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CPAs are collateral damage in DOL freelance rule, Trump administration must intervene

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Following the pandemic, a dramatic shift in the American workforce has led to an explosion in freelance labor. 

More than half of people born after 1996 are self-employed, forgoing the corporate ladder in pursuit of flexibility, autonomy and a “new American dream.” Even more complex tax requirements, such as the addition of quarterly IRS payments on estimated income, haven’t dulled the movement’s momentum, with freelancers opting to enlist qualified CPAs and accountants to help shoulder the burden instead of returning to full-time employment. However, in a chilling turn for these resilient freelancers and their trusted financial advisors, new regulations by the Department of Labor now threaten to irreparably damage the gig economy.

In late October, an Atlanta court ruled in favor of a Biden administration DOL guideline reclassifying many freelancers as full-time employees. The rule, which attempts to solve the problem of sub-par benefits that have long plagued those who are self-employed, does so by forcing companies to hire their most prolific freelancers so that they may receive employer-sponsored benefits. However, by hamstringing freelancers and employers into a work style they neither fully want, the DOL’s legislative folly risks destroying the freedom to freelance altogether. Thus, it is imperative that CPAs, accountants and other tax professionals band together with freelancers to implore the incoming administration to decisively repeal these guidelines.

The vital impact of freelance work

For millions of Americans, freelancing is a ticket to economic and geographical independence, and a way to level the playing field and uplift diverse perspectives in the workforce. None of these advantages can be easily replicated in a full-time work environment. From freelance writers broadening the perspective of publications to creatives transforming an organization’s brand, these workers infuse new energy into companies every day, in addition to contributing $1.27tn in annual earnings to the US economy. 

Freelancers also contribute more in taxes than the average worker, with the addition of a 15.3% self-employment tax to fund Social Security and Medicare to the normal slate of federal, state and local tax rates paid by all full-time employees. To offset these costs and help navigate the complexities of what constitutes a deductible business expense, freelancers will often turn to a professional CPA. This is a particularly critical step considering that freelancers are audited at three times the rate of full-time employees. Thus, even as full-time employees with W2-only returns have spurned their tax preparers for online options like TurboTax, the gig economy has become an unexpected lifeline for the dwindling accounting profession.

Better solutions for freelance benefits

Despite the DOL’s misguided approach, the agency is aligned with freelancers in believing that the lack of benefits is one of the most pressing issues for freelancers today, one of the reasons why health insurance premiums are a deductible business expense on Schedule C. Without access to employer-sponsored plans, freelancers are left to fend for themselves to create a health insurance benefits package or piece together their retirement fund. They miss out entirely on many of the most prominent benefits enjoyed by full-time workers, including sick, parental and maternity leave, paid vacation, a 401(k) match and even a steady month-to-month income. 

However, the accounting profession should join freelancers in imploring the next administration to let these issues be solved by the private sector, rather than through heavy-handed government action. Startups like Catch are already developing solutions to some of the biggest pain points of freelance work, including expensive health, dental and vision insurance. By acting as an administrative companion for independent contractors, Catch offers insurance rates comparable to those offered in a corporate benefits package, but for freelancers. However, in stark contrast to the DOL’s proposal, freelancers also retain their independence. If a startup can strike a balance between providing affordable benefits to freelancers while allowing them to operate independently, surely it is not too tall an order to demand that the DOL do the same.

An action plan for freelance advocacy

Almost 40% of the entire US workforce, or 64 million Americans, performed freelance work in just the past year alone. This is a figure worth celebrating not only for gig economy workers, but for every industry that benefits from a thriving freelance community, accountants and tax professionals included. However, if the DOL rule as written is allowed to remain on the books, the number of freelancers could decline precipitously in the coming years. Given the emerging, symbiotic relationship between the gig economy and their tax preparers, the accounting profession must intervene.

Taking action starts with lobbying the incoming administration for an immediate repeal of the DOL’s current rule on Inauguration Day. However, regardless of success or failure, the accounting profession should recognize its advocacy efforts are only beginning. Given the rising prevalence of the gig economy to accountants’ bottom lines, the profession should build on its momentum and push for pro-freelance legislation throughout the years to come, especially in support of self-employment tax reform efforts

As written, the Biden administration DOL rule muddles the definition of freelance labor so that most independent contractors could conceivably be reclassified as employees. Such an expansive proposition isn’t worth the risk, and the accounting profession should join freelancers in calling for an immediate repeal in favor of a more pragmatic approach to freelance labor. To sit idly by risks negating the positive impact of a thriving gig economy on the U.S. economy and its citizens.

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House passes tax administration bills

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The House unanimously passed four bipartisan bills Tuesday concerning taxes and the Internal Revenue Service that were all endorsed this week by the American Institute of CPAs, and passed two others as well.

  • H.R. 1152, the Electronic Filing and Payment Fairness Act, sponsored by Rep. Darin LaHood, R-Illinois, Suzan Delbene, D-Washington, Randy Feenstra, R-Iowa, Brad Schneider, D-Illinois, Brian Fitzpatrick, R-Pennsylvania and Jimmy Panetta, D-California. The bill would apply the “mailbox rule” to electronically submitted tax returns and payments to allow the IRS to record payments and documents submitted to the IRS electronically on the day the payments or documents are submitted instead of when they are received or reviewed at a later date. The AICPA believes this would offer clarity and simplification to the payment and document submission process while protecting taxpayers from undue penalties.
  • H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act, sponsored by Rep. Randy Feenstra, R-Iowa, and Brad Schneider, D-Illinois, which would require notices describing a mathematical or clerical error to be made in plain language, and require the Treasury to provide additional procedures for requesting an abatement of a math or clerical error adjustment, including by telephone or in person, among other provisions.
  • H.R. 517, the Filing Relief for Natural Disasters Act, sponsored by Rep. David Kustoff, R-Tennessee, and Judy Chu, D-California. The process of receiving tax relief from the IRS following a natural disaster typically must follow a federal disaster declaration, which can often come weeks after a state disaster declaration. The bill would provide the IRS with authority to grant tax relief once the governor of a state declares either a disaster or a state of emergency and expand the mandatory federal filing extension under Section 7508(d) of the Tax Code from 60 days to 120 days, providing taxpayers with more time to file tax returns after a disaster.
  • H.R. 1491, the Disaster related Extension of Deadlines Act, sponsored by Rep. Gregory Murphy, R-North Carolina, and Jimmy Panetta, D-California, would extend the amount of time disaster victims would have to file for a tax refund or credit (i.e., the lookback period) by the amount of time afforded pursuant to a disaster relief postponement period for taxpayers affected by major disasters. This legislative solution would place taxpayers on equal footing as taxpayers not impacted by major disasters and would afford greater clarity and certainty to taxpayers and tax practitioners regarding this lookback period.

“The AICPA has long supported these proposals and will continue to work to advance comprehensive legislation that enhances IRS operations and improves the taxpayer experience,” said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement Tuesday. “We are pleased to work closely with each of these Representatives on common-sense reforms that will benefit taxpayers, tax practitioners and tax administration and we’re encouraged by their passage in the House. We look forward to continuing to work with Congress to improve the taxpayer experience.”

The bills were also included in a recent Senate discussion draft aimed at improving tax administration at the IRS that are strongly supported by the AICPA.

The House also passed two other tax-related bills Tuesday that weren’t endorsed in the recent AICPA letter. 

  • H.R. 1155, Recovery of Stolen Checks Act, sponsored by Rep. Nicole Malliotakis, R-New York, would require the IRS to create a process for taxpayers to request a replacement via direct deposit for a stolen paper check. If a check is determined to be stolen or lost, and not cashed, a taxpayer will receive a replacement check once the original check is cancelled, but many taxpayers are having their replacement checks stolen as well. Taxpayers who have a check stolen are then unable to request that the replacement check be sent via direct deposit. The bill would require the Treasury to establish processes and procedures under which taxpayers, who are otherwise eligible to receive an amount by paper check in replacement of a lost or stolen paper check, may elect to receive such amount by direct deposit.
  • H.R. 997, National Taxpayer Advocate Enhancement Act, sponsored by Rep. Randy Feenstra, R-Iowa, would prevent IRS interference with National Taxpayer Advocate personnel by granting the NTA responsibility for its attorneys. In advocating for taxpayer rights, the National Taxpayer Advocate often requires independent legal advice. But currently, the staff members hired by the National Taxpayer Advocate are accountable to internal IRS counsel, not the Taxpayer Advocate, creating a potential conflict of interest to the detriment of taxpayers. The bill would authorize the National Taxpayer Advocate to hire attorneys who report directly to her, helping establish independence from the IRS. 

House  Ways and Means Committee Chairman Jason Smith, R-Missouri, applauded the bipartisan House passage of the various bills, which had been unanimously passed by the committee.

“President Trump was elected on the promise of finally making the government work better for working people,” Smith said in a statement Tuesday. “This bipartisan legislation helps fulfill that mandate and makes improvements to tax administration that will make it easier for the American people to file their taxes. Those who are rebuilding after a natural disaster particularly need help filing taxes, which is why this set of bills lightens the load for taxpayers in communities struck by a hurricane, tornado or some other disaster. With Tax Day just a few days away, we must look for common-sense, bipartisan ways to make filing taxes less of a hassle.”

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Accounting

In the blogs: Many hats

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Teaching fraud; easement settlement offers; new blog on the block; and other highlights from our favorite tax bloggers.

Many hats

  • Taxbuzz (https://www.taxbuzz.com/blog): There’s sure an “I” in this “teamwork:” What to know about potential IRS and ICE collaboration.
  • Tax Vox (https://www.taxpolicycenter.org/taxvox): How IRS data would likely be unhelpful validating SNAP eligibility.
  • Yeo & Yeo (https://www.yeoandyeo.com/resources): How financial benchmarking (including involving taxes) can help business clients see trends, pinpoint areas for improvement and forecast future performance.
  • Integritas3 (https://www.integritas3.com/blog): One way to take a bite out of crime, according to this instructor blogger: Teach grad students how to detect, investigate and prevent financial fraud.
  • HBK (https://hbkcpa.com/insights/): Verifying income, fairly distributing property, digging the soon-to-be-ex’s assets out of the back of the dark, dark closet: How forensic accounting has emerged as a crucial element in divorces.

Standing out

Genuine intelligence

  • AICPA & CIMA Insights (https://www.aicpa-cima.com/blog): How artificial intelligence and other tech is “Reshaping Finance,” according to this podcast. Didem Un Ates, CEO of a U.K.-based company offering AI advisory services, tackles the topic.
  • Taxjar (https:/www.taxjar.com/resources/blog): How AI and automation can help even the knottiest sales tax obligations and problems.
  • Dean Dorton (https://deandorton.com/insights/): Favorite opening of the week: “The madness doesn’t just happen on college basketball courts — it also happens when your finance team is stuck using a legacy on-premises accounting system.”
  • Canopy (https://www.getcanopy.com/blog): Top client portals for accounting firms in 2025.
  • Mauled Again (https://mauledagain.blogspot.com/): Despite what Facebook claims, dependents have to be human.

New to us

  • Berkowitz Pollack Brant (https://www.bpbcpa.com/articles-press-releases/): This Florida firm offers a variety of services to many industries and has a good, wide-ranging blog. Recent topics include the BE-10, nexus and state and local tax obligations, IRS cuts and what to know about the possible bonus depreciation phase out. Welcome!

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Accounting

Is gen AI really a SOX gamechanger?

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By streamlining tasks such as risk assessment, control testing, and reporting, gen AI has the potential to increase efficiency across the entire SOX lifecycle.

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