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Danny Werfel resigns as IRS commissioner

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IRS commissioner Danny Werfel said Friday he plans to resign next Monday, Jan. 20, coinciding with Inauguration Day.

President-elect Donald Trump announced plans last month to nominate former Rep. Billy Long, a Republican from Missouri, as the next IRS commissioner, even though Werfel’s term doesn’t end until November 2027. 

“While I had always intended to complete my full term as Commissioner, the President-elect has announced his plan to nominate a new IRS Commissioner,” Werfel said in an email Friday to all IRS employees. “I have been touched by those who have reached out to me to share how they were hopeful that I could remain in seat and continue the important work underway. But as civil servants, we have a job to do, and that job is to now ensure a new Commissioner is set up for success.”

Werfel has been serving as IRS commissioner since March 2023 after previously serving as acting commissioner in 2013, bringing much needed stability to the agency after a scandal erupted over the delayed approval of political groups for tax-exempt status. During his most recent tenure, he oversaw tax seasons that ran relatively smoothly thanks to increased funding from the Inflation Reduction Act as well as the launch of the free Direct File program for electronic filing.

“After significant introspection and consultation with others, I’ve determined the best way to support a successful transition is to depart the IRS on January 20, 2025,” Werfel wrote. “While leaving a job you love is never easy, I take comfort in knowing that the civil servant leaders and employees at the IRS are the exact right team to effectively steward this organization forward until a new IRS Commissioner is confirmed. I know this because of what I have seen you achieve over the past two years — remarkable work that will serve as a strong foundation for the future.”

Werfel said he has been holding discussions with members of Congress and the presidential transition team to ensure a smooth transition at the IRS as the start of tax season approaches on Jan. 27.

“At the IRS, we can’t take any days off in protecting the non-partisan nature of our work,” he wrote. “And this of course includes during a presidential transition. In the past few weeks, I have had discussions with IRS employees, members of Congress, staff on the transition team and other stakeholders on how the IRS can best ensure a successful transition to a new administration. I start each of those conversations with the same key point: As a non-partisan entity, the IRS will work as tirelessly to support the incoming Treasury team’s agenda just as we have for the outgoing Treasury team.”

Werfel was asked during a press conference last week about how long he plans to remain at the IRS and insisted he has remained “laser focused” on his job and preparing for filing season.

“I spend every waking hour during the day and, quite frankly, at night, focused on one thing and one thing only, and that’s getting ready for this filing season,” said Werfel. “That has consumed all of my energy, and that is my sole focus.”

Long has not yet been officially nominated by Trump, and in the meantime, deputy commissioner Douglas O’Donnell will be in charge of the agency.

“Deputy Commissioner Douglas O’Donnell, with his extensive experience and proven leadership, will step in as Acting Commissioner, to ensure a smooth transition and continuity of the agency’s critical work until a new Commissioner is confirmed,” said Werfel on Friday. “Over the next few days, we will provide more specifics on leadership changes. I also want to thank the Treasury Secretary, the Deputy Secretary, and their entire leadership team who have been active champions for all the positive change underway.”

Werfel has been leveraging the funding from the Inflation Reduction Act to improve taxpayer service, technology and enforcement at the IRS, including new digital tools such as the Tax Professional Online Account

“We are making major progress toward the same modern experience that taxpayers get with their bank or financial institution,” he wrote. “We launched more digital tools in the last two years than the previous 20, making it easier for taxpayers to access services and manage their accounts. This includes more than two dozen new features and enhancements to Individual and Tax Professional Online Account and the launch of Business Tax Account.”

The IRS has also been ramping up enforcement, doing more audits of large partnerships and corporations and high-income taxpayers, as well as cracking down on abuse of the Employee Retention Credit, imposing a temporary moratorium on processing new ERC claims. The IRS has since lifted the moratorium, but a recent report from National Taxpayer Advocate Erin Collins has criticized the slow processing of the claims. while lauding other improvements in taxpayer service at the IRS. Long has been a booster for the ERC since leaving office and was recently questioned about it by Sen. Elizabeth Warren, D-Massachusetts, in a letter last week.

Werfel highlighted some of his other accomplishments in his email to IRS employees. “We launched new initiatives to ensure tax enforcement is fair by strengthening complex and high-end enforcement,” he wrote. “In just one example, more than $1.4 billion has been recovered from a small number of high-income people who have not paid overdue tax debt or filed tax returns for many years. Lastly, we have made major progress updating foundational technology to process transactions more quickly, transparently and securely. We have turned a corner on modernizing our core processing system, the Individual Master File, and we are now running the new system in parallel with our legacy system, a longstanding goal of the agency. Brick by brick — and online tool by online tool — we are making improvements that will empower IRS to more quickly implement any tax code changes like those that may be enacted in 2025, while reducing the costs of maintaining IRS systems.”

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Accounting

Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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