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Scott Bessent, nominated by U.S. President-elect Donald Trump to lead the Treasury Department, emphasized the urgency of extending the package of tax cuts from 2017 during his Senate Finance Committee confirmation hearing on Thursday. He said that failing to renew these cuts, which are set to expire at the end of the year, would lead to "an economic calamity" and a "gigantic middle class tax increase." In his prepared remarks, Bessent also emphasized the importance of addressing the budget deficit, saying the U.S. "must work to get our fiscal house in order" by adjusting domestic discretionary spending. The debt ceiling kicked back in on January 2nd, and the Treasury is expected to begin taking special accounting measures to avoid breaching it within the coming days.

 

Accounting Today

New York Times

US News and World Report

Washington Post

The IRS has announced a pilot program to enhance the Fast Track Settlement (FTS) process for taxpayers under examination in various divisions, including Large Business and International (LB&I) and Small Business/Self-Employed (SB/SE). This initiative aims to facilitate quicker resolutions of disputed issues while cases remain under IRS jurisdiction. The program, which began in 2001, allows taxpayers to collaborate with the IRS and the Independent Office of Appeals to resolve outstanding issues. Notably, the pilot will introduce a “Last Chance FTS” option for SB/SE taxpayers, providing them with an opportunity to engage in FTS before their cases move to Appeals. The changes will be evaluated after a two-year period, with the goal of increasing the use of Alternative Dispute Resolution (ADR) methods. As stated in the announcement, these modifications are designed to "extend the provisions of the current FTS and PAM programs to a wider range of cases." The pilot programs will be effective from January 15th 2025, to January 15th 2027.

 

Tax Notes

As the tax filing season approaches, the IRS is reminding businesses to submit wage statements and information returns by January 31st. This deadline is crucial for employers filing Form W-2 and Form 1099-NEC, as it allows employees to prepare for their tax filings by April 15. The IRS emphasizes that timely and accurate submissions help avoid penalties and assist in combating fraud. Employers can request a 30-day extension for filing, but this does not extend the deadline for providing copies to employees. "Penalties may apply if filings are untimely, inaccurate and/or improperly submitted," warns the IRS.

 

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The accounting profession is undergoing significant changes due to technological advancements, regulatory shifts, and a decline in students pursuing accounting degrees, which is straining the talent pool, according to UHY principal Cory Teller. As firms adapt to these challenges, they must focus on integrating Artificial Intelligence (AI) to streamline operations and enhance client value. "The ability to provide real-time support and enhanced accuracy positions AI as a cornerstone of modern accounting operations." Additionally, the rise of cloud-based platforms and advanced analytics tools is transforming financial data management and decision-making. However, increased digitization also brings data security risks, necessitating robust cybersecurity measures. Environmental, social, and governance (ESG) reporting is becoming essential, pushing firms to align their strategies with stakeholder expectations. Consultants play a crucial role in guiding organizations through these transitions, ensuring they are well-prepared for the complexities of 2025 and beyond.

 

Accounting Today

The Wall Street Journal reports that venture capitalists are increasingly focusing on accounting firms, with Bessemer Venture Partners, General Catalyst and Thrive Capital prominent among those investing in the industry. Marc Bhargava, a managing director at General Catalyst who leads the firm’s Creation strategy, covering venture buyouts and incubations, observes: “We do think there’s a huge opportunity to roll up accounting firms and automate a lot of the workflow and let the same accounting firms take twice as many clients.” He continued: “The idea is not to cut people with AI, the idea is to enable them to do two to three times the work."

 

Wall Street Journal

U.S. retail sales increased in December, the Commerce Department reported on Thursday, pointing to strong demand in the economy and further reinforcing the Federal Reserve's cautious approach to cutting interest rates this year. The value of retail purchases, not adjusted for inflation, increased 0.4% after an upwardly revised 0.8% gain in November. Economists polled by Reuters had forecast a 0.6% advance. On an annual basis, sales rose 3.9%. Ten of the report’s 13 categories posted increases, including gains at furniture and sporting goods stores. Spending at restaurants and bars, the only service-sector category in the retail report, declined 0.3%, the biggest drop since the start of last year.

 

Bloomberg

Reuters

The number of Americans filing for unemployment benefits increased by 14,000 to 217,000 in the week ending January 11th, according to the Labor Department. Economists had expected jobless claims to rise to 210,000. However, despite this rise, layoffs remain historically low, with the total number of Americans receiving unemployment benefits dropping by 18,000 to 1.859m. The four-week average of claims, which softens some of the week-to-week volatility, dipped by 750 to 212,750. Ryan Sweet, Chief U.S. Economist at Oxford Economics, said the rebound by jobless claims "doesn't raise a red flag," noting: "New filings remain comfortably below our estimate of the breakeven level, or that consistent with no monthly job growth." He added that they "could increase over the next couple of weeks because of the wildfires. Our preliminary estimate is that the wildfires will reduce January nonfarm employment between 20,000 and 25,000."

 

The Baltimore Sun

Nasdaq

Reuters

The administration of incoming President Donald Trump is perceived as being business-friendly, with dealmaking and trading buoyant. After Goldman Sachs recorded its biggest quarterly profit since the third quarter of 2021, chief executive David Solomon said: "There has been a meaningful shift in CEO confidence, particularly following the results of the U.S. election. Additionally, there is a significant backlog from sponsors and an overall increased appetite for dealmaking, supported by an improving regulatory backdrop." Stephen Biggar, banking analyst at Argus Research, added: "There are good times to be over-exposed to capital markets revenues, and this is one of them." The KBW Banking index has risen almost 10% since Trump we re-elected in November.

 

Reuters

Iowa Gov. Kim Reynolds is intensifying her efforts to reduce government spending in the state with the introduction of a new "DOGE" task force, modeled after the new federal Department of Government Efficiency launched by President-elect Donald Trump. This initiative aims to assist local governments in finding efficiencies, thereby enabling Republican lawmakers to implement property tax cuts during the current legislative session. Reynolds stated, "I like to say that we were doing DOGE before DOGE was a thing," emphasizing the need for local governments to be leaner to facilitate meaningful tax reform. Local officials, however, express concerns about the potential impact on essential services and the unpredictability of the property tax system. The task force, led by Emily Schmitt, general counsel of Sukup Manufacturing, is still in the early stages, with details on its operations yet to be disclosed. State Auditor Rob Sand highlighted that his office's Public Innovations and Efficiencies program could save hundreds of millions if adopted statewide.

 

Des Moines Register

Supreme Court lawyer Tom Goldstein has been indicted in Maryland on federal tax evasion charges after allegedly failing to declare millions of dollars won at poker games. He is also charged with using law firm money to pay debts and making false statements to two mortgage lenders. Goldstein’s own lawyers, John Lauro and Christopher Kise of Continental, issued a statement saying “Mr. Goldstein is a prominent attorney with an impeccable reputation. We are deeply disappointed that the government brought these charges in a rush to judgment without understanding all of the important facts.” They noted that Mr Goldstein intends to contest the charges in court.

 

CNBC

Writing for the FT, Stefan Stern considers ongoing research which suggests that following a drive to articulate company-wide purpose, employee engagement may go up, but actual staff retention does not.

 

Financial Times

Firms are significantly investing in technology this year, particularly in automating tax return workflows, as highlighted by a recent Wolters Kluwer survey. The survey revealed that 19% of firms plan to invest in tax return automation tools, with 41% expecting benefits from automating tax returns and financial statements. Additionally, 15% are looking to acquire tax compliance and law monitoring solutions. Despite previous investments, firms are seeking more advanced solutions, with 48% desiring anytime, anywhere access. The survey also noted that 44% of firms now identify as innovators or early adopters of technology, the highest level in three years. "There's a noticeable shift in the industry as accountants and auditors increasingly embrace technology as a key driver of success," the report stated.

 

Accounting Today