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New data from the IRS shows that, with an audit rate of 0.8%, people making over $500,000 on their latest tax return were more than twice as likely to be audited compared with the same point in the audit cycle in previous years. At the same time, the matching audit rate for taxpayers making under $500,000 declined slightly. The figures covered 2022 tax returns that were filed in 2023 and audited during the 2024 fiscal year, which ended September 30th. On Wednesday Daniel Werfel, IRS commissioner during the second half of President Joe Biden's spell in the Oval Office, said he had changed the agency’s mandate so that it could “ramp up” audits on certain types of returns, while keeping audit rates steady for most individuals. On average, audits of individuals with high incomes return substantially more money to the government, so proponents have argued they are the most effective way for the tax agency to collect more revenue. It is unclear as to how the audit rate will look in the future, due to the number of cuts introduced under President Donald Trump. “I think we’re heading into an unprecedented set of circumstances,” Mr. Werfel said. “I don’t know how it plays out as a result.”

 

New York Times

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In a party-line vote on Tuesday, the Senate Finance Committee voted 14-13 to advance Billy Long’s nomination to become IRS commissioner, sending it for a full floor vote. Finance Committee Chair Mike Crapo (R-ID) said that he looks forward to working with Mr. Long, who served in the House from 2011 to 2023, should he be confirmed by the full Senate. “In sum, congressman Mr. Long is uniquely suited to instill needed change at the IRS, and I will vote in favor of his nomination,” he added. “I encourage my colleagues on both sides of the aisle to do the same.”

 

Washington Examiner

The IRS faces ongoing challenges in service delivery, as highlighted in the TIGTA's Semiannual Report to Congress. The report covers IRS activities from October 1st 2024, to March 31st 2025, following the Inflation Reduction Act's $80bn funding boost. Despite an average service level of 87.6% and a wait time of 3.4 minutes, TIGTA noted that "previous recommended corrections had not been made," particularly regarding tax scam information on hold lines. Additionally, taxpayer assistance centers (TACs) experienced issues, including unclear hours and inadequate security, with some self-service kiosks non-operational for over a year. The report also revealed that unanticipated demand during Saturday events led to long wait times, prompting the IRS to increase security after safety concerns were raised. Overall, while there are improvements, significant gaps remain in IRS service quality.

 

Accounting Today

The recent notice from the Treasury Department and the IRS provides interim guidance on the corporate alternative minimum tax (CAMT), aimed at easing compliance burdens for applicable corporations. The guidance introduces an optional simplified method for determining applicable corporation status, reducing thresholds from $1bn to $800m and from $100m to $80m. This change is part of the broader effort to clarify the CAMT regulations, which were amended by the Inflation Reduction Act of 2022.

 

Tax Notes

AICPA has voiced strong opposition to key provisions in the House-approved budget bill, H.R. 1, particularly regarding the limitation of the passthrough entity tax/state and local tax (PTET SALT) deduction for specified service trades or businesses (SSTBs). The bill, which narrowly passed the House with a vote of 215 to 214, restricts SSTBs from deducting state and local taxes. AICPA has released a new “Fact or Fiction” analysis to clarify the implications of these changes, stating, "Practitioners or other interested parties who may have questions about preserving the PTET SALT deduction can read the new Fact or Fiction resource." Additional resources are also available to assess the impact of the proposed changes.

 

Journal of Accountancy

President Donald Trump's tariff plan would reduce deficits by $2.8trn over 10 years, but could also shrink the economy and increase inflation. According to the Congressional Budget Office (CBO), the tariffs could raise the average annual inflation rate by 0.4% in 2025 and 2026, leading to reduced purchasing power for households. The CBO's analysis indicates that while the tariffs could cut deficits, they would also decrease household wealth and GDP by 0.06 percentage points annually. Recent court rulings have allowed the tariffs to remain in effect, despite challenges. Mr. Trump's recent announcements include increasing tariffs on steel and aluminum imports to 50%, which could further impact consumer prices.

 

AP News

Des Moines Register

The Hill

Reuters

A new report from the Federal Reserve suggests that economic activity declined slightly in the U.S. over the last several weeks, indicating tariffs and elevated concerns are rippling across the economy. The latest Beige Book compilation of anecdotes from businesses across the Fed's 12 member districts, published Wednesday, stated that they all "reported elevated levels of economic and policy uncertainty, which have led to hesitancy and a cautious approach to business and household decisions." Hiring was “little changed” across most of the Fed’s 12 districts, with seven describing employment as “flat” amid widespread growth in applicants and lower turnover rates. Prices increased at a “moderate” pace, with a few districts describing the increases as "strong, significant, or substantial." Regionally, Boston, New York and Philadelphia all reported declining economic activity, while Richmond, Atlanta and Chicago were among the districts reporting better growth.

 

Bloomberg

CNBC

The U.S. services sector contracted for the first time in nearly a year in May while businesses paid higher prices for inputs, the Institute for Supply Management reported on Wednesday. The organization's nonmanufacturing purchasing managers index (PMI) dropped below the 50-mark separating expansion from contraction, to 49.9, from 51.6 in April. Economists polled by Reuters had forecast the services PMI rising to 52, following some easing in trade tensions between the United States and China. The ISM survey's new orders measure dropped to 46.4 from 52.3 in April, while its supplier deliveries index rose to 52.5 from 51.3. Services sector employment picked up. The survey's measure of services employment rose to 50.7 from 49.0 in April. Separately, S&P Global Market Intelligence's Services PMU came in at 53.7, above the 52.3 forecast. “Alongside sluggish economic growth, the survey is also signaling intensifying inflationary pressures," said S&P chief business economist Chris Williamson. "Rising costs in the service sector were again blamed widely on tariffs, which were in turn passed on to customers to result in the steepest rise in average prices charged since August 2022. These rising price pressures will only add to policymaker reluctance to reduce interest rates, which we consequently expect to remain on hold until December."

 

Bloomingbit

Advisor Perspectives

Reuters

The Wall Street Journal reports that some big clients decided to take their business elsewhere after several law firms struck deals to avoid punitive White House executive orders. The capitulating firms, which include some of the industry’s largest and best-known, agreed to provide about $1bn in pro bono work. Some clients, including financial services provider Morgan Stanley, technology corporation Oracle, and others in the airline and pharmaceutical industries, are planning or are already giving more work to those firms that have been targeted by Trump or his administration but did not relent, according to general counsels. The Journal says Microsoft had also expressed skepticism about working with a law firm that came to a deal with the Trump administration. General counsels doubt whether they could trust a firm to negotiate deals and win their own cases in court if they did not resist demands from Trump, the report says.

 

Law

NJ.com

Wall Street Journal

Google's Threat Intelligence Group has warned that a hacking group has been impersonating IT personnel to break into companies’ Salesforce tools, using the access for data theft and extortion. The hackers use voice calls to trick employees into visiting a purported Salesforce connected app setup page and unwittingly install a modified version of Salesforce's Data Loader tool. Technical infrastructure linked to the campaign shares characteristics with suspected ties to the loosely organized ecosystem known as “The Com,” known for small, disparate groups engaging in cybercriminal and sometimes violent activity. A Salesforce spokesperson said “there’s no indication the issue described stems from any vulnerability inherent in our platform.” The spokesperson said the voice calls used to trick employees “are targeted social engineering scams designed to exploit gaps in individual users’ cybersecurity awareness and best practices.”

 

Bloomberg

Reuters

Workers are putting away a record share of their income for retirement, according to a Fidelity Investments analysis of the millions of accounts it manages. It found that the average savings rate in 401(k) plans rose to a record high 14.3% of income in the first three months of this year, even though account balances fell in volatile markets earlier this year. Most are staying the course, said Mike Shamrell, vice president at Fidelity Investments, which released the data Wednesday. In the first quarter, 17.4% of people with 401(k) accounts at Fidelity increased their savings rate, while 5% decreased. Less than 1% stopped saving altogether. Boomers saved 17.2% on average, while generation X and millennials put away 15.4% and 13.5%, respectively. Average 401(k) balances fell 3% to $127,100 since the end of last year. Among the more than 24m people whose 401(k) accounts are administered by Fidelity, 6% changed their investment mix in the first three months of the year, with just over one-quarter tilting more conservative.

 

Wall Street Journal

President Donald Trump's proposed tax increase on income earned by overseas investors threatens to undermine confidence in U.S. financial markets. The plan, part of Section 899 of the One Big Beautiful Bill Act, aims to raise the withholding tax on dividends and interest payments from 30% to 50% over four years. Jorge Fernandez Revilla, head of the Irish asset management practice at KMPG, expressed concern, stating: “There is significant cause for concern for the asset management industry in Ireland and other European jurisdictions.” The Investment Company Institute warned that the bill could deter foreign investment in the U.S., while George Saravelos from Deutsche Bank noted that the tax proposals could escalate tensions into a "capital war." The Senate's approval remains uncertain, with potential implications for the U.S. fiscal deficit reaching $3.8tn over the next decade.

 

ETF Stream

A recent study by the Association for Accounting Marketing (AAM) and Hinge Marketing reveals a significant link between marketing expenditure and revenue growth in accounting firms. The study, which involved 87 firms with over 66,000 employees and combined revenues exceeding $16bn, found that high-growth firms allocate 2.1% of their revenue to marketing, double that of their slower-growing counterparts at 1%. Liz Harr, managing partner at Hinge, said: "the data shows that those that spend more on marketing are getting superior results.” High-growth firms also invest more in recruiting and employer branding, spending 66% more on these areas than low-growth firms. Additionally, they allocate 29.6% of their marketing budget to conferences and events, highlighting the importance of face-to-face marketing. Laura Metz, AAM President, noted: “Today's high-performing accounting firms are taking a somewhat more balanced approach to marketing.”

 

CPA Practice Advisor

Texas has removed New York asset manager BlackRock from a list of companies that were seen to be boycotting the energy industry. Texas Comptroller Glenn Hegar said the decision reflected the firm's retreats from industry climate groups such as the Net Zero Asset Managers initiative. Hegar also observed that BlackRock has lowered its support for shareholder environmental resolutions and backed a new Texas Stock Exchange. BlackRock "has acknowledged the real social and economic costs, both here in Texas and globally, that come from limiting investment in the oil and gas industry," Hegar said.

 

Reuters

According to Wolters Kluwer's Annual Accounting Industry Survey Report, accountants are increasingly adopting technology to enhance their practices. The report, based on interviews with 1,776 tax and accounting firms in the U.S., highlights that a majority aim to grow revenue and profits by 2025, alongside improving client service and reducing costs. Notably, 72% of firms are interested in generative AI for research, while 64% consider it for client communications. Additionally, 54% plan to conduct more remote tax return preparations, indicating a shift towards less in-office contact.

 

Accounting Today

Brazil's Finance Minister Fernando Haddad has said that any changes to a recent increase in the tax on financial transactions (IOF) would be tied to broader corrections of what he described as distortions in financial taxation. The government last month increased the IOF tax on some transactions to meet its fiscal targets, but the hike met with backlash and lawmakers indicated they could overturn the measure. Haddad suggested that the ensuing discussion had opened the door to wider reforms. "If there's any adjustment, it will be part of a broader effort to correct existing imbalances in taxes related to finance," Haddad said, adding "Beyond addressing the 2025 issue, (the aim is) to carry out a structural reform for the coming years."

 

US News and World Report