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In the blogs: Feeling your pain

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High-income backdown; Direct File collision; the vaping excise mess; and other highlights from our favorite tax bloggers.

Feeling your pain

  • Parametric (https://www.parametricportfolio.com/blog): One favorite opening of the week: “Presidential election cycles are invariably driven by emotions, often accompanied by unpredictable and even shocking events.” How to look more dispassionately at our parties’ tax policies.
  • Virginia – U.S. Tax Talk (https://us-tax.org/about-this-us-tax-blog/): A recent Treasury Inspector General for Tax Administration report said that to meet an audit quota set in 2020, the IRS started examining tax returns that fit a designated profile of “high-income” taxpayers even if these returns did not show typical signs of irregularities. As TIGTA reports, the drop in efficiency at the IRS was so steep that the agency has ceased compliance with the directive.
  • Don’t Mess with Taxes (http://dontmesswithtaxes.typepad.com/): Matchup of big-boy letters: The IRS and the congressional GOP are on a collision course over the Direct File program.
  • National Taxpayer Advocate (https://www.taxpayeradvocate.irs.gov/taxnews-information/blogs-nta/): The IRS forums are off and running, and one quote’s called out from the “Taxpayer Advocate’s town hall: “I feel your pain — telephones are sadly the No. 1 thing I hear about when chatting with tax pros.”
  • Marcum (https://www.marcumllp.com/insights): On July 19, many organizations found themselves fighting to restore operations after a flawed update from the cybersecurity firm (no joke) Crowdstrike ignited the largest global IT outage in history. IT and cybersecurity communities need to scrutinize how a single failure caused such a massive disruption.
  • Taxable Talk (http://www.taxabletalk.com/): Is this or isn’t this a phishing attempt? A number of clues to examine a given example.
  • Tax Vox (https://www.taxpolicycenter.org/taxvox): Ask seven public policy think tanks how to get the federal budget on a “strong, more sustainable fiscal path” and you’ll get seven different answers. But when one foundation recently asked that question of policy shops that spanned the political spectrum, nearly all respondents agreed on one thing. 

Across borders

  • HBK (https://hbkcpa.com/insights/): A look at Canada’s new Digital Services Tax, which kicked in on June 28 with a 3% tax on Canadian-source digital services revenue earned by large domestic and foreign taxpayers.  
  • The Tax Times (https://www.thetaxtimes.com): Turns out that a Canadian citizen’s $6.5 million in gains from her sale of a U.S. partnership interest in a company that sold energy drinks was not federally taxable as income, reversing a U.S. Tax Court ruling. 
  • Tax Foundation (https://taxfoundation.org/blog): Another fav opening: “The U.S. vaping market is a disaster.” Streams of illicit products and a mishmash of excise taxes combine for no one knowing whether these taxes are being collected and remitted.
  • Avalara (https://www.avalara.com/blog/en/north-america.html: A Wayfair 2.0 case is brewing in Illinois, but how level can the playing field really be?
  • Peisner Johnson (https://peisnerjohnson.com/blog/): Why automation alone won’t cut it when clients try to keep up with sales tax obligations.

Think about it

  • University of Illinois Tax School (https://taxschool.illinois.edu/blog/): An upcoming webinar addresses what some don’t want to think about: a potentially looming cliff for the TCJA estate tax exemption.
  • Dean Dorton (https://deandorton.com/insights/): For any entity that receives federal funding, the process for monitoring and managing grant money is about to be streamlined and simplified. 
  • Sikich (https://www.sikich.com/insights/): The U.S. Compliance Supplement guides federal agencies in establishing audit protocols to ensure non-federal entities comply with 2 CFR Part 200 (the supplement is also used by entities’ auditors to shape and select audit procedures). Changes this year to both the annual Compliance Supplement and Uniform Guidance should be on non-federal entities’ radars. A recap of the major updates.
  • Taxing Subjects (https://www.drakesoftware.com/blog): What to remind them about home energy credits.
  • Summing It Up (http://blog.freedmaxick.com/summing-it-up): What biz clients who are trying to plan an exit strategy should know about ESOPs.

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Accounting

Accountants on IRS and PwC layoffs, accounting students and more

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Complimentary Access Pill

Enjoy complimentary access to top ideas and insights — selected by our editors.

This week’s stats focus in part on the job titles seeing the greatest losses at the IRS during layoffs; as well as the states that have proposed or passed alternatives to the 150-hour rule; the percentage of master’s in accounting program applicants since 2020; the number of PwC employees laid off in May; the projected size of Deloitte’s new New York City headquarters; and the amount of 2026 HSA annual contribution limits, depending on coverage.

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CrowdStrike says DOJ, SEC sent inquiries on firm accounting

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CrowdStrike Holdings Inc. said U.S. officials have asked for information related to the accounting of deals it’s made with some customers and said the cybersecurity firm is cooperating with the inquiry.

The Austin, Texas-based company said in a filing Wednesday that it has gotten “requests for information” from the U.S. Department of Justice and the Securities and Exchange Commission “relating to the company’s recognition of revenue and reporting of ARR for transactions with certain customers.” ARR refers to annual recurring revenue, a measure of earnings from subscriptions.

The company said the federal officials have also sought information related to a CrowdStrike update last year that crashed Windows operating systems around the world.

“The company is cooperating and providing information in response to these requests,” the filing states.

U.S. prosecutors and regulators have been investigating a $32 million deal between CrowdStrike and a technology distributor, Carahsoft Technology Corp., to provide cybersecurity tools to the Internal Revenue Service, Bloomberg News first reported in February. The IRS never purchased or received the products, Bloomberg News earlier reported.

The investigators are probing what senior CrowdStrike executives may have known about the $32 million deal and are examining other transactions made by the cybersecurity firm, Bloomberg News reported in May.

Asked for comment about the filing, CrowdStrike spokesperson Brian Merrill said, “As we have told Bloomberg repeatedly, this is old news and we stand by the accounting of the transaction.” 

A lawyer for Carahsoft previously declined to comment on the federal investigations, and representatives didn’t respond to subsequent requests for comment about them.

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Elon Musk urges Americans take action to ‘kill’ Trump tax cut bill

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Tech titan Elon Musk ratcheted up his offensive against Donald Trump’s signature tax bill on Wednesday, urging that Americans contact their lawmakers to “KILL” the legislation.

“Call your Senator, Call your Congressman,” Musk wrote in a social media post. “Bankrupting America is NOT ok!”

The post came one day after Musk lashed out at the tax bill, describing it as a budget-busting “disgusting abomination” as Republican fiscal hawks stepped up criticism of the massive fiscal package. 

Trump hasn’t publicly responded to Musk’s comments, but the White House put out a statement Wednesday saying the legislation “unleashes an era of unprecedented economic growth.” 

And House Speaker Mike Johnson told reporters that Musk is “dead wrong” about the bill and that the tax cuts will pay for themselves through economic growth.

Musk’s public condemnation pits him against the president at a critical time as Trump is personally lobbying holdouts on the bill. His campaign against the legislation threatens to stiffen resistance and delay enactment of the tax cuts and debt ceiling increase. 

Musk has attacked the legislation days after leaving a temporary assignment leading the administration’s Department of Government Efficiency initiative to cut federal spending. The Tesla Inc. chief executive officer’s high-profile role in the Trump administration eroded his business brand and sales of his company’s electric vehicles plunged. 

The House-passed version of the tax and spending bill would add $2.4 trillion to U.S. budget deficits over the next decade, according to an estimate released Wednesday from the nonpartisan Congressional Budget Office.

The CBO’s calculation reflects a $3.67 trillion decrease in expected revenues and a $1.25 trillion decline in spending over the decade through 2034, relative to baseline projections. The score doesn’t account for any potential boost to the economy from the bill, which Johnson and Trump argue would offset the revenue losses. 

Musk, the world’s richest man with a net worth of about $377 billion according to the Bloomberg Billionaires Index, has become a crucial financial backer of the Republican party. After making modest donations most years, Musk became the biggest U.S. political donor in 2024, giving more than $290 million.

Johnson said Musk had promised to help reelect Republicans just a day before savaging Trump’s bill. Musk did not respond to a request for comment. 

Most of Musk’s giving was aimed at electing Trump but he also supported congressional candidates. America PAC, the super political action committee that Musk largely funded, spent $18.5 million in 17 separate House races. Though that total pales in comparison to the roughly $255 million he spent backing Trump, the spending means a lot in a congressional election, where challengers on average raise less than $1 million.

Control of the House will likely be decided by the outcome of fewer than two dozen close races in the 2026 midterm elections. The GOP’s chances of holding their majority would suffer a major blow if Musk were to withdraw his financial support.

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