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The 2025 filing season has been completed quietly, despite trepidation regarding the Internal Revenue Service’s ability to function effectively in the face of cuts in funding and staff. 

“It’s been pretty smooth,” according to Roger Harris, president of Padgett Business Services. “A very typical season. Of course, the last four or five days are always a challenge when all the procrastinators come in. There’s always a hiccup during the last week.”

One of the reasons it was smooth was a concerted effort to focus all IRS resources to make it smooth, according to Harris — an important lesson for the future.

(Read more: “Struggles ahead for the IRS.“)

“The IRS needs to have money and technology and people to work effectively,” he said. “It’s easy to pick on them, but the system wouldn’t work without them, so we need a well-functioning IRS. I don’t know how many people or dollars that takes — like many branches, they can probably do more with less — but we don’t want to cross over the line and become nonfunctional. Hopefully this smooth season is a harbinger of what’s coming.”

The ability of the agency to function effectively will be particularly important in the near future.

“There will be a massive tax bill, which will require the IRS to issue guidance and forms,” Harris explained. “They need the resources just to issue resources and to have the ability to process returns under the new rules. Once the law is passed, the burden is on the IRS to implement it. So many senior people and talented people have left, and we don’t know yet how well they will be able to function without them.”

Complexity for everyone

“It seems that no matter how well we have prepared for tax season with education, conferences, chats, what we can never be ready for is America’s changing taxpayer,” said Beanna Whitlock, managing member and executive director of Tax Pro Fellowship LLC, and former director of national public liaison for the IRS. “I remember when my parents went to the ‘tax man’ to have their taxes done. Normally they went just as soon as my dad got his W-2, because of the small refund they expected, which would normally fund our modest summer vacation. Now taxpayers are looking for the ‘great giveaway,’ whether it is the Earned Income Tax Credit, energy credits or the Child Tax Credit. Almost every taxpayer has a credit available to them. Those that partook of the advanced premium tax credit for health insurance through the exchange were shocked at having to pay some back — in many cases, this was a lot of money. Taxpayers do not understand the complexity of anything that has to do with federal, and in some cases, state tax complexity.”

Whitlock summarized her lessons learned during the busy season:

• Know your client. Much of this knowledge will come from requiring a deposit on the work to be done. If they balk now, imagine their attitude when the work is finished.
• Do not feel sorry for your client. You didn’t make their decisions nor were you consulted. The tax professional’s job is to prepare a complete and accurate tax return and, in the process, educate clients about our tax system. 

“Our service to America’s taxpayers is of quality return preparation, and representation of our taxpayer at the highest level,” she said. “When we look in the mirror we should like who we see.”
For those who work primarily with individual and family office clients, tax season begins in late November and December, prior to the beginning of the traditional tax season period, according to Jim Guarino, managing director at Top 100 Firm Baker Newman Noyes. 

“This is primarily due to the concentrated efforts we spend working with our clients to do year-end tax planning,” he explained. “Most tax seasons include a series of ebbs and flows beginning with year-end tax planning in late fall and continuing into mid-January when fourth quarter estimated tax payments are due. We then experience a minor lull between mid-January and mid-February as clients begin to receive their tax forms and assemble their documents. We typically notice an uptick in client correspondence in late February, which then leads to a period of nonstop tax preparation activity for the final six weeks of tax season, culminating on April 15.”

(Read more: “Tax season is over; now comes the hard part.“)

Guarino agreed with Harris that the 2025 season was fairly smooth: “This past tax season felt like a traditionally typical tax season without any notable hiccups or announcements other than the disaster relief provisions the IRS put in place to assist communities impacted by natural disasters in 2024 and early 2025. Although this past season was relatively uneventful, especially in comparison to tax seasons past, there are always lessons to be learned.”

That doesn’t mean it didn’t offer lessons, however, he said. “There was less client anxiety about the December 2025 expiration date of the Tax Cuts and Jobs Act,” said Guarino. “Although nothing has officially changed, there was less concern about initiating early 2025 tax planning. Taxable income spikes — required minimum distributions and capital gains — were higher than in 2023. Many of my retiree clients reported substantially larger 2024 RMDs and capital gain distributions (mutual funds) along with increased realized capital gains in their investment portfolios. This resulted in clients incurring higher tax liabilities in 2024 compared to 2023. 

The importance of thinking ahead

Proper prior planning, of course, can prevent those shocks.

“For many of our planning clients who had balances due, it was not a surprise, due to the year-end planning we did in November,” Guarino continued. “This prevented April tax trauma, and gave their investment advisors time to accumulate cash so they would have the necessary cash available to make their April tax payments.”

“There was an uptick in the number of clients requesting additional tax planning and tax advisory services,” he added. “In effect, clients are looking for holistic financial planning advice, much of which is centered on how taxes impact their financial decisions. The more frequently requested client inquiries included business owners requesting business succession and retirement planning advice, pre-retirement couples requesting advice on traditional IRA rollover and Roth IRA conversion planning, Social Security claiming options, and IRMAA threshold planning [income-related monthly adjustment amount for Medicare Part B and Part D premiums].”

Guarino described a situation in which the firm’s experience and curiosity saved a client thousands of dollars.

“We encountered an unusual situation concerning a Form 1099 reporting error for one of our clients,” he said. “We noticed a substantial short-term capital gain from the sale of three blue-chip type securities during one of our client engagements. The cost basis was extremely low and was not consistent with the fair market value of the securities during 2024. We suspected that the tax basis only represented the cost for an option to purchase the security instead of the actual price, and asked the client’s investment advisor to review whether the assigned tax basis was correct.”

On further review, they determined that the securities sold were the result of a previous stock split, the original stock had been purchased decades earlier, and the allocated tax basis to the news shares was minimal. 

“This explained the very low tax basis assigned to the security sales but did not explain the short-term category of the gains,” Guarino said. “We believed the gain should have been long-term gains, not short-term. If left uncorrected, the client’s short-term capital gain would have been taxed at a 37% tax rate compared to a 15% rate. The difference in federal tax liability would have amounted to more than $15,000.”

“We’ll never know if this reporting error would have been caught by our client if they had prepared their own return, or by a less-experienced tax preparer,” he concluded. “Would most taxpayers have simply input the $70,000 short-term capital gain into their software and not questioned the appropriateness of the 1099 reporting? It was gratifying that our firm’s review process and sense of professional curiosity resulted in our client saving that amount.”

Risks on the rise

The big news from this tax season is that liability claims for tax services are really up, according to John Raspante, senior vice president and director of risk management at McGowanPro. Until this past tax season, Raspante kept a small CPA practice in addition to his work as an insurance executive. 

Part of the reason for the rise is that a lot of firms stopped doing audit work. “Audit engagements just weren’t profitable, especially in government engagements,” he said. “There is not much in the way of fees, and it’s not worth the time needed to satisfy professional standards.”

“Moreover, taxes are not getting any easier,” he observed. “Staffing has caused problems, and although outsourcing has helped, there are still issues. Without outsourcing it could be a perfect storm — lack of staff combined with increased oversight by authorities, including audits and exams. Tax claims continue to be the most common, but they’re the smallest in dollar amount.”

More broadly, Raspante foresees more changes in ownership of accounting firms coming through private equity, as has been the case in other professions, such as dental practices. 

“I get calls about this almost daily,” he said. “It’s a switch in traditional succession planning. Different states have different rules, but as long as the firm is 51% owned by CPAs, it’s good. The problem from a liability standpoint is the fact that down the road, clients may use this as a factor once their liability goes before a jury. Where non-CPAs are involved could be an element of concern.”

People trust AI tools less and are more worried about their negative impacts than they did two years ago but, despite this, their use has been growing steadily, as many feel the benefits still outweigh the risks. 

This is according to what Big Four firm KPMG said was the largest survey of its kind, polling over 48,000 people across 47 countries, including 1,019 people in the U.S. 

The poll found, among other things, that the proportion of people who said they were willing to rely on AI systems went from 52% in 2022 to 43% in 2024; the proportion of those saying they perceive AI systems as trustworthy went from 63% to 56%; and the proportion of those saying they were worried about AI systems rose from 49% to 62%. 

Yet, at the same time, most people use AI today in some form or another. The poll found that the proportion of organizations reporting that they’ve adopted AI technology went from 34% in 2022 to 71% in 2024; consequently, the proportion of employees who use AI at work went from 54% to 67% in the same time period.

Outside of work, in terms of their personal lives, 20% of respondents said they never use AI, but 51% said they use AI daily, weekly or monthly. For the most part, when people are using AI, it is usually a general purpose public model: 73% said this is what they use for work, versus 18% who are using AI tools developed or customized to their particular organization. 

However, while more people are using AI, fewer say they know enough about it. The poll found that nearly half, 48%, reported their AI knowledge as “low” while a further 31% rated it as “moderate.” Only 21% said they had a high amount of knowledge on AI. 

Despite this, most who use AI believe they’re pretty good at using it effectively. The poll found 62% saying they could skillfully use AI applications to help with daily work or activities; 60% said they could communicate effectively with AI applications; 59% said they can choose the most appropriate AI tool for the task; and 55% said they can evaluate the accuracy of AI responses. Those saying they lacked confidence in any area hovered between 21% to 24%.

The report suggested that this disparity might be due to AI solutions having intuitive interfaces that people can quickly grasp: just as one may not need to know much about cars to drive one, maybe people don’t need to know how AI works to use it well. 

This could be borne out by the benefits people say they have personally witnessed from using AI. A clear majority, 67%, of those using AI at work said they have become more efficient, 61% say it has improved access to accurate information, 59% say it has improved idea generation and innovation, 58% say the quality or accuracy of work and decisions has improved, and 55% say they have used it to develop skills and ability. 

However, other viewpoints are more contentious. Yes, 36% say it has saved them time on repetitive and mundane tasks but 39% say it has increased time; 40% say it has decreased their workload but 26% say it has increased it; meanwhile, 36% say it has led to less pressure and stress at work, but 26% say it has added more. Tellingly, while 19% say AI has reduced privacy and compliance risks, 35% say it has made them worse, and while 13% think it has led to less monitoring and surveillance of employees, 42% say AI has amplified it.  

While more people are using AI, they are not always doing so in ways their organizations would approve. The poll found, for example, that about 31% have contravened specific AI policies at their organizations, 34% admit they uploaded copyright material or intellectual property to a generative AI tool, and 34% said they uploaded company information. Meanwhile, 38% admitted to using AI tools when they weren’t sure if it was allowed and 31% used AI tools in ways that might be considered inappropriate (though the specifics of what that might mean was not mentioned.) 

People are also not entirely forthcoming when they have used AI, as the survey found 42% avoided revealing AI use in their work and 39% have passed off generative AI content as their own. 

The poll also found that AI has had impacts on how people work: 51% concede they’ve gotten lazier because of AI, 42% say they’ve relied on AI output without evaluating the information, and 31% admit they’ve made mistakes in their work because of AI. 

This might explain, at least partially, why 43% overall have reported personally witnessing negative outcomes from AI. The three biggest problems people have personally seen with AI are “loss of human interaction and connection” with 55% saying they’ve seen this; inaccurate outcomes, at 54%; and misinformation or disinformation, at 52%. Meanwhile, though they remain the lowest in the list, a still-troubling 31% said they saw bias or unfair treatment due to AI, 34% have witnessed both environmental impacts and the undermining of human rights due to AI, and 40% said they have seen manipulation and harmful use of AI (though, again, the specifics of this were not elaborated upon.) While right now many still believe the benefits outweigh the risks, this proportion has actually lowered from 50% in 2022 to 41% in 2024. 

However, 83% report they would be more willing to trust an AI system when such assurance mechanisms are in place. The survey also found strong support for the right to opt out of having their data used by AI systems, 86%, as well as for monitoring for accuracy and reliability, 84%, training employees on safe and responsible AI use, 84%, allowing humans to override the system’s recommendations and output, 84%, and effective AI laws or regulations, 84%. The poll also found that the clear majority, 74%, support third party independent assurance for AI systems. 

“Employees are asking for greater investments in AI training and the implementation of clear governance policies to bridge the gap between AI’s potential and its responsible use,” said Bryan McGowan, trusted AI leader for KPMG. “It’s not enough for AI to simply work; it needs to be trustworthy. Building this strong foundation is an investment that will pay dividends in future productivity and growth.”

The Public Company Accounting Oversight Board’s Investor Advisory Group is asking for examples of critical audit matters or key audit matters that can be used for analysis.

The PCAOB’s Office of the Investor Advocate released an advisory last week asking the public to submit examples to the Investor Advisory Group by June 30. 

The nominations can come from public company issuers (both management and boards), auditors, financial analysts and investors. They’re looking for the most decision useful CAM or KAM contained in public company audit reports included in the 2024 Form 10-Ks and Form 20-Fs. The PCAOB began requiring the disclosure of CAMs in 2019, while the International Auditing and Assurance Standards Board began requiring KAMs disclosures in 2016.

The IAG plans to choose what they believe to be the top three decision useful CAMs or KAMs for 2024 among those nominated. The CAMs or KAMs selected will be identified and discussed in an IAG report expected to be issued publicly later this year.

Each nomination (which may be submitted anonymously) should include an explanation (maximum five hundred words) of why the nominated CAM or KAM provides decision useful information to investors.

The IAG has asked the public to provide submissions to the IAG by June 30, 2025. For more details, see the IAG announcement available here. A similar announcement went out last year.