As of this writing, around 150 federal disaster declarations have already been announced for 2024, involving 44 states, two territories, and half a dozen Native American tribes or bands. Hurricane Helene resulted in greater loss of life than any natural disaster since Hurricane Katrina. 

After the immediate needs of those affected by disasters for shelter, food, water and communications are met, taxpayers look for help in rebuilding their lives. Both Congress and the Internal Revenue Service have acted to provide tax assistance in response to these disasters.

IRS filing and payment extensions

The IRS routinely issues information releases in response to federal disaster declarations highlighting the tax relief available. This relief includes an extension of filing and payment deadlines for those in the area of the disaster declarations. 

In Information Release 2024-253, the IRS addressed tax relief for the Helene disaster declarations. Those disaster areas include the entire states of Alabama, Georgia, North Carolina and South Carolin and 41 counties in Florida, eight counties in Tennessee, and six counties and one city in Virginia. Additional disaster declarations for Hurricane Helene are still possible.

These taxpayers now have until May 1, 2025, to file various federal individual and business tax returns and make tax payments. This includes 2024 individual and business returns normally due during March and April 2025; 2023 individual and corporate tax returns with valid extensions; and quarterly estimated tax payments. It also includes estimated tax payments, quarterly payroll tax returns, and excise tax returns. 

The IRS also stated that taxpayers who were already under filing and payment extensions for Tropical Storm Debby and are in the Helene disaster area now are further postponed to May 1, 2025.

The beginning effective date for this extended deadline for disaster relief for Hurricane Helene varies slightly with each disaster declaration: Sept. 22, 2024 in Alabama; Sept. 23 in Florida; Sept. 24 in George; Sept. 25 in North Carolina, South Carolina, and Virginia; and Sept. 26 in Tennessee.

The IRS will automatically provide filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. The service has specified procedures for other taxpayers who had their records in the disaster area but not their address, who recently moved into the area, or who had tax clients outside of the disaster area to obtain relief.

Casualty loss deductions

In addition to filing and payment extensions, the Tax Code provides a casualty loss deduction for uninsured or unreimbursed federal disaster-related losses. 

If the property is personal-use property or is not completely destroyed, the amount of the casualty loss is the lesser of the adjusted basis of the property or the decrease in the fair market value of the property as a result of the casualty. If the property is business or income-producing property, such as rental property, and is completely destroyed, then the amount of the loss is the adjusted basis minus any salvage value, insurance or other reimbursement received or expected to be received.

A casualty loss deduction is claimed as an itemized deduction on Schedule A of Form 1040. Even taxpayers who usually claim the standard deduction rather than itemized deductions may have a large enough casualty loss to warrant itemizing deductions. For property held for personal use, $100 must be subtracted from each casualty event after subtracting any salvage value and any insurance or other reimbursement. All such casualty amounts are then totaled, and 10% of the taxpayer’s adjusted gross income is subtracted from that amount to total the allowable casualty loss deduction for the year.

Generally, casualty losses are deductible in the year the loss is sustained, which is generally in the year the casualty occurred. A loss is not considered to have been sustained if there is still a reasonable prospect of recovery through a claim for reimbursement. However, very importantly to potentially get more rapid access to funds to speed recovery, a taxpayer can choose to treat the casualty loss as having occurred in the year immediately preceding the tax year in which the disaster loss was sustained, by filing an amended tax return even if the return for that year has already been filed. This can result in a more rapid refund than waiting to claim the casualty loss deduction when the 2024 tax return is filed in 2025.

Congress has in the past sometimes adopted special relief provisions with respect to casualty losses and specific disaster periods but has not yet done so for 2024 disasters.

Access to retirement funds

If the taxpayer has a retirement plan that permits hardship withdrawals, the taxpayer may be able to withdraw funds from the retirement plan penalty-free, with the right to repay the funds to the plan within three years or to spread the tax due on the withdrawn funds over three years.

Starting in 2024, a retirement plan may also permit a taxpayer to make an emergency withdrawal of up to $1,000 penalty-free.

Exclusion for relief payments

Qualified disaster relief payments from a government agency for necessary disaster-related expenses may generally be excluded from taxable income.

Summary

As of this writing, additional hurricanes are still threatening the East and Gulf Coasts, and wildfires continue to burn in the West. The number of federally declared disasters for 2024 is likely to continue to grow. As it has sometimes done in the past, Congress may, after the November elections, pass legislation that may include some additional tax relief for 2024 disasters.

High-profile enforcement activity is beginning to undermine the trust that the audit profession has earned over more than a century of diligent work. However, the historically large fines are not indicators of a degradation in audit quality. Instead, key audit quality indicators point to significant improvements in audit quality.

Recent enforcement actions by the Public Company Accounting Oversight Board appear to prioritize administrative burdens and punitive measures over substantive improvements in audit quality. As these multimillion-dollar fines make their way into headlines of mainstream news, the public perception of auditors and audit quality erodes.

Our profession supports the need to root out bad actors and poor quality, while ensuring the integrity of audits. However, the PCAOB’s current enforcement-first, overly prescriptive guidance leads to excessive administrative costs and enforcement measures that do little to enhance audit quality. Instead, this approach contributes to an atmosphere of hostility that forces staff and prospective auditors to think twice about their engagements and leadership roles in audit firms. This shift harms our profession — which is already struggling to attract and retain talent, even at the partner level — and also the broader capital markets.

Audit quality indicators already showed significant improvement before the PCAOB’s recent push for greater enforcement. For example, the Big Four audit firms have maintained relatively low deficiency rates, and the number of financial restatements has decreased dramatically in recent years. The percentage of material restatements, “Big R” restatements, fell from 28% to 18% from 2013 to 2022, reflecting better adaptation to new reporting standards and internal controls by public companies and their auditors, according to the Center of Audit Quality. While restatements ticked up slightly in 2021 due to financial statement reporting challenges resulting from COVID, in a more recent snapshot of our industry’s performance, the total number of restatements significantly decreased by 69% from 1,467 in 2021 to 454 in 2022.

Despite these gains, the PCAOB’s aggressive enforcement agenda overshadows the profession’s achievements. In the first half of 2024 alone, the PCAOB levied nearly $35 million in penalties — more than the combined total of penalties imposed in the previous four years. Just 10 years ago, the PCAOB levied fines totaling $85,000. In the span of a decade, that makes for an astonishing increase of over 40,000%. Prior to current PCAOB Chair Erica Williams, the average yearly fines from the board were approximately $2.6 million. From 2022 to the first half of 2024, the average annual total of fines sits at roughly $22 million.

This spike in fines reflects an ‘enforcement-first’ mentality that focuses on punishment rather than collaboration and guidance to improve quality.

Growing enforcement activity and eroded trust, despite improving audit quality

If we look more closely, many of these fines are imposed for technicalities, such as lapses in documentation, communication, or not filing a Form AP 60 in a timely fashion. Accounting firms should avoid these errors, yes, but the current regime punishes them with disproportionate severity. 

Rather than providing firms an opportunity to remediate without financial penalties, the PCAOB’s aggressive actions discourage professionals from continuing in the auditing field, undermining the goal of promoting high audit quality. The effectiveness of the board’s regulatory oversight should be measured by improvements in audit quality, not the dollar figure it tallies in fines.

High-profile enforcement actions often overshadow the diligent, day-to-day work that most auditors perform, and these incidents do not reflect the overall health of the profession. Yet still, enforcement activity remains elevated.

Doing more with less: Guidance, technology and people

Since COVID, audit professionals are being asked to do more with less. More work, greater scrutiny, and harsher penalties exacerbate the profession’s talent pipeline challenges. Recent PCAOB proposals suggest a drastic expansion of audit scope — including the proposal on noncompliance with laws and regulations, for example, that would require auditors to provide greater assurance across areas typically outside the scope of a financial statement audit, which would result in significant increases in time and effort, and significantly increased audit fees. 

While these regulations aim to increase trust and accountability, they can often create challenges for firms trying to comply. This is particularly true for smaller firms, which may struggle to meet new demands due to limited resources. Larger firms, while more equipped to adapt, must still weigh the balance of compliance against delivery of high-quality audits, and even some of the largest auditors have backed out due to the risk of over-zealous PCAOB enforcement.

Many firms see emerging technologies like artificial intelligence and automated analytics tools as a way to streamline processes and alleviate some aspects of increasing scrutiny and workloads. These innovations have the potential to revolutionize audits by automating data-heavy tasks and allowing auditors to focus on deeper, more complex analysis. 

While the technology exists, many firms face challenges in integrating it at the speed and scale needed, in part due to a regulatory environment that pushes for enforcement instead of innovation. I believe that with a proper refocusing on progressive policy and support in regards to audit technology, we can create a framework that leads to fast adoption of technology to not only support auditors, but substantially improve audit quality.

A balanced approach to reform

Voices within the profession already call for a more sensible approach to reform. Christina Ho, a PCAOB board member, advocates for practical standards that enhance audit quality without imposing undue burdens on firms. These perspectives, echoed by the Pennsylvania Institute of CPAs, stress the importance of balancing improved processes with realistic operational expectations.

Moving forward, the audit profession must navigate the fine line between regulation, enforcement and innovation. If current regulatory pressures continue unchecked, they could drive professional talent away, threatening the diversity and competitiveness of the field. By supporting policies that prioritize both innovation and practicality, the audit profession can continue to thrive in a rapidly changing environment.

Audit and finance automation platform Data Snipper announced the acquisition of AI-native UpLink, a cloud-based secure document request portal. UpLink is designed to instantly identify insights from large volumes of client documents in order to facilitate document collection, review, and testing. The integration within the DataSnipper ecosystem creates a seamless, unified workflow, enabling audit teams to manage the entire process as documents are received in real-time from clients.  … Accounting solutions provider Numeric announced it has attracted significant investor attention, leading to a $28 million Series A funding round led by Menlo Ventures, just five months after raising $10 million in seed funding. The round also saw participation from new investors like IVP and Socii, alongside previous backers such as Founders Fund and Long Journey. … Accounting-focused cloud services provider Rightworks experienced a brief outage on Oct. 15. A spokesperson said only a very small percentage of its firms were affected, and they were back up quickly.