Tax Court judges; like-kind slip-ups; estate planning and digital assets; and other highlights from our favorite tax bloggers.

Start to finish

• Eide Bailly (https://www.eidebailly.com/taxblog): How Congress is behaving like a lazy teenager in the face of monumental tax decisions.
• Institute on Taxation and Economic Policy (https://itep.org/category/blog/): Rampant uncertainty this year extends beyond the national economy and federal policy. Many state legislatures are declaring their tax and budget debates finished and just getting started, sometimes in the same breath.
• The Wandering Tax Pro (http://wanderingtaxpro.blogspot.com/) Fifty years of professionally filing can be yours in “The Joy of Preparing Taxes.”

Benchmarks

• TaxProf Blog (http://taxprof.typepad.com/taxprof_blog/): Favorite opening of the week: “Tax practice is like comedy. Timing is critical.” Of all the corners citizens must round squarely when interacting with government, the timing requirements in the Internal Revenue Code contain some of the squarest and sharpest. Did the Supreme Court’s decision in Boechler v. Commissioner sand down some of those corners?
• HBK (https://hbkcpa.com/insights/): The Tax Court’s recent decision in Kaleb J. Pierce v. Commissioner provides guidance for valuing closely held business interests in the context of gift tax planning — and IRS scrutiny.
• Taxnotes (https://www.taxnotes.com/procedurally-taxing): To remedy an “asymmetric information gap,” this series provides a guide to each Tax Court judge. First is Judge Patrick J. Urda, and reader input is sought for future profiles. No pejorative comments, please, but there is great interest in comments about specific practices.

In action

Three questions

The Internal Revenue Service has been conducting “sweeps” in recent years to uncover cases where high-income people have not been filing taxes, but the tracking data and training need to be improved, according to a new report.

The report, released last week by the Treasury Inspector General for Tax Administration, found that high-income nonfiler sweeps cases worked on by IRS revenue officers from fiscal years 2021 through 2022 were more impactful in terms of case closures and dollars collected than similar non-sweeps cases. As a percentage of the overall cases they worked on, revenue officers secured more returns under sweeps than non-sweeps and referred significantly more returns to the IRS’s Examination function. “For tax years 2014 through 2020, revenue officers consistently collected more per sweep case than non-sweep case,” said the report.

Sweeps are a strategy employed by the IRS to either address an increase in its unassigned high-priority inventory of tax cases in an understaffed location or to support a compliance initiative, such as egregious employment tax cases and high-income nonfilers. The IRS expanded the use of sweeps between fiscal years 2019 and 2022.

Last year, former IRS Commissioner Danny Werfel announced an initiative in which it began sending notices to high-income people who haven’t been filing tax returns since 2017.

“When people don’t file a tax return they’re required to, it’s not fair to those hardworking taxpayers who responsibly do their civic duty under the laws of our nation,” he said during a press call last year. “When people don’t file their taxes, they need to know there’s a consequence. And this is why I was particularly troubled to learn when I became commissioner that the IRS had to back off our core compliance work on non-filers. Due to severe budget and staff limitations, the IRS non-filer program has only run sporadically since 2016. This program pullback didn’t happen because of lack of information. The IRS knows who these non-filers are. The IRS has the third-party information, such as through Forms W-2 and 1099, indicating these people received significant income but failed to file a tax return. The IRS has known these people are out there, and they involved some very prosperous households.”

Sweeps were conducted throughout the U.S. and internationally, the TIGTA report noted, but there were several geographic areas in the continental U.S. that have a high number of high-income nonfilers where limited or no sweeps were done. The report suggested opportunities for more sweeps in places like eastern New Mexico, western Texas, northwestern Nevada and Wyoming. 

However, it’s unclear whether the IRS will be prioritizing such sweeps in the future, given the layoffs underway at the agency. On Monday, TIGTA reported that more than 11,000 IRS employees have been laid off so far this year, or about 11% of the workforce, under the Trump administration’s efforts to reduce the size of the federal workforce, with cuts especially heavily among revenue agents, where 31% have been laid off or agreed to participate in the voluntary buyout program. 

There were other areas where the sweeps could be improved. The review found that missing, incomplete, and/or inaccurate data were found in data fields such as the taxpayer’s name, address, revenue officer identifier and case assignment date. These errors were not identified and corrected before TIGTA’s review. 

TIGTA said it worked with the IRS to make corrections so the data reviewed for the audit were accurate and complete. However, it suggested the IRS would benefit from complete and accurate data to track the results of sweeps. 

The IRS’s Field Collection team is not always using sweeps to help train and develop employee skills, the report noted. And while the sweeps desk guide provides the IRS with many opportunities to develop employee skills, managers at the IRS’s Collection unit are not always taking advantage of them. Those kinds of activities have the potential to make sweeps an even more effective tool. 

TIGTA recommended that the IRS’s Small Business/Self-Employed Division’s director of Field Collection should continue to identify and perform sweeps of all types, including assessments of high-risk geographical areas as well as issue-based sweeps. The report also suggested the IRS should regularly review sweeps data to identify and correct errors and ensure it’s accurate and complete before using it for management reporting. The IRS should also capture more information in the tracking spreadsheet so management can better assess the productivity of each sweep, the report recommended. That should include information such as which delinquent tax return modules were secured, whether any of the returns had tax assessments, and the results of specific collection initiatives. In addition, the IRS should remind all levels of management of the sweeps desk guide procedures and provide refresher training on their responsibilities in the sweeps process, the report recommended. IRS management agreed with all of TIGTA’s recommendations.

“We appreciate the audit team’s efforts to understand Field Collection employees’ experiences with Sweeps through revenue officer and manager interviews,” wrote Lia Colbert, commissioner of the IRS’s Small Business/Self-Employed division, in response to the report. “Their experiences and feedback conveyed the positive impact of Sweeps, and the importance of raising awareness of tax laws and compliance for many taxpayers in communities across the country.”

Accounting is in the midst of a massive transformation that may leave some firms behind if they don’t keep up, industry leaders told attendees at a major event on Monday.

Delivering a keynote address at the BDO Alliance’s 2025 Evolve Conference, held this week in Las Vegas, alliance executive director Michael Horwitz likened the process to hiking the Grand Canyon from the North Rim to the South Rim — a grueling but ultimately rewarding journey that takes hikers down to the bottom of the canyon and then requires them to climb thousands of feet back up.

“There will more than ever be firms that will be left behind,” Horwitz said. “They’ll be able to see the other rim, but they won’t be able to reach it.”

And the rift will only get wider, he noted: “I believe that the tectonic shift that started in our business just a few years ago is only going to accelerate, and the difference between firms that have invested in transforming their relationships will only widen,” he told attendees.

Horwitz laid out a number of the largest challenges that accounting firms face — from the need to make significant investments in both staff and technology, to the aging of CPA firm leadership and the lack of succession planning, rapidly expanding service expectations (particularly around advisory services), the entrance of private equity into the accounting landscape, and an erosion in accountants’ confidence to insist on their own value — but noted that these issues also come with potential upsides.

“For every challenge, we can see the opportunity for those on the right side of the canyon to differentiate themselves,” he said, and offered four major steps firms can take to emerge successfully:

1.  Invest in people. “Firms are spending more time being intentional about helping their staff thrive,” Horwitz said, in areas ranging from compensation and incentivizing of top producers to offering a wide range of training.

As part of the same keynote session, BDO USA CEO Wayne Berson talked about the Top 10 Firm’s prioritization of this area: “Our strategy will focus on the wellbeing of our professionals,” he said. “We’ve seen significant changes in the workforce, and we have embraced those changes.”

Initiatives like adapting to an ever-more flexible workforce, becoming a C corp and then establishing an employee stock ownership program, and otherwise working to help their team members thrive have helped drive down turnover significantly, he explained.

2. Invest in technology. “The risks of not leveraging AI will be significant,” Horwitz warned. Berson highlighted the benefits of the firm’s introduction of its own instance of ChatGPT: “Since we launched ChatBDO, this tool has saved 1,200 users 600,000 hours on everyday tasks over two years,” he explained. “Regular users have increased their billable hours, without significantly increasing their hours spent — saving countless hours spent on administrative tasks.”

3. Invest in service offerings. To meet client needs, accountants need to go beyond traditional compliance services, whether by focusing extremely narrowly or offering a much wider range of service lines. “Some firms go deep, and some firms go broader,” Horwitz said. “I think the firm of the future will be rewarded for doing either one.”

4. Invest in relationships. Deepening connections with the right clients is critical for firms that want to reach the other rim of the canyon. “We’re all more or less in the relationship business,” he said. “Our vision is to establish trusted advisory relationships across what we call ‘priority accounts.'”

Changing the accounting model

Other speakers in the opening session highlighted another aspect of transformation that accountants need to focus on: the multiplying number of business models available to accounting firms.

“The Big Four are restructuring their businesses and thinking about their models,” said BDO Global CEO Pat Kramer. “There are models for every type of firm around the world, but making the right choice is critical.”

Mark Koziel, the new president and CEO of the AICPA, said the traditional structure of accounting firms needs some serious rethinking.

“There are many ways to improve on the business model that we have — the partnership model that was established over 150 years ago,” he told attendees. “The partnership model isn’t dying – it’s dead, and we have to figure out different ways of doing business.”

He was quick to emphasize the profession’s strong position of trust in the market, however, and the fact that there is upside to all the challenges faced by accountants. He noted how, when he took the helm at the AICPA on Jan. 1, many of his initial discussions with staff were focused on the problems.

“Internally, everyone kept talking about the issues, the issues, the issues,” he said. “But I said, ‘Wait a minute — these are all opportunities.'”