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The IRS is planning to increase audit rates for wealthy taxpayers and corporations, according to Commissioner Danny Werfel. The agency aims to raise audit rates by over 50% on wealthy taxpayers with more than $10m in total positive income and nearly triple audit rates on corporations with assets over $250m by 2026. However, Werfel emphasized that audit rates won't increase for small businesses and taxpayers making under $400,000. The IRS is also addressing racial disparities in tax enforcement, following a study that found Black taxpayers were audited at higher rates. The agency is using funding from the Inflation Reduction Act to modernize and improve taxpayer services. The Treasury Department estimates that the IRS could collect over $561bn in overdue taxes over the next 10 years. The IRS plans to hire more personnel and double audit rates on the wealthiest taxpayers. Stable funding is crucial for the IRS to continue technology modernization and taxpayer service improvements.

 

CPA Practice Advisor

U.S. taxes are likely to rise as lawmakers look to narrow the federal deficit, according to Warren Buffett. Speaking at Berkshire Hathaway's annual meeting, Buffett stated that his company will pay whatever the tax rate is, whether it remains at the current 21% or increases. He believes that higher taxes are quite likely given the present fiscal policies. Buffett said: "I think higher taxes are likely. They may decide that some day they don’t want the fiscal deficit to be this large because that has some important consequences. So they may not want to decrease spending and they may decide they’ll take a larger percentage of what we own, and we’ll pay it." Asked whether he was concerned about the rapidly rising levels of U.S. government debt, Buffett said what worried him was the fiscal deficit more than the size of the Treasuries market - which is now nearly $27trn. He added that while the market focus is on the next steps the U.S. central bank will take to tackle inflation, fiscal policies could be more problematic. "Jay Powell is ... a very, very wise man," he said, referring to the chairman of the Federal Reserve. "But he doesn't control fiscal policy."

 

Bloomberg Tax

Bloomberg

Reuters

The IRS is reminding taxpayers to prepare for disasters ahead of National Wildfire Awareness Month, and National Hurricane Preparedness Week which begins May 5th. The IRS advises individuals, organizations, and businesses to protect their tax and financial information as part of a disaster emergency plan. The Federal Emergency Management Agency (FEMA) has already issued 25 major disaster declarations in 15 states this year. The IRS offers tips to help taxpayers safeguard their personal and tax information, including making copies of important documents, keeping a record of valuables, and reconstructing records after a disaster. Employers are also urged to check if their payroll service providers have a fiduciary bond in place. The IRS may provide tax relief after a disaster, automatically identifying taxpayers in covered disaster areas and applying filing and payment relief. Taxpayers impacted by a disaster can contact the IRS disaster hotline for assistance.

 

Accounting Today

Tax Notes

The AICPA's Auditing Standards Board (ASB) is set to vote on final quality management (QM) attestation standards, including revisions to Statements on Standards for Attestation Engagements (SSAE). If adopted, the final standard would be SSAE 23, Amendments to the Attestation Standards for Consistency With the Issuance of AICPA Standards on Quality Management. The most significant change that would be introduced by SSAE 23 is the deletion of the defined term “other practitioner' and its replacement with two new terms: ”participating practitioner” and “referred-to practitioner.”

 

The Cpa Journal

You’re invited to the Chief Future Officer event

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Join us from May 20th to May 24th to learn what the future holds!

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AICPA has submitted its recommendations to the U.S. Treasury and the IRS regarding the tax classification of purpose trusts, and functionally similar structures, for federal income tax purposes. The recommendations would simplify filing for taxpayers and practitioners and will reduce the administrative burden on the IRS. A purpose trust lacks identifiable beneficiaries. Historically, common law deemed such trusts invalid due to this lack of beneficiaries. The trust’s validity may hinge on whether someone else can enforce it. Additionally, uncertainty about the tax status of purpose trusts complicates compliance, leaving taxpayers and advisors unsure about applicable rules and required filings. ​​​​​​​“The growth in the use of noncharitable purpose trusts makes this issue important,” says Eileen Sherr, AICPA’s Director of Tax Policy & Advocacy. “If a purpose trust is not treated as a trust, the existing regulations do not provide any guidance on how it should be classified. A purpose trust, or an alternative structure functioning as a purpose trust, should be able to elect its tax classification because an entity can already de facto elect by choosing to organize as a trust, foundation, or corporation under state law.”

 

CPA Practice Advisor

Ari Brojde in Accounting Today suggests that the $129trn wealth transfer from baby boomers to their heirs presents an unprecedented opportunity for accounting professionals. Advances in technology, such as AI and automation, are transforming the role of accountants in estate accounting. Brojde says these tools enhance accuracy and efficiency, foster deeper client relationships, and allow accountants to focus on higher-value activities like strategic advising and tax planning. He says accountants can guide families through the complexities of estate accounting, building trust with heirs and beneficiaries. By leveraging AI and automation, accountants can streamline manual processes and reduce the administrative burden associated with estate accounting. This technology also mitigates the risks of human error and costly complications. He ends by saying that integrating AI into estate accounting is crucial for retaining clients and attracting a broader client base.

 

Accounting Today

CliftonLarsonAllen, the eighth largest U.S. accounting firm,  has announced its acquisition of Ronald Blue and Co., an 80-person tax, audit, and accounting services provider with offices in Atlanta, Tempe in Arizona, Knoxville in Tennessee, and Santa Ana, California.

 

Bloomberg Tax

Integrated Tax & Wealth Strategies, an independent wealth management firm, has been acquired by Avantax, a provider of tax-focused financial planning and wealth management. The acquisition adds $760m in total client assets to Avantax's portfolio. Founder Brian Stephens will continue with the tax practice, while the other financial advisors and wealth management team have become representatives of Avantax Planning Partners.

 

CPA Practice Advisor

U.S. employers added a seasonally adjusted 175,000 jobs in April, according to the Labor Department, below the 240,000 estimate from the Dow Jones consensus. The unemployment rate ticked higher to 3.9% against expectations it would hold steady at 3.8%. Average hourly pay rose seven cents to $34.75, pushing down the yearly increase from 4.1% to 3.9%, the lowest since June 2021. Health care led job creation, with a 56,000 increase. Other sectors showing significant rises included social assistance (31,000), transportation and warehousing (22,000), and retail (20,000). Construction added 9,000 positions while government, which had shown solid gains in recent months, was up just 8,000 after averaging 55,000 over the previous 12 months. Workers holding full-time jobs soared by 949,000 on the month, while those hold part-time jobs slumped by 914,000. “The slower jobs report will be welcome news to the Federal Reserve and signals that interest rate hikes are impacting a labor market that has been extremely resilient over the past few years,” said Joseph Gaffoglio, president of Mutual of America Capital Management. “The Fed clearly stated that it is taking a cautious approach on the timing of any interest-rate cuts to ensure that inflation is well contained, and this could lead to continued pressure on the jobs market in the months to come.”

 

USA Today

The Hill

CNBC

Wall Street Journal

More than 80% of business leaders believe the U.S. economy is strong compared to just 40% of American consumers, according to a report from the Milken Institute and Harris Poll. The survey found business leaders are much more optimistic than U.S. consumers about navigating recent economic instability, technology disruptions, and societal shifts. Almost three-quarters of consumers agree that they are not feeling the economic recovery where they live. The most recent data on U.S. consumer confidence shows a decline, reaching the lowest level since mid-2022. Business leaders and consumers both see artificial intelligence (AI) as a disruptive force, but consumers express concerns about its impact on jobs. The Federal Reserve Bank of Dallas survey found that only 3.1% of Texas businesses using AI expect employment to increase, while a quarter believe it will decrease or change the type of workers needed.

 

Bloomberg

In 2023, savers made $315.4bn in interest in deposit accounts, four times the $78.7bn they earned in 2022, according to Lending Tree’s DepositAccounts.com, which used data from the Federal Deposit Insurance Corporation in its calculations. The Fed's rate-hike project, which began in 2022 but has since stalled, made it possible for savers to earn inflation-beating yields on their U.S. domestic deposits, including bank and credit union savings accounts, certificates of deposit and money market accounts. At the same time, yields on Treasury bills have also been very competitive with the higher rates banks are offering and are equally low risk. “It’s a great time for savers,” said Greg McBride, chief financial analyst at Bankrate.com.

 

CNN

The IRS has urged entrepreneurs to put in place data security safeguards protecting their financial, personal and employee information from scams and cybercriminals hunting for easy targets. The IRS pointed out that small businesses face a variety of financial and identity theft related schemes that try to obtain information that can be used to file fake small business tax returns, rob business bank accounts, and create stolen identities. The best way business owners and individuals can protect themselves is to stay well informed on the latest scams, continuously protect their computers and smart phones and install data security at home and work, the IRS add.

 

Bloomberg Tax

Regulators are planning to impose new rules that would require banks to claw back pay from executives who engage in risky behavior. The Federal Deposit Insurance Corp. (FDIC) is proposing mandatory clawbacks, tightening the reins on executive pay. The FDIC's proposal is expected to be announced soon, but it still faces opposition from the banking industry and other US agencies, including the Federal Reserve. Last year's banking turmoil reignited the debate on holding executives accountable for bad decisions, leading to the proposed rules.

 

Bloomberg

The U.S. Securities and Exchange Commission has charged audit firm BF Borgers CPA PC and its owner, Benjamin Borgers, with "deliberate and systemic failures" to comply with auditing standards, affecting over 1,500 SEC filings. In order to settle the charges, BF Borgers has agreed to pay a $12m civil penalty, while Benjamin Borgers will pay a $2m civil penalty. Both parties have also agreed to permanent suspensions from appearing and practicing before the Commission as accountants. Trump Media & Technology Group is one of the companies affected with experts predicting its results will be delayed as a result. Trump Media “looks forward to working with new auditing partners in accordance with today's SEC order,” a representative for the company said.

 

Bloomberg

Forbes

Financial Times

Reuters

The Daily Telegraph

Warren Buffett, the chairman and chief executive of Berkshire Hathaway, has raised concerns about the dangers of AI, saying it could have devastating consequences on society, much like the atomic bomb, if used incorrectly. Buffett acknowledged that he knew little about how the underlying technology works, but said he had reason to worry. He recently saw his own image and voice so convincingly replicated by an AI tool that he said even his wife and children would have struggled to determine they were fake. Greg Abel, Buffett's designated successor as CEO of Berkshire, noted that the company has begun using AI inside some of its businesses to help make its employees more efficient. Abel said the company was looking to deploy the technology to make certain tasks more effective or safer. Buffett, for his part, said he struggled to predict the ultimate effects of AI on the world. “It has enormous potential for good and enormous potential for harm,” Buffett said. “And I just don’t know how that plays out.” 

 

The Wall Street Journal

New Jersey's film and television industry has experienced significant growth since 2018, with over $2bn spent on film projects and the ancillary economy. The state's tax credit program has played a vital role in bolstering the industry, attracting major productions like "West Side Story" and "Army of the Dead." Governor Phil Murphy has actively promoted the state's incentives, meeting with executives from Paramount, Amazon Studios, and Netflix. The diverse range of locations in New Jersey, from urban centers to scenic suburbs, mountains, and beaches, makes it an attractive destination for filmmakers. The tax credit program compensates productions for business and income tax bills, with additional incentives for filming in South Jersey and hiring diverse talent. The state is also working with local towns to make them "film ready." By establishing long-term partnerships with studios, New Jersey aims to create permanent jobs and stimulate economic growth.

 

New Jersey Herald