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The E.U. this morning retaliated against U.S. President Donald Trump’s 25% tariffs on steel and aluminum within hours of them taking effect, escalating a trade war that has rattled financial markets and threatens the global economy. They include levies of up to 50% on products such as jeans, bourbon whiskey, and Harley-Davidson motorcycles. Charges could also be applied to a further €18bn ($19.6bn) of goods from April 13th, on products such as cosmetics, wood, apparel, and agricultural produce. Yesterday, Mr. Trump reversed a threat to impose an additional 25% in tariffs on Canadian steel and aluminum products - on top of a 25% tariff already set to go into effect today. The change in policy came after an agreement announced by Ontario Premier Doug Ford and U.S Commerce Secretary Howard Lutnick to suspend a planned 25% surcharge on electricity from Ontario sent to U.S. customers that Ford had warned he would impose. A meeting will be held at the White House tomorrow to discuss a renewal of the trade agreement between the U.S. and Canada.

 

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The IRS has revealed that over 1.1m taxpayers have unclaimed refunds for the 2021 tax year, totaling more than $1bn. The median refund is estimated at $781. Taxpayers have until April 15 to file their Form 1040 to claim these refunds, or they risk losing the money to the U.S. Treasury. Additionally, many low- and moderate-income workers may qualify for the Earned Income Tax Credit, which could be worth up to $6,728 for those with qualifying children. The IRS emphasizes that refunds may be withheld if tax returns for 2022 and 2023 are not filed. Taxpayers are encouraged to gather necessary documents and file promptly to avoid missing out on their refunds.

 

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Tax Notes

In 1982, Bob Dole introduced the Tax Equity and Fiscal Responsibility Act to address the federal deficit following significant tax cuts. This act aimed to close loopholes and enhance IRS enforcement, which saw a 39% increase in IRS staffing by 1988. However, IRS staffing declined in the 1990s, leading to fewer audits of high-income taxpayers. Recently, the Inflation Reduction Act allocated $80bn for IRS funding to improve enforcement, but this has been reduced to $60bn due to House GOP actions. Mr. Dole's approach to IRS funding is now challenged, as cutting resources could lead to a revenue drop greater than payroll savings, potentially increasing the deficit. The Congressional Budget Office estimates that reduced IRS funding could decrease tax revenue by $44bn over ten years, exacerbating the deficit projected at $1.9tn this fiscal year. Justin Fox, a Bloomberg Opinion columnist, highlights the political implications of these funding cuts.

 

The Columbian

In a letter to key congressional leaders, Linda Moore, President and chief executive of TechNet, outlined critical tax policy priorities for the 119th Congress. She emphasized the need for tax reforms that support innovation and economic growth, arguing: "By supporting and enacting these policies, lawmakers can ensure that our tax code spurs investment." Key recommendations include maintaining the 21% corporate tax rate, supporting startups through favorable tax treatment, enhancing R&D incentives, and promoting domestic semiconductor manufacturing. Additionally, Ms. Moore urged Congress to address the burdensome 1099-K reporting threshold, which could negatively impact millions of Americans. TechNet represents a diverse network of technology companies and advocates for policies that strengthen the U.S. economy.

 

Tax Notes

The IRS is urging taxpayers to utilize free filing options, including Direct File, which is now accessible in 25 states. Direct File is a user-friendly, web-based service that guides taxpayers through the filing process on various devices. It allows for automatic data import from IRS accounts and offers live chat support. The IRS estimates that over 30m taxpayers are eligible for Direct File, which supports various credits, including the Child and Dependent Care Credit and the Premium Tax Credit. "Direct File began as a pilot program last year and, after receiving overwhelmingly positive reviews from taxpayers, is now available in 25 states," the IRS said.

 

Tax Notes

In today's competitive business environment, establishing a genuine connection with clients is crucial. Dr. Michael Thomas, a financial planning educator, emphasizes the importance of "financial empathy," which involves understanding the emotional impact of financial issues on clients. He explains that empathy encompasses cognitive, affective, and compassionate elements, allowing advisors to connect deeply with clients. For instance, a newly divorced business owner named David found reassurance and clarity through his CPA's empathetic approach, which transformed his overwhelming tax situation into a manageable plan. Dr. Thomas warns that accountants who neglect empathy risk losing client trust, stating, "Clients won't share vulnerability unless they feel seen and heard." By integrating empathy into their practices, accountants can foster stronger relationships and enhance client satisfaction.

 

Accounting Today

The PCAOB has censured nine firms within KPMG's global network, imposing fines totaling $3.375m for violations of quality control standards. The firms, located in countries including Australia, Brazil, Canada, and the U.K., failed to disclose audit participants and meet regulatory requirements. PCAOB chair Erica Williams emphasized the importance of transparency, commenting: "It is essential that investors and audit committees know where issuers' audits are being conducted and by whom." KPMG acknowledged the penalties and stated that the errors on PCAOB Forms have been corrected, asserting that they did not affect any financial statements. Each firm has agreed to undertake remedial actions to enhance their quality control policies. Robert E. Rice, director of PCAOB's Division of Enforcement and Investigations, noted that these actions demonstrate the board's commitment to holding firms accountable for violations.

 

Accounting Today

The Accountant Online

The House passed a seven-month funding patch Tuesday that aims to avoid a shutdown in three days’ time. The 217-213 vote was almost entirely on party lines, with a single Democrat voting "yes," and a single Republican voting "no." Lawmakers said the bill would trim $13bn in non-defense spending from the levels in the 2024 budget year and increase defense spending by $6bn. The bill now heads to the Senate, where Republicans will need at least eight Democrats to cross the aisle to clear it for President Donald Trump’s signature.

 

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Job openings grew in January while hiring, voluntary quits and layoffs held steady, the Labor Department reported on Tuesday. The Job Openings and Labor Turnover Survey (JOLTS) found that available positions increased to 7.74m, an increase on December's downwardly-revised total of 7.51m, and just ahead of the 7.7m expected by economists, according to a FactSet report. Hiring activity remained steady, adding an estimated 5.4m jobs in January and running at a rate of 3.4% of total employment. The retail sector saw 143,000 positions added, with finance providing 122,000, and leisure and hospitality dropping 46,000. There were 135,000 job openings for federal workers, landing slightly below the 138,000 seen in December and 140,000 from January 2024. The number of layoffs dropped in January to 1.64m, the lowest level since June, while the "quits rate" grew to 2.1%, from 1.9% in December. The level of quits rose to an estimated 3.27m from 3.1m. "The January JOLTS report showed a surprising improvement in the labor market, but we take the data with a grain of salt," commented economist Stuart Paul. "The uptick in job openings was driven by financial services and retail trade — but more recently, financial-services firms have announced high-profile layoffs and other firms have guided investor expectations lower".

 

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The Trump administration still plans to terminate all staff at the Consumer Financial Protection Bureau (CFPB), according to witness testimony. The testimony delivered Tuesday runs counter to CFPB court filings, according to which the agency would continue to exist only in a "streamlined" form, after a judge temporarily blocked it from continuing with mass dismissals. However the witness said she was privy to conversations with the Office of Personnel Management this month at which officials were still discussing firing all agency workers.

 

US News and World Report

Poland's Deputy Prime Minister Krzysztof Gawkowski has reaffirmed plans to implement a new tax on big tech companies, despite criticism from the incoming U.S. ambassador, Thomas Rose. Rose described the tax as "self-destructive" and warned it could harm Poland's relations with the U.S. Gawkowski, a member of the Left party, responded to Rose's comments by saying: "This is standing democracy on its head," as he underscored Poland's right to legislate independently. While some coalition members, like Funds Minister Katarzyna Pelczynska-Nalecz, support taxing big tech, they question the timing amid potential trade tensions.

 

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