Become more informed in minutes....

The U.S. Supreme Court has thrown out a case about the scope of attorney-client privilege involving an unnamed law firm's attempt to withhold records from prosecutors related to a cryptocurrency-promoting client in a tax probe. The unsigned one-sentence ruling "dismissed as improvidently granted" an appeal by the firm of court orders holding it in contempt for not turning over records related to one of its clients in response to a federal grand jury subpoena. Reuters notes that many of the details of the case are unclear.  According to court papers, the law firm specializes in international tax issues and advised a client who the Department of Justice says was an early advocate of cryptocurrency who expatriated himself from the United States in 2014. In other Supreme Court news, it has turned away a Missouri appeal that sought to ensure states can cut taxes even as they receive $195bn. The justices without comment left in place a federal appeals court decision that said Missouri lacked legal standing to press a lawsuit over the requirements imposed under the American Rescue Plan Act. Missouri is among several Republican-led states that sued after President Joe Biden signed the $1.9 trillion measure into law in March 2021. The law includes a provision that says a state can’t use the money “to either directly or indirectly offset a reduction in the net tax revenue of such state.” Missouri said that provision prohibits only the deliberate use of relief funds to pay for a tax cut. The state argued that the Treasury Department’s interpretation of the law would sweep more broadly, blocking any new state tax policy that reduces revenue without some sort of offset.

 

CPA Practice Advisor

Reuters

Former President Donald Trump has dropped a long-running court fight with Congress over access to his New York state tax returns, notifying a judge late Friday in a joint filing with a House committee that the new Republican leadership “has no interest” in the documents. The case dated back to 2019, when Mr. Trump was still president. He sued the House Ways and Means Committee, then led by Rep. Richard Neal (D-MA), and New York state officials over a newly passed state law known as the TRUST Act, which gave members of Congress a way to get a president’s state tax records. The committee didn’t end up making a request for the New York documents and a judge didn’t have to rule on Mr. Trump’s claims challenging the validity of the law. The case stayed mostly dormant for the next two years, with the judge occasionally ordering status reports from the parties. “Plaintiff is no longer ‘the president of the United States.’ Even if he were, Defendant Neal no longer chairs the House Ways and Means Committee, and the current committee has no interest in plaintiff’s tax returns,” the lawyers wrote in the joint submission. In other news relating to Mr. Trump, a group of House Democrats has written to the Government Accountability Office (GAO) asking it to investigate why the IRS failed to “adequately conduct mandatory audits” into the former president's tax returns. The Hill reports that the lawmakers want a report of the GAO's findings, including answering questions on why the IRS failed to complete the audits, why the agency did not ask for additional resources and how could Congress strengthen the presidential audit program.

 

The Hill

CPA Practice Advisor

Forbes

For the first time since the Internal Revenue Service enacted the educator expense deduction in 2002, the agency has raised it from $250 to $300 for the current tax filing season. K-12 educators who work a minimum of 900 hours during the school year will benefit and among the items deductible are classroom materials, including technology equipment and any COVID-19 protective items recommended by the Centers for Disease Control and Prevention. Classroom teachers use around $550 of their own money each year to provide their students with basic supplies, according to data from savings.com, prompting financial experts to complain that the deduction broadly falls short. Pauline Stavrou, a tax attorney for Frost Tax Law in Baltimore, comments: “The amount is just so small, it’s a joke.”

 

Education Week

Don’t be Scammed By The ERC

You probably have many clients who have been approached about the ERC or asked you questions about advertisements they’ve seen, promising large amounts of money and quickly. We wanted to give you another tool to help them navigate what’s real about the ERC and what may be a scam.

Alpharesults put together a short ebook about navigating these scams, and how to not fall victim to a false promise: Don’t fall for the Scams. This is an excellent resource to help you and your clients break down the rumors about the ERC, and provide an overview of the qualifications.

Download Here

 

RSM’s annual revenues grew by 15% last year, as clients sought advice on complex tax issues and cybersecurity risks, the world’s sixth-largest accounting firm said Monday. The firm’s $8bn in 2022 fees represents a 41% surge from 2019, with supply chain disruption and the COVID-19 pandemic helping fuel requests for help, according to RSM International. After announcing the firm's results, chief executive Jean Stephens told the FT that the firm is open to merger talks with rivals as the accounting profession gears up for a potential wave of consolidation or private equity buyouts. “If there’s some deal or some big conversation to be had, absolutely we’ll look at that to see what does that mean, what does that look like for us,” she said. “I think where there are willing parties then that’s what you start with [and then it’s a matter of] what [are] the goals and objectives and what’s the business deliverable that’s going to come from [it]?”

 

Bloomberg Law

Financial Times

A gauge of future U.S. economic activity tumbled for a 10th straight month in December with a widespread weakening outlook for manufacturing, home building and both job and financial markets. The Conference Board's Leading Economic Index slid 1.0% in December following a downwardly revised decline of 1.1% in November. The decline exceeded all 22 forecasts in a poll of economists by Reuters, which had a median expectation of a decline of 0.7%. Seven of the index’s 10 components declined in December. “There was widespread weakness among leading indicators in December, indicating deteriorating conditions for labor markets, manufacturing, housing construction, and financial markets in the months ahead,” Ataman Ozyildirim, the Conference Board’s senior director of economics, said in a statement. “Overall economic activity is likely to turn negative in the coming quarters before picking up again in the final quarter of 2023."

 

CNN

CBS News

Reuters

A study, led by Alexander Dyck, a finance professor at the University of Toronto, suggests U.S. corporate fraud, “like an iceberg,” may be greater than thought. The research found that only about a third of frauds in public companies are ever identified, and that fraudulent activity is more common than previously assumed. About 40% of companies are committing accounting violations and 10% are committing securities fraud, destroying 1.6% of equity value each year — equivalent to about $830bn in 2021. “Fraud is indeed like an iceberg, with significant undetected fraud beneath the surface,” the study says. Reuters notes that the Securities and Exchange Commission (SEC) has stepped up its enforcement of fraudulent activity. In the agency's 2022 report on enforcement actions, the regulator filed 760 enforcement actions and recovered a record $6.4bn in penalties and disgorgement, a 9% increase over the prior year, and included 462 new, or “stand alone,” enforcement actions, a 6.5% increase over fiscal year 2021. “The SEC’s stand-alone enforcement actions in fiscal year 2022 ran the gamut of conduct, from ‘first-of-their-kind’ actions to cases charging traditional securities law violations,” the agency said.

 

Reuters

The Wall Street Journal reports that Wells Fargo, Bank of America, JPMorgan Chase, and four other banks, are working on a new product that will allow shoppers to pay at merchants’ online checkout with a wallet that will be linked to their debit and credit cards. The digital wallet will be managed by Early Warning Services, the bank-owned company that operates money-transfer service Zelle. One goal of the new service is to compete with third-party wallet operators such as PayPal and Apple Pay. The banks expect to enable 150m debit and credit cards for use within the wallet when it rolls out. U.S. consumers who are up-to-date on payments, have used their card online in recent years, and have provided an email address and phone number, will be eligible. 

 

Wall Street Journal

Microsoft has announced a multibillion dollar investment in artificial intelligence (AI) as it extends its partnership with OpenAI, the creator of popular image generation tool Dall-E and the chatbot ChatGPT. In 2019, Microsoft invested $1bn in the company. “We formed our partnership with OpenAI around a shared ambition to responsibly advance cutting-edge AI research,” Microsoft CEO Satya Nadella wrote in a blog post. “In this next phase of our partnership, developers and organizations across industries will have access to the best AI infrastructure, models and toolchain with Azure to build and run their applications,” he added. OpenAI works closely with Microsoft’s cloud service Azure. Microsoft’s 2019 investment made it the “exclusive” provider of cloud computing services to OpenAI. Microsoft said Azure will continue to serve as OpenAI’s exclusive provider.

 

CNBC

U.S. News