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The IRS has announced a pause in processing new employee retention claims as it investigates cases of fraud and conducts audits. The popular employee retention tax credit, created in 2020 to support U.S. businesses and employees during the COVID-19 pandemic, is now on hold. Businesses that have claimed or planned to claim the credit are seeking answers. In a piece for Bloomberg Tax FORVIS' Kristin Balding Gutting, ERC Provider's Sunshine Chapman, and Akerman's Joshua Hamlet offer their perspectives on what businesses should do. Ms. Balding Gutting advises businesses to review both old and new claims, while Ms. Chapman believes the pause shouldn't discourage legitimate claims. Mr. Hamlet suggests using the stoppage to consult with a trusted tax professional. The IRS will continue processing previously filed claims but will intensify audits and investigations. The agency will provide remedial options for improper claims and a settlement program for repaying improperly received refunds. The IRS recommends consulting a trusted tax professional and warns against dubious claims. The pause in processing new claims is not the end of the program, but a short-term measure to detect fraudulent claims.

 

Bloomberg Tax

The IRS is making preparations to remain fully operational in the event of a government shutdown by utilizing funds from President Joe Biden's tax-and-climate law, according to the president of the National Treasury Employees Union, Doreen Greenwald. While IRS employees will continue to work and be paid during a shutdown, the final plan from the Treasury Department is still awaited. The contingency plan put in place by the agency last year largely guides these preparations.

 

Bloomberg Tax

North Carolina lawmakers are working to pass a long-delayed budget that includes a new proposal to reduce the state's personal income tax. State Rep. John Bradford revealed that the 2023 conference budget would move up scheduled personal income tax rate reductions by one year. The budget proposal aims to provide relief to taxpayers and stimulate economic growth.

 

Bloomberg Tax

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The PCAOB has proposed expanding liability for individual auditors and certain accounting firms when they contribute to violations by the primary firms handling an audit. The current rule, dating back to 2005, focuses on the liability of contributors to registered accounting firms' violations of auditing standards. The PCAOB wants to lower the threshold for liability to negligence from recklessness for contributors. The proposal would allow the PCAOB to penalize partners or assisting firms that played a direct and substantial role in conflicts of interest and failures related to audit quality controls. However, some PCAOB members have expressed concern that the rule change could encourage junior auditors to leave the profession, exacerbating the accounting talent crisis. 

 

Accounting Today

Compliance Week

CPA Practice Advisor

Wall Street Journal

Deloitte is planning a January groundbreaking ceremony for part of the $300m expansion of its Westlake campus, northwest of DFW International Airport in Texas. The Big Four firm has filed plans with Tarrant County for a 257,000 sq ft  building that would open in 2025. The project “consists of classrooms, meeting rooms, outdoor roof terrace, food and beverage and approximately 300 guest rooms.” The building joins the existing 700,000 sq ft Deloitte University campus where the firm trains thousands of employees in a resort-style center.

 

Dallas Morning News

Eide Bailly is to merge in Raimondo Pettit Group, extending its presence in Southern California, and adding six partners and 55 staff to its roster. Last month, Eide Bailly announced it was expanding in California and Washington State by adding another firm, Bessolo Haworth, although that deal also does not take effect until late October. Bessolo Haworth has offices in the Los Angeles, San Francisco and Seattle areas.

 

Accounting Today

New US home construction dropped in August to the lowest level since June 2020, highlighting the toll of declining housing affordability. The Commerce Department said residential starts dropped 11.3% to a 1.28m annualized rate, due in large part to a sharp fall in multifamily construction. Economists polled by Reuters had forecast starts would slip to a rate of 1.440m units. Single-family housing starts, which account for the bulk of homebuilding, dropped 4.3% to a rate of 941,000 units. Starts for housing projects with five units or more plunged 26.3% to a rate of 334,000 units. Permits for future homebuilding jumped 6.9% to a rate of 1.543m units, the highest since October 2022. They were boosted by a 14.8% surge in multi-family housing permits to a rate of 535,000 units. Single-family housing permits rose 2.0% to a rate of 949,000 units, the highest since May 2022. Despite starts falling sharply in August, the uptick in building permits “suggests housing starts could pick up modestly again and today’s data could reflect some volatility,” CIBC Economics said in a note. “Nonetheless, the cooling in building activity is a good sign for the Fed which is expecting to limit housing market activity in an effort to contain inflation.”

 

Bloomberg

Market Watch

Reuters

Washington Examiner

A wholly-owned Walmart subsidiary is challenging its liability for $8m in Missouri use tax and interest for IT equipment it purchased and resold to Walmart stores and Sam's Clubs. The subsidiary argues that the equipment was solely meant for resale to Walmart-owned stores, qualifying for the resale exemption. The Missouri Supreme Court has previously rejected the state's narrow interpretation of the resale exemption.

 

Bloomberg Tax

The recent Tax Court ruling in Sinopoli v. Commissioner has brought attention to the Masters rule, a tax provision that allows homeowners to exclude income when renting their properties for up to 14 days annually. The rule, which originated from the Augusta National Golf Club's world-famous tournament, is now facing scrutiny in the age of Airbnb and social media influencers. The Sinopoli case revealed the challenges taxpayers face when creatively interpreting this rule. The Tax Court found that the taxpayers' rental deductions were part of a tax-saving strategy and adjusted the deductions accordingly. The court also disallowed certain marketing expenses, highlighting the risks of aggressive tax strategies. While the Masters rule offers advantages, the Sinopoli case may indicate a shift in the IRS's stance. Tighter enforcement, amendments, or a repeal of the rule could be possible outcomes. Staying within the boundaries of the law becomes imperative as tax strategies evolve.

 

Bloomberg Tax

Bankrupt crypto exchange FTX is suing founder Sam Bankman-Fried's parents, accusing them of siphoning millions of dollars in company funds to enrich themselves and their "pet causes." The lawsuit, which was filed in the U.S. Bankruptcy Court for the District of Delaware by lawyers representing the estate of the collapsed exchange, alleges that Allan Joseph Bankman and his wife, Barbara Fried, “exploited their access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars.” Bankman-Fried’s parents are legal scholars who taught at Stanford Law School. His mother is an expert on ethics, while his father specializes in taxes. The FTX lawsuit seeks compensatory relief, including punitive damages resulting from Bankman and Fried’s “conscious, willful, wanton, and malicious conduct,” as well as the return of any property or payments made to the pair from FTX.

 

CNN

CNBC