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House Republicans successfully passed a multitrillion-dollar tax breaks package in a late-night session that ended early this morning, with Speaker Mike Johnson commenting: “To put it simply, this bill gets Americans back to winning again.” The bill, which narrowly passed 215-214, with one lawmaker voting present, aims to extend $4.5tn in tax breaks from President Donald Trump's first term while introducing new ones, including exemptions on tips and overtime pay. The bill includes a temporary boost in the standard deduction — a $1,000 increase for individuals, bringing it to $16,000 for individual filers, and a $2,000 boost for joint filers, bringing it to $32,000. There is also a temporary $500 increase in the child tax credit, bringing it to $2,500 for 2025 through 2028, when it will return to $2,000. The estate tax exemption rises to $15m and is adjusted for inflation going forward. Small businesses, including partnerships and S corporations, will be able to subtract 23% of their qualified business income from their taxes. Republicans are also looking to prohibit Medicaid funds from going to Planned Parenthood, which provides abortion care. The Congressional Budget Office estimates that the proposed changes could lead to 8.6m fewer people having health care coverage and a $3.8tn increase in federal deficits over the next decade. Democrats criticized the bill, with House Democratic leader Hakeem Jeffries (D-NY) calling it “one big ugly bill.” The package also includes significant spending increases, particularly for defense and border security.

 

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The 2025 tax filing season is proving to be unusually prolonged, with many tax preparers continuing their work into the summer and fall due to extensions and disaster relief. By April 18th 2025, the IRS reported 140,633,000 tax returns filed, a 1.1% increase from 2024. An additional 10% of returns are expected by the extended deadline of October 15, 2025. The average tax refund was $2,942, up 3.3% from the previous year. However, the IRS is facing challenges, including a potential 25% workforce reduction and leadership instability, which could impact enforcement and customer service. With Congress considers new tax legislation, the 2026 tax season may bring significant changes.

 

Accounting Today

The National Association of Manufacturers (NAM) has called for the disbandment of the IRS' new unit focused on pass-through entities and partnerships, claiming it imposes excessive burdens on taxpayers. In a comment letter dated May 8th, NAM stated that the unit, operational since last October, is “contributing to the overreaching and unduly burdensome administrative state” that the Trump administration aimed to reduce. The unit, established during the Biden administration, operates within the IRS' Large Business and International Division.

 

Bloomberg Tax

Washington Gov. Bob Ferguson has enacted a tax package aimed at generating $9bn to address a significant budget deficit. This initiative is part of the state's budget for the next two years, which Mr. Ferguson also approved. The tax increases will affect major programs, including business and occupations, capital gains, and sales taxes, along with a levy on Tesla's electric vehicle sales credits. These measures are designed to help mitigate a projected $16bn deficit over the next four years.

 

Bloomberg Tax

The proposed regulations address various aspects of the Previously Taxed Earnings and Profits (PTEP) regime, including stock basis adjustments and foreign currency gains. AICPA submitted comments to the U.S. Department of the Treasury and the IRS, emphasizing the need for clarity. Reema Patel, senior manager at AICPA Tax Policy & Advocacy, said: “There is some uncertainty regarding taxpayer's continued reliance on Notice 2019-01.” AICPA recommends allowing taxpayers to rely on the proposed regulations until finalized and extending certain provisions to foreign nongrantor trusts. These changes aim to prevent double taxation and clarify the treatment of PTEP distributions.

 

CPA Practice Advisor

Value pricing has gained traction in various sectors, yet many CPA firms still rely on traditional hourly billing methods. The CPA Journal outlines a strategy for CPA firms to adopt value pricing, which focuses on bundling services based on perceived customer value rather than costs. Research has found that a 1% increase in price can boost margin dollars by 12.5%. The article emphasizes the importance of understanding client needs and designing service packages accordingly. Derrick Bonyuet, PhD, CFA, CFP, a clinical assistant professor at the University of Texas at Austin, notes that "value pricing is subjective and more art than science." The implementation of value pricing requires careful consideration of service attributes and market conditions.

 

The CPA Journal

The outlook for the U.S. economy remains weak despite a temporary cooling of the U.S.-China trade war, a Reuters poll of economists showed, with a debate over the country's fiscal health hanging in the balance. Economists polled in the seven days to May 21st were unanimous the Trump administration's policies have hurt the economy, with over 55% saying "significantly hurt." But after big downgrades to their growth and upgrades to inflation forecasts in April, economists kept these broadly unchanged in May. "The bad news is the detente virtually locks in a slow-growth, sticky-inflation environment as the base case for the U.S. economy. The effective tariff rate at 13% is still substantially higher than where it was coming into the year (around 2%)...Policy uncertainty is high, and recession risks remain elevated," said Michael Gapen, chief U.S. economist at Morgan Stanley. "Another round of large tariff hikes would probably be more painful for the economy than a less expansionary fiscal package," commented Aditya Bhave, a senior U.S. economist at Bank of America.

 

Reuters

The SEC is closely examining the initial set of annual financial reports from companies that have implemented updated accounting rules for segment reporting. These rules allow firms to disclose multiple profit measures, including unofficial metrics. Heather Rosenberger, chief accountant for the SEC's division of corporation finance, emphasized the importance of adhering to commission guidance for these non-standard measures during her remarks at the Practising Law Institute's SEC Speaks event. Companies began applying these new accounting standards in their annual reports earlier this year.

 

Bloomberg Tax

Rite Aid has received court approval to close stores and sell most of its pharmacy assets to major retailers like CVS, Walgreens, Albertsons, and Kroger. The pharmacy chain, which recently filed for bankruptcy for the second time in two years, operates around 1,200 stores and serves approximately 8m customers. U.S. Bankruptcy Judge Michael Kaplan emphasised the importance of transferring prescription services to ensure customer continuity, commenting: "I cannot delay or defer that process to address specific landlord issues". Rite Aid entered bankruptcy with over $2bn in debt and reported $750m in losses for the previous fiscal year. The company aims to expedite the transfer of customer prescription files to 13 buyers, including CVS, which is acquiring 64 store locations.

 

Reuters

A federal judge has dismissed the U.S. Treasury Department's attempt to annul a union contract affecting tens of thousands of IRS employees, marking a setback for President Donald Trump's efforts to curtail collective bargaining rights. U.S. District Judge Danny Reeves stated that the Treasury lacked legal standing to pursue the case against the National Treasury Employees Union (NTEU). The lawsuit followed Trump's executive order exempting certain agencies from union obligations, which the NTEU claims affects around 100,000 of its members. Judge Reeves noted: "This decision says nothing of the merits of the case," indicating that the lawsuit was premature as the Treasury had not yet acted on Trump's order. The NTEU and other unions have accused Trump of retaliating against them for challenging his policies.

 

US News and World Report

IRIS Software Group has made a significant minority investment in Instead, an artificial intelligence (AI)-driven tax platform developed by Corvee, aimed at revolutionizing tax preparation for accountants. Jim Dunham, president and general manager of IRIS Americas, said: “Our investment in Instead marks an important step in supporting meaningful innovation in the market, for the benefit of US customers.” Instead's platform automates over 90% of the tax preparation process and has received IRS approval to e-file various tax forms. This partnership will enable both companies to enhance product development and address customer challenges in the accounting ecosystem. Andrew Argue, chief executive of Instead, emphasized that this investment will help simplify compliance and allow professionals to focus on higher-value advisory services.

 

CPA Practice Advisor