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The PCAOB is reporting significant improvements in audit quality among major firms, as noted by Chair Erica Williams. "Today, three years into this board's tenure, our inspectors are seeing significant improvements from the largest firms," she stated. The upcoming 2024 inspection reports will reflect these advancements, stemming from the PCAOB's new QC 1000 quality control standard approved in September. However, challenges remain, including a rise in financial statement restatements, which have reached a nine-year high. Ms. Williams emphasized the importance of maintaining focus on quality, stating, "When QC systems operate effectively, quality audits are likely to follow." The PCAOB continues to work towards enhancing audit standards and investor protection.

 

Accounting Today

A recent report, the 2024 Client Satisfaction Report, commissioned by TaxDome, reveals a significant shift in client expectations for accountants. Based on surveys of 1,000 U.S. taxpayers, the findings emphasize the necessity for seamless technology, proactive communication, and personalized service. Ilya Radzinsky, co-founder of TaxDome, stated, “Clients are no longer satisfied with traditional practices. They demand modern, secure tools and a personalized approach.” Key insights include that 87% of clients expect user-friendly technology, while 84% value timely updates. Additionally, 89% seek reassurance about data security, highlighting the importance of SOC 2-certified systems. TaxDome recommends that firms focus on secure technology and clear communication to meet these evolving client needs.

 

CPA Practice Advisor

The Registered Apprenticeship for Finance Business Partner (RAP) program, launched by AICPA & CIMA, has celebrated its inaugural graduates, Daniel Grufferman and Jeffrey Culp. This program, established in November 2022, aims to address the talent gap in the finance and accounting sectors by creating a pipeline of skilled professionals. Tom Hood, Executive Vice President of Business Engagement & Growth at the AICPA, emphasized the urgency of developing talent, stating, “The battle for talent is increasing, making the need for more skilled accounting and finance talent even more pressing.” The graduates were honored during National Apprenticeship Week, highlighting the program's success and the importance of mentorship and on-the-job training in fostering a diverse and innovative workforce.

 

CPA Practice Advisor

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The IRS's recent community assistance visit to the Navajo Nation has been described as "a start," but not a replacement for a permanent taxpayer assistance center, according to Ramón E. Ortiz-Vélez, managing director of the federal tax clinic at the University of Washington School of Law. The IRS aims to provide services in "hard-to-reach areas" and plans to return to Gallup, New Mexico, for future events. However, Leslie McLean of DNA-People’s Legal Services criticized the agency for not visiting the Navajo reservation directly, stating, "How can you assist a community when you are unwilling to visit the people where they live?" The nonprofit provides free legal aid to low-income taxpayers in seven Native American nations. The IRS said it is also increasing recruitment efforts for VITA and tax counseling for the eldery (TCE) services in tribal areas. Those programs offer free tax return preparation services to low- and moderate-income taxpayers through partner organizations. According to Edward Killen, commissioner of the IRS Tax-Exempt and Government Entities Division, the IRS held a virtual workshop for 13 tribes interested in learning how they can create their own VITA sites. “This was in response to concerns raised by Indian Country with respect to access to free tax preparation, and we will continue to consider ways in which we can assist on these concerns,” he said.

 

Tax Notes

The Los Angeles City Council has approved new guidelines for spending approximately $480m collected from the Measure ULA, also known as the mansion tax. This tax, implemented in April 2023, has faced legal challenges but remains intact. The guidelines focus on creating and preserving affordable housing through a social housing model, which emphasizes tenant involvement and ownership. The council's unanimous vote allows the housing department to begin soliciting proposals for affordable housing projects. Additionally, $168m of the tax revenue will be allocated for the 2024-2025 fiscal year, with $133m dedicated to building and rehabilitating affordable housing, $21m for renter support programs, and $13m for administration.

 

Los Angeles Times

Minnesota has announced its unemployment insurance tax rates for 2025, which will range from 0.4% to 9.3% for experienced employers, including a base tax rate of 0.4%. New employers will face varying rates by industry, also between 1.4% and 9.3%, with 51 distinct rates available. Additionally, employers will incur a 5% assessment on their unemployment tax for the year.

 

Bloomberg Tax

The U.S. federal budget deficit came in at $367bn in November, up 17% from a year earlier, the Treasury Department reported on Wednesday. It added that, without the acceleration of December payments for the Medicare and Social Security programs into November, the deficit last month would have been about $29bn, or 9% lower than last year. Government receipts rose 10% to $302bn, while outlays grew 14% to $669bn. The deficit for the first two months of the 2025 fiscal year, which began on October 1st, rose 64% to $624bn, a total that included a $4bn increase in Department of Homeland Security spending related to recent hurricanes and storms.

 

Reuters

U.S. inflation picked up in November, according to the Labor Department, whose consumer price index (CPI) increased 2.7% from a year earlier, following on from a 2.6% rise in October. Core prices, which exclude volatile food and energy items, climbed 3.3% over the previous 12 months. On a monthly basis, CPI was 0.3% higher, driven by persistent inflationary pressures in the cost of food, vehicles and medical care. The cost of shelter rose 0.3% on the month and 4.7% on an annual basis. Food costs rose 0.4% monthly and 2.4% year over year, while the energy index increased 0.2% but was down 3.2% annually. Within food, the measure of cereals and bakery products fell 1.1% in November, the single biggest monthly decline in the measure’s history going back to 1989. “Overall we’re looking at an environment where the low-hanging fruit has been picked and it’s getting harder and harder to make further inroads into reining in inflation”, said Sarah House, senior economist for Wells Fargo. “Now we’re getting to a point where you really need the demand side of the economy to weaken. That’s what makes the last mile so hard".

 

CNN

USA Today

CNBC

Wall Street Journal

Sen. Ron Wyden (D-OR) and Sen. Elizabeth Warren (D-MA) have asked the chief executive of Toronto-based TD Bank to turn over information about how employees responded to a money-laundering scheme by a Flushing, Queens-based man named Da Ying Sze. A TD Bank spokeswoman said the lender was continuing to cooperate with prosecutors in ongoing investigations into individuals who laundered money through the bank. “We appreciate the concerns expressed by Sens Warren and Wyden,” the spokeswoman said. “TD has taken full responsibility for its AML [anti-money-laundering] program failures and is making significant investments and enhancements to meet regulatory obligations and help protect the financial system.”

 

Wall Street Journal

Party City is considering options including a sale or a potential bankruptcy filing, just over a year after it emerged from Chapter 11, according to people with knowledge of the matter. The company first filed for Chapter 11 bankruptcy protection in the U.S. in January last year, with $150m in debtor-in-possession financing to support its operations and reported $1bn-$10bn of estimated assets and liabilities. Lenders including Monarch Alternative Capital and Silver Point Capital took over ownership of Party City when it exited Chapter 11 protection and reduced its debt load by about $1bn in the process, allowing it to avoid liquidation. 

 

Bloomberg

Reuters

Macy's has revised its profit outlook downward following an investigation into an employee's scheme to conceal $151m in delivery expenses. The company reported that this misstatement will impact its gross margin and adjusted earnings per share by $79m for the full year, primarily affecting the fourth quarter. Consequently, Macy's adjusted its earnings forecast to a range of $2.25 to $2.50 per share, down from a previous high of $2.90. Chief executive Tony Spring said: "We've concluded our investigation and are strengthening our existing controls," without explaining how the erroneous entries were uncovered, or how they went undetected by auditor KPMG. The company is also facing pressure from Barington Capital Group and Thor Equities to restructure its real estate operations.

 

Accounting Today

New York Times

Wall Street Journal

A bulletin issued by the New York Police Department underscores the heightened risk environment for corporate executives in the wake of last week's killing of United Healthcare chief executive Brian Thompson. The bulletin was published on the day that Luigi Mangione, the man accused of shooting dead Thompson in New York, appeared in court in Pennsylvania and was charged with murder. Multiple "Wanted" signs featuring corporate executives have been posted throughout Manhattan and users on social media continue to celebrate Thompson's death, according to the bulletin. Mangione's action has the "capability to inspire a variety of extremists and grievance-driven malicious actors to violence," the NYPD said, as it encouraged companies to increase precautions and security for executives.

 

ABC News

Charles Kinney's appeal against the Tax Court's ruling on his 2016 income tax deficiencies has been upheld by the Ninth Circuit. The court found that Kinney failed to substantiate his claimed deductions, including a $16,201 automobile mileage deduction and $12,522 in litigation expenses. The Tax Court determined that these expenses were personal rather than business-related, stating that “the origin of the claim underlying [Kinney's] disbarment, vexatious litigant declaration, and prior property disputes is personal.” Additionally, Kinney could not provide sufficient evidence for his claimed net operating loss carryover deduction. The ruling emphasizes the importance of maintaining adequate records to support tax deductions.

 

Tax Notes

The IRS has issued a reminder for individuals aged 73 and older regarding the deadline for Required Minimum Distributions (RMDs) from IRAs and other retirement plans. The SECURE 2.0 Act has introduced significant changes, including raising the age for starting RMDs and eliminating them for Designated Roth accounts in 401(k) and 403(b) plans. "If an account owner fails to withdraw the full amount of the RMD by the due date, the owner is subject to a 25% excise tax on the amount not withdrawn," the IRS stated. It is crucial for account owners to understand their responsibilities, as they must ensure the correct RMD is taken, with penalties for non-compliance. The IRS provides resources to assist in calculating RMD amounts and understanding the new provisions.

 

CPA Practice Advisor

Tax Notes

A new EY Institutional Investor Survey highlights growing skepticism and inaction within the investment community regarding ESG priorities. The survey of 350 decision-makers from global investment firms reveals a deepening concern over greenwashing, with 85% seeing it as worse problem than five years ago. Additionally, although 88% say their firms last year increased the use of ESG information last year, just 25% feel equipped to assess the long-term impacts of ESG initiatives. Nevertheless, 93% of investors maintain confidence that companies will meet decarbonization and sustainability goals. “Unchecked climate risks can spell disaster for companies and their financial backers . . . If the world is to stand any chance of hitting net zero goals, we’ll need trillions of dollars of funding and an investor community that treats sustainability as a source of value rather than purely as a risk," commented Dr. Matthew Bell, EY Global Climate Change and Sustainability Services Leader.

 

ESG News

ESG Today

The IRS Business Modernized e-File system will partially and temporarily shut down at 11:59 a.m. EST on Thursday, December 26th, to prepare the system for the upcoming filing season. Acknowledgements not retrieved by the deadline cannot be accessed until the MeF system opens for production in January. The IRS recommends that states adjust their processing schedule to retrieve submissions in time to validate returns and submit acknowledgements.

 

Accounting Today

The New York State Bar Association's Tax Section Report No. 1504 addresses the treatment of foreign partnerships under Section 1445 of the Internal Revenue Code. The report advocates for a look-through rule for foreign partnerships to determine withholding liability, which would align Section 1445 with other withholding regimes. Jiyeon Lee-Lim, Chair of the Tax Section, emphasizes that the current entity-level withholding leads to overwithholding for foreign partnerships with U.S. partners. The report outlines the historical context of Section 1445 and suggests modifications to improve clarity and reduce administrative burdens for taxpayers. "Such a change would harmonize Section 1445 with other withholding regimes," the report states, highlighting the need for reform in the treatment of foreign partnerships.

 

Tax Notes

Adidas is embroiled in a significant tax investigation, and on Wednesday faced a second consecutive day of raids by criminal prosecutors and customs investigators. The European Public Prosecutor's Office confirmed that it is conducting “evidence collecting activities” in Germany and Austria related to suspicions of tax evasion concerning customs duties and import sales tax. A press officer indicated that this is expected to be the last search for the foreseeable future. Adidas acknowledged the official search, highlighting the ongoing scrutiny the company faces in this matter.

 

Bloomberg Tax