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Accounting

Private sector added 233K jobs in October as annual pay grew

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Private sector employers added a robust 233,000 jobs in October as annual pay grew 4.6% year over year, payroll giant ADP reported Wednesday.

The ADP National Employment Report found the service-providing sector contributed the bulk of those jobs, 211,000, including 31,000 in professional and business services such as accounting and tax preparation, and 11,000 in financial activities such as banking. The goods-producing sector added only 22,000 jobs, including 37,000 jobs in construction and 4,000 in natural resources and mining offset by a loss of 19,000 manufacturing jobs. 

Small businesses with between one and 19 employees added 10,000 jobs last month, but businesses with between 20 and 49 employees lost 6,000 jobs last month. Medium-size establishments with between 50 and 249 employees gained 58,000 jobs, and those with between 250 and 499 employees added 28,000 jobs. Large establishments with 500 employees or more added 140,000 jobs.

“I’m pleased to report a very strong and healthy labor market with you today in a month that promised to be super messy with a double hit of hurricanes,” said ADP chief economist Nela Richardson during a conference call Wednesday with reporters. “We are seeing that the national labor market was strong and is broadly robust.”

ADP
An ADP sign at the TechFair LA job fair in Los Angeles.

Patrick T. Fallon/Bloomberg

Year-over-year pay gains for people who stayed at their jobs dipped to 4.6%, continuing a two-year slowdown. For those who changed jobs, pay gains slowed to 6.2%. In professional and business services, the percentage for job stayers was 4.5%.

“In the midst of such strong job gains, the wage premium between job changers and job stayers fell to the lowest number we’ve ever seen since we’ve been calculating these numbers in October 2019,” said Richardson. 

The premium for switching jobs has fallen from a peak of 9% in 2022 to 1.5% today, so it’s less profitable for workers to switch jobs, and that helps explain the drop in the quit rates that ADP is seeing. 

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Accounting

Trump win may threaten IRS funding

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The Internal Revenue Service may be facing steep cuts in its budget with the win on Tuesday night of President-elect Donald Trump.

Funding for the IRS has become a political issue, with Republicans successfully pushing to cut the extra $80 billion funding from the Inflation Reduction Act of 2022 already during battles over the debt limit.

“I think IRS funding is at significant risk right now, both the annual appropriation funding as well as the remaining IRA funding,” said Washington National Tax Office principal Rochelle Hodes at the Top 25 Firm Crowe LLP. 

Donald Trump during an election night event in West Palm Beach, Florida
Donald Trump during an election night event in West Palm Beach, Florida

Win McNamee/Getty Images

So far, Republicans have mainly called for cuts in the IRS’s enforcement budget. The increase in enforcement is supposed to be used to pay for the cost of the IRA, but the funding increase is also supposed to be used for taxpayer service and technology improvements.

“The only question for me on funding is, will any portion of the funding remain available for taxpayer service-related improvements at the IRS?” said Hodes.

The Direct File free tax prep program that the IRA funded could also be targeted, even as the IRS makes plans to expand it beyond the original 12 pilot states this year to 24 next tax season.

“I don’t think that will be in the sight line, but the IRA money is part of what’s being used for that,” said Hodes. “As we’ve seen in appropriations bills, there could be language directed at that, that no money can be spent on that initiative.”

A more important priority will be the extension of the expiring provisions of the Tax Cuts and Jobs Act of 2017. “Getting TCJA resolved is going to be the first priority,” said Hodes. “The second question is, how will the cost of that endeavor be determined. If the view that is held by several Senate Republicans wins the day, then the cost of extending the expiring provisions will not be counted under those particular budget rules that are created dealing with extending current policy. If, however, that view is not adopted, then there is a high cost just to TCJA, and so any other provisions with cost will sort of stretch the boundaries of what many in Congress would be comfortable with. I think it will be necessary to see how the scoring goes for extending TCJA provisions.”

Trump has also called for exempting various forms of income, such as tip income, Social Security income and overtime from taxes.

“I also am not sure which of the ideas that were put forward on the campaign trail, other than extending TCJA, are provisions that have true champions who will want to pursue those,” said Hodes. 

That may depend on who ends up in Congress, with several important races in the House yet to be decided.

“Although the House remains undecided, the Republicans’ control of the Senate makes it much more likely that Republicans will be able to implement many of Trump’s proposed tax policies, such as making parts of the expiring 2017 TCJA provisions permanent,” said John Gimigliano, principal in charge of the Federal Legislative & Regulatory Services group within KPMG’s Washington National Tax practice, in a statement. “The pressing question now is how the Administration and Congress will fund such an ambitious agenda and what additional measures they might introduce, such as eliminating taxes on tips and overtime. These items will only add to the hefty $4+ trillion price tag they face. Until then, taxpayers should continue to stay apprised of developments and scenario plan for the different outcomes to get ahead.” 

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Accounting

Firms plan to raise fees next year

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Over half of accounting and tax firms plan to increase fees across all services in 2025, according to a new survey.

The survey, released Wednesday by practice management technology company Ignition, found that the majority (around 58%) cited rising business costs as the main motivator for their fee increases, while only 5% are raising prices to increase revenue. Most of the nearly 350 firms surveyed intend to increase fees across services by 5% or 10%.

Some 57% of the respondents plan to increase fees across all services. With regard to tax preparation specifically, 90% of the survey respondents plan to increase fees for individual tax returns, and 87% plan to increase fees for business tax returns. In addition, 70% plan to increase fees for tax planning and advisory services;. 85% plan to increase fees for bookkeeping and accounting services; and 76% plan to increase fees for CFO and controller services.

“While accounting firm owners are embracing price increases in 2025, the report shows that the majority (around 58%) cite rising business costs as the main motivator,” said Ignition global president Greg Strickland in a statement. “Only 5% are raising prices to increase revenue, which indicates an opportunity for firms to leverage pricing as a strategic tool to unlock revenue growth.”

The report found a shift from hourly billing to fixed-fee and value-based pricing, with 79% of the survey respondents indicating they use fixed-fee or value-based pricing for bookkeeping and accounting services. Over half (54%) use fixed-fee or value-based pricing for tax preparation services, 67% use fixed-fee or value-based pricing for tax planning and advisory services, and 75% use fixed-fee or value-based pricing for CFO and controller services.

The report benchmarked current fees for tax, accounting and advisory services, which varied based on firms’ annual revenue range. The biggest variation in pricing was for tax planning and advisory services in particular. For firms with revenue of as much as $250,000, approximately 23% said they charge less than $500 for these services, while a nearly equal number (around 21%) indicated they charge more than $2000.

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Accounting

Millionaire tax backed by Illinois voters in threat to Chicago

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Illinois voters approved a nonbinding proposal to add an extra 3% levy on annual incomes of more than $1 million, which could fuel a new effort to raise taxes on the state’s highest earners.

The ballot measure – which was an advisory question – won 60% of support, according to the Associated Press. About 90% of the votes have been counted.

“The vote is a gigantic step in the right direction,” said former Governor Pat Quinn, a supporter of the measure. 

quinn-pat-bl020212-357.jpg
Pat Quinn

Daniel Acker/Bloomberg

While the proposal has no legal effect, the vote opens the door to a new debate over ramping up taxes on the rich even as Illinois and Chicago, its biggest city, contend with population declines and a string of departures by major companies and wealthy residents. In 2020, voters rejected a separate measure backed by Governor JB Pritzker to replace the state’s flat tax on incomes with a graduated system that would raise rates on higher-earners.  

The Pritzker plan drew staunch opposition from billionaire financier Ken Griffin, who donated about $50 million to help torpedo the initiative. Griffin then left Chicago for Miami in 2022, moving the headquarters of his Citadel empire there as well. Companies from Caterpillar Inc. to Boeing Co. have also departed amid rising concerns over public safety, regulation and taxes. 

This year’s referendum asked voters if the Illinois Constitution should be amended to create the additional tax on income over $1 million. It called for using the proceeds to ease the state’s notoriously high property levies. 

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