longer a tax-savvy move. Whew!

Standard deductions doubled: The single-filer deduction increased from $6,350 to $12,000, while the married and joint filer deduction increased from $12,700 to $24,000. But sadly, these deductions will revert back in 2026, so don’t get too comfortable with them.

Most itemized deductions were eliminated: While the TCJA retains deductions for charitable contributions, retirement savings, and student loan interest, it tosses out deductions like moving expenses, except for members of the military. Basically, getting that home-office deduction will be harder now.

Individual income tax brackets shifted, and some received tax rate reductions: People in five of the seven tax brackets got a tax break.

A $10,000 deduction for state and local taxes was added: Taxpayers must choose between property taxes and income or sales taxes. Let’s just add to the housing woes of people in New York and California, why don’t we?

Corporate tax rates were cut: The TCJA reduced corporate tax rates from 35% to 21%. And though the individual tax changes expire at the end of 2025, these corporate tax cuts are permanent. Best Christmas present ever, amirite?

OK, enough examples. Now, let’s answer the next big question: What do all of these REG changes mean for CPA exam candidates?

Clearly, they mean that candidates taking REG must know the new tax law inside and out.

That’s easier said than done because we haven’t had a lot of time to get used to the TCJA. However, the major CPA review course providers have updated their courses for the revised REG content using the CPA Exam Blueprints. And, as I always say, there’s no better way to learn about revolutionary tax bills than in preparation for super-hard accounting certification exams.

We’ll know how well those preparations went/how tricky this tax law really is when we see the 2019 REG pass rates. The 2018 REG pass rates have been uncharacteristically high.

REG CPA Exam Pass Rates by Quarter (2017-19)

Q1 2017: 46.10%
Q1 2018: 49.99%
Q1 2019: ?

Q2 2017: 48.32%
Q2 2018: 55.75%
Q2 2019: ?

Q3 2017: 49.31%
Q3 2018: 56.55%
Q3 2019: ?

Q4 2017: 45.89%
Q4 2018: ?
Q4 2019: ?

See? Those Q2 and Q3 2018 percentages are the first- and second-highest REG pass rates EVER (in the last 12 years). These skyrocketing pass rates possibly appeared because the latest CPA exam version (released on April 1, 2018) was designed to provide an easier testing experience.

While I’m all about being optimistic, I’m skeptical the pass rates will stay that high in 2019. But fingers crossed REG candidates prove me wrong.

So, in conclusion, best of luck to everyone taking REG in the next CPA exam testing window! I hope the REG pass rates don’t tank.

Stephanie Ng is the author of How to Pass The CPA Exam (published by Wiley) and publisher of several accounting certification exam prep sites. Stephanie is a licensed CPA (not in public practice) and avidly encourages others to earn professional accounting certifications and designations. To help candidates do so, Stephanie recalls her own experience as a CPA candidate to rank CPA review courses honestly.

Stephanie spent several years working at Morgan Stanley as an investment banker and later went to work in internal corporate finance in the private sector. She now volunteers full-time as a CFO with the charitable organization New Sight.

She is committed to assisting tax preparers, accountants, and future accountants in achieving their career goals by providing useful information on her websites.

The post REG Changes Are Coming Right After Santa; Here’s What CPA Exam Candidates Need to Know appeared first on Going Concern.

Perhaps you’ve seen the hashtags and memes floating around and wondered to yourself, what in the hell is a #thotaudit? If you did, I’m gonna guess you’re safely in my age bracket (35-44 tyvm) and have only encountered the word “thot” in random Twitter threads you accidentally stumbled into on your way to WebMD to search acute lower back pain. Spoiler alert: #thotaudit is not about inventory counts at brothels.

It all started a few days ago with this Facebook post, the origins of which are unknown:

The long and short of it is that dudes who are mad they can’t monetize pictures of their dicks (can you imagine) are claiming to report premium Snapchats to the IRS for “tax fraud.”

Now, as funny as this is, it is also pretty unlikely. Aspiring Thot Police (see what I did there?) should realize that reporting someone to the IRS isn’t as simple as calling some tax cheat hotline to report XxXdestinyXxX21 as a tax cheat. The IRS probably doesn’t care too much about some random half-assed internet sex worker pulling in a few extra bucks from morons who think “premimum Snapchat” is equivalent to getting sexts from someone who actually gives a shit about you. Like this guy:

Poor bastard, he actually believed she was his friend. Yikes.

Back to my point, though: reporting tax fraud takes a little more than being like yes, hello Mr. Tax Man, I’d like to report this here sexy lady for a-fraudin‘.

Look, I’m as paranoid as … uh … I’m more paranoid than most people and even I know that the IRS doesn’t contain a file on each of us that can match up SSNs to screen names. If they really wanted to they could demand the information from Snapchat I suppose, but ain’t no tax man got time for that.

Still, it appears some salty dudes with nothing better to do have decided to make this their personal crusade. Look, I get it, it’s un-American to dodge the tax man, but let’s not act as though this sloppily-coordinated effort has anything to do with defending the tax code. If it did, these dudes would have reported the entire Home Depot parking lot and half the restaurants in their respective towns long before waging war against paid internet poon.

And who’s to say these enterprising young ladies aren’t paying taxes? The smart ones know that PayPal sends out 1099s after a certain threshold is met. Many of them wisely treat their activities as any independent contractor would.

Yikes.

Ladies, pay your taxes. And boys, go find something better to do with your time. This is pointless, not because tax fraud is a serious matter but because the IRS is spread so thin at this point, going after the Snapchat T&A community is probably pretty low on the priority list. If anything, let’s not give the IRS an excuse to browse porn on the taxpayer dime again, eh?

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But before we explain why, first a little background on why Trump hates the NFL.

In 1986, the NFL was sued by its biggest competitor, the United States Football League, which alleged that the NFL was a monopoly. The USFL team owners had voted to move their season from the spring to the fall in order to compete with the NFL, despite many of the three-year-old league’s teams struggling financially. But the USFL couldn’t get a national television contract from the three major TV networks at the time, and it blamed the NFL, which did have deals with CBS, NBC, and ABC. So the USFL filed an antitrust lawsuit against the NFL. Leading that charge was the owner of the USFL’s New Jersey Generals: Donald Trump.

Trump really wanted to own an NFL team, so he thought the best way to do that was to sue the NFL, and he predicted that the NFL would lose the lawsuit, have to pay the USFL hundreds of millions if not billions of dollars in damages, and would then offer to merge in the USFL’s teams. Then he’d be the owner of the NFL’s New Jersey Generals.

He was right about one thing: the NFL did lose the antitrust lawsuit. But the jury concluded that the USFL’s financial struggles were of its own doing, so instead of being awarded millions of dollars in damages, the USFL was awarded $1. Well, actually $3 because in antitrust cases, damages are tripled.

Trump’s dream of owning an NFL team died, and so did the USFL. Since then, Trump tried unsuccessfully to buy the New England Patriots in 1988 and the Buffalo Bills in 2014. But truth be told, the NFL wanted no part of Trump as a team owner.

So, Trump has gotten revenge on the NFL … sort of. And it has to do with the Tax Cuts and Jobs Act he signed into law late last year.

According to Bloomberg:

The 2017 law could put teams in states with high personal income tax rates at a disadvantage when negotiating with free agents thanks to new limits on deductions, including for state and local taxes, according to tax economist Matthias Petutschnig of the Vienna University of Economics and Business.

Petutschnig’s research into team performance over more than two decades shows that National Football League franchises based in high-tax states lost more games on average during the regular season compared to teams in low or no-tax states. That’s because of the NFL’s salary cap for teams, according to Petutschnig; if they have to give certain players more money to compensate for higher taxes, it reduces how much they pay other players and lowers the team’s overall talent level.

“The new tax law exacerbates my findings and makes it harder for high-tax teams to put together a high-quality roster,” Petutschnig said.

According to his research, which examined NFL regular seasons from 1994 to 2016, the three teams in high-tax California—Oakland Raiders, San Francisco 49ers, and San Diego Chargers (the Los Angeles Rams were still in St. Louis)—won three fewer games on average than teams like the Miami Dolphins and the Dallas Cowboys, which play in states (Florida and Texas) where no state income taxes are levied. A player on those teams “was always going to come out a whole lot better than somebody playing in New York,” Jerome Glickman, a director at Friedman LLP who works with professional athletes, told Bloomberg. “Now, it’s worse.”

Why? Because the TCJA set a $10,000 annual cap for the amount of state and local taxes that taxpayers can deduct on their federal tax returns, which is pocket change for star NFL players who live in states with high property taxes, like New York, New Jersey, and California. That SALT provision is set to expire in 2025.

NFL agent Joe Linta told Bloomberg that a free agent considering a California team compared to a team in Texas or Florida would need to make 10% to 12% more to compensate for his state tax bill. He added that the SALT cap is “a factor” in negotiations.

House Republicans recently passed legislation that would make the $10,000 limit on SALT deductions permanent, but the bill is expected to die in the Senate.

In addition, the TCJA eliminated the popular deduction for unreimbursed employee business expenses, which means football players are no longer allowed to write off union dues and fees for agents, public relations, business management, or off-season trainers, according to Bloomberg.

Joseph Criscuolo, a managing associate at accounting firm Drucker & Scaccetti who works with professional athletes, said that under the tax law, athletes “in the mid-range are going to break even,” with the law’s individual federal income rate cut compensating for lost deductions. But for the highest-paid athletes, the canning of deductions for unreimbursed expenses “is a big deal,” he said.

Under the old law, athletes could deduct those expenses if they exceeded 2 percent of their adjusted gross income.

So Raider Nation, don’t just point fingers at Jon Gruden for your team’s 1-5 start to the season, and for not re-signing star outside linebacker Khalil Mack; you should also kinda/sorta point fingers at President Trump and his tax overhaul, too.

The post Why You Can Kinda Blame President Trump and His Tax Cuts for Your Favorite NFL Team Sucking appeared first on Going Concern.

House Republicans introduced legislation on Sept. 10 that would lock in individual tax provisions contained in the Tax Cuts and Jobs Act that are set to expire in 2025. It also includes making permanent the $10,000 annual cap for state and local tax deductions, which is unpopular in high-tax states like New York, New Jersey, and California.

The Joint Committee on Taxation estimated the cost of the new plan at $657 billion, according to Politico.

According to Bloomberg, other provisions in the legislation, which I guess is officially being dubbed “Tax Reform 2.0,” would:

[P]ermanently lower the tax rates for individuals as well as preserve a larger child tax credit and the approximately $22 million estate tax exemption for couples, which was doubled in the 2017 law.

It expands the medical expense deduction for an additional two years. Under the tax law, taxpayers can deduct medical expenses exceeding 7.5 percent of adjusted gross income — down from 10 percent — for 2017 and 2018. Tax 2.0 would allow them to use the lower threshold through the end of 2020.

The bill includes several retirement-related provisions that would allow small businesses to more easily offer 401(k) plans, as well as new individual savings accounts for education and newborns. The legislation would also allow startups to write off more of their costs.

The House Ways and Means Committee will mark up the legislation on Sept. 13. House Speaker Paul Ryan (R-WI) has said the legislation will get a vote on the House floor before the end of the month, according to Bloomberg.

The SALT cap had made unveiling the Tax Reform 2.0 legislation a little complicated for Republicans. They had been weighing the pros and cons of putting incumbent lawmakers in high-tax states in a tricky position of either supporting the cap or voting against tax cuts backed by their party.

There are 57 competitive House races in the midterm elections, according to the Cook Political Report, and about a third of those are in districts located in high-tax states where the SALT cap has been a hot-button issue, Bloomberg noted earlier this month.

And Reps. Leonard Lance (R-NJ) and Peter King (R-NY), both seeking re-election in November, said they won’t vote for a bill that includes a permanent extension of the SALT cap, according to Bloomberg.

But there was no way that cowboy boot-wearin’, tax reform-toutin’ House Ways and Means Chairman Kevin Brady (R-TX) would not push through a second round of tax cuts.

He said in a statement:

“Last year we said goodbye to America’s old, broken tax code. Under our new system, we’re seeing incredible job growth, bigger paychecks, and a tax code that works on behalf of families and American businesses. Now it’s the time to ensure we never let our tax code become so outdated again.”

Maybe Brady has chosen to ignore the fact that the Tax Cuts and Jobs Act really hasn’t been too popular with voters.

Emily Stewart of Vox wrote:

Polls show many Americans aren’t noticing tax cuts in their paychecks, and the bill has actually become less popular with voters over time. According to a RealClearPolitics average of polling, 37 percent of voters approve of the GOP’s tax cuts, while almost 42 percent disapprove.

But, let’s face it, this is all for show. Yes, the legislation will pass in the House, but there’s not a snowball’s chance in hell that it becomes law. In fact, I have a better chance of one day writing for the Wall Street Journal or becoming an anchor for Fox News than this legislation does passing the Senate.

Here’s why, according to Bond Buyer:

Passage in the Senate would require a 60-vote supermajority because the legislation would add to the already burgeoning federal deficit.

Republicans hold only a 51-49 majority in the Senate and none of the Democrats are expected to support the legislation.

Sorry, Kevin.

The post Well, House Republicans Went Ahead With Their ‘Tax Reform 2.0’ Legislation Anyway appeared first on Going Concern.

House Republicans were planning to vote on the proposed tax legislation later this month. But according to a Bloomberg report, those plans have come to a screeching halt. Here’s why:

House Republicans had planned to use a second phase of tax cuts to force Democrats into a difficult vote ahead of mid-term elections. Now, party leaders may drop the effort, fearing it could backfire by antagonizing voters in some hotly contested Congressional districts.

The proposal would make the individual changes in last year’s overhaul permanent — including the $10,000 annual cap for state and local tax deductions, one of the law’s most disputed provisions. That would put Republican lawmakers in high-tax states like New York, New Jersey and California in the tricky position of either supporting the cap, or voting against tax cuts backed by their party.

Largely because of the SALT cap dilemma, House Republicans are hitting the pause button on “Tax Reform 2.0” legislation, according to three GOP aides who requested anonymity to speak about the matter. The lawmakers want to weigh the political benefits and risks of a vote on the bill in the coming weeks, and assess if they have enough support to pass it.

The Wall Street Journal noted on Sept. 3 that “a sizable number of competitive [House] districts—almost all currently Republican—are vulnerable to new tariffs, a new cap on deductions for state and local income taxes, or a jobs picture worse than the national average.”

There are 57 competitive House races in the midterm elections, according to the Cook Political Report, and about a third of those are in districts located in high-tax states where the SALT cap has been a hot-button issue, Bloomberg noted.

So in other words, some vulnerable House Republicans are fearing for their political lives. Take Leonard Lance (R-NJ), whose district includes many affluent towns west of New York City, including Bedminster, home to one of President Donald Trump’s golf clubs, for example. According to Bloomberg, he said that he doesn’t support tax legislation that includes the SALT cap and believes the bill would have a better chance of passing without it.

And then there’s a lawsuit the attorneys general in New York, Connecticut, Maryland, and New Jersey filed in July against the Trump administration, which is asking the U.S. District Court for the Southern District of New York to invalidate the $10,000 cap.

According to The Hill:

The states argued that prior to the 2017 federal tax overhaul, Congress consistently allowed federal taxpayers who itemized their tax deductions to deduct, subject to certain incidental limitations, all of their state and local real and personal property taxes, and either state and local income taxes or sales taxes from their federal income tax returns, which often adds up to more than the $10,000 cap.

“The new cap effectively eviscerates the SALT deduction, overturning more than 150 years of precedent by drastically curtailing the deduction’s scope,” the states said in the complaint.

The states argue in the complaint the new cap is unconstitutional because it goes beyond settled limits on the federal government’s power to impose an income tax and deliberately harms certain states and their residents.

So, what options do House Republicans have? According to Bloomberg, they have two:

1. Have the House Ways and Means Committee mark up the bill and hold a vote for it in the next two weeks before shelving it.
2. Hold a floor vote by the end of the month.

A decision to put the bill on ice before the election would signal Republicans’ need to protect vulnerable members.

If I were a betting man, I think they’ll go with option No. 2. House Ways and Means Committee Chairman Kevin Brady really wants to try and push this through the House, Dems be damned. And as Bloomberg noted, Brady “probably doesn’t want to strip the SALT provision from the 2.0 bill because it would open the floodgates for members to start requesting tweaks to other tax breaks that the 2017 law scaled back and which are set to expire in 2026, such as decreasing the cap on the home mortgage interest deduction.”

But even if the House passes the legislation, the bill would likely stall in the Senate, where some Democratic support would be needed for it to pass in that chamber.

So, don’t expect “tax cuts 2.0” to be happening anytime soon, if at all.

Image: iStock/arto_canon

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