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IRS adds AGI import to Direct File

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The Internal Revenue Service has added a new feature to the Direct File free tax filing program that will import a taxpayer’s adjusted gross income from the previous year, according to the Treasury Department as a new government report finds the program could cost the IRS considerably more than the estimated $64 million to $249 million per year to maintain.

The IRS has been pilot testing the Direct File program in 12 states this tax season after launching it last month and has been seeing steadily increasing use, even though the pilot program is currently limited to certain types of income such as W-2 wages, Social Security and unemployment compensation and only supports the standard deduction. However, it promises to rival commercial tax software if more features get added to increase its usage, such as the ability to directly import prior tax return information, as in the newly added feature.

“An important update has been made to IRS Direct File to better serve taxpayers and minimize user error,” said a Treasury official in an email Tuesday. “When taxpayers finish their returns and it’s time to file, they must enter last year’s AGI or temporary PIN as the final step before submitting. With online filing options taxpayers have previously used, this information is imported from past years. An upgrade made today to Direct File will pull last year’s AGI from the information the IRS already has about you to minimize taxpayer error. In the opening weeks of Direct File being widely available, this was the most common mistake taxpayers would make because the information was not readily available to them because Direct File is a new tool. This upgrade is an example of how Direct File is being updated with taxpayers at the forefront.”

The Treasury said taxpayers are only able to access information from their own IRS account, which is protected via National Institute of Standards and Technology-compliant identity verification, and they cannot retrieve information for anyone else.

“Direct File was built with and for taxpayers and has been continuously improved based on their feedback and experience,” said Bridget Roberts, Direct File lead at the IRS, in a statement Tuesday. “This important update will allow Direct File users to take advantage of information the IRS already has to simplify the filing process even further.”

Separately on Tuesday, the Government Accountability Office released a report on the Direct File program that found more actions are needed during the pilot program to improve information on its costs and benefits. The IRS estimated that Direct File could cost between $64 million and $249 million annually, depending on assumptions such as the number of taxpayers served. The IRS estimated that participating taxpayers may save $21 million in tax preparation costs, according to the GAO report, but the IRS’s cost estimates did not include startup costs, such as the technology required for a new system. The GAO recommended, among other things, that the IRS estimate the full costs of developing and operating a Direct File system.

The program is largely funded by the Inflation Reduction Act of 2022, which allocated $80 billion over 10 years to the IRS to improve taxpayer service, technology and enforcement, although Congress later rescinded about $20 billion of that amount as part of a deal to avert a default on the debt limit. The Inflation Reduction Act appropriated funds for the IRS to study the cost of developing and running a free Direct File tax return system and included a provision for the GAO to oversee the distribution and use of such funds. 

A group of tax software companies have banded together to oppose expansion of the Direct File program and issued a statement in response to the GAO report.

“The report released today by GAO confirms the IRS Direct File program is an unnecessary and expensive solution in search of a problem,” said David Ransom, counsel for the American Coalition for Taxpayer Rights. “As the report demonstrates, the agency’s cost estimates — already in the hundreds of millions — failed to include startup costs, including the technology needed to launch the tool. As the tax filing season nears its end, we’re seeing just how little the appetite is for government-completed tax returns. Roughly 50,000 of the 19 million eligible Americans — far less than one percent — have used Direct File. In contrast, the tax industry provided nearly 30 million free returns last year. The millions of dollars spent on Direct File would be better directed towards improving IRS customer service and promoting Free File, a long-standing public-private partnership that provides free returns to low-income Americans.”  

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The IRS reported to Congress in May 2023 that it estimated the annual costs of a Direct File tax system could range from $64 million to $249 million depending on the number of taxpayers served and the complexity of tax situations supported, the GAO noted. The IRS also described the assumptions it used to estimate those costs. It assumed the Direct File system would start with a limited tax scope, as it did this tax season. The IRS also included elements of a sensitivity analysis to examine how its changes in assumptions could affect cost estimates. The IRS described how those costs were expected to change depending on the number of taxpayers served and the complexity of tax situations supported.

However, the report noted that the IRS’s cost estimates did not address other recommended best practices, such as ensuring all costs were included and documented. The GAO and the Treasury Inspector General for Tax Administration found the IRS had no documentation to support the underlying data, analysis or assumptions used for its Direct File cost estimates. IRS officials told the GAO that the cost estimates didn’t include startup costs, such as technology for a new system, which could be substantial. 

On the positive side, the report acknowledged that the Direct File pilot provides opportunities for the IRS to estimate potential benefits for taxpayers and improve tax administration. The IRS estimates the Direct File pilot for this tax season will save taxpayers around $21 million in compliance costs. The IRS also sees other potential benefits of Direct File, such as making it easier for eligible taxpayers to claim credits and deductions, reducing the volume of paper returns, and reducing errors. However, the IRS evaluation documents did not consistently identify relevant metrics for measuring these potential benefits.

IRS officials told the GAO in February that its senior leadership has not decided on the future of the pilot beyond the 2024 tax filing season. IRS officials reported that the time required to continue Direct File would depend on several factors, such as the size of the team working on the program. They noted that hiring new employees to replace outgoing employees is a lengthy process, so IRS officials will only have a short amount of time to analyze the cost and benefit information before making decisions about the pilot for the 2025 tax filing season.

“Direct File is a completely new service offered by the IRS and, in terms of technology and customer support, is not something the IRS or other federal agencies have offered before,” wrote IRS Commissioner Danny Werfel in response to the GAO report. “Unlike other government technology projects like student loan relief, passport applications and the Free Application for Federal Student Aid (FAFSA), Direct File is not the only option for taxpayers but is one of many options available for taxpayers to fulfill their tax filing obligations.”

The IRS is keeping track of several customer service costs and metrics during the pilot phase, including live chat assistance, wait time, average handle time, and shifting demand throughout the day and the filing season as a whole. It’s also looking at technology costs, as well as the costs of integrating state tax returns and of supporting additional tax situations.

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The Importance of Backing Up Bookkeeping Data

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Importance of Backing Up Bookkeeping Data

Protecting Your Business’s Financial Lifeline

In today’s digital business environment, backing up bookkeeping data is not just a good practice—it’s a critical part of financial management. Your financial records are among your company’s most valuable assets. Losing them can lead to serious consequences, from lost revenue and legal penalties to a complete breakdown of operations. Whether you’re a small business owner or a large enterprise, understanding the importance of data backup in bookkeeping can save you from irreversible damage.

Why Financial Data Backup Matters

Financial data backup is essential because data loss can happen at any time. It can come from hardware failures, cyberattacks, software crashes, natural disasters, or even simple human mistakes. One accidental deletion or system crash could wipe out years of financial records, including invoices, receipts, tax filings, payroll data, and customer information. Without a solid backup plan, restoring that information can be impossible, leading to compliance violations and major setbacks.

Business Continuity and Bookkeeping Reliability

One of the main goals of any data backup strategy is business continuity. When your financial information is backed up and easily restorable, your business can continue to function even after an unexpected event. This minimizes downtime and ensures your bookkeeping stays accurate and up to date. Whether you face a cyberattack or a flood, a reliable backup ensures you can access your critical financial records and get back on track quickly.

Follow the 3-2-1 Backup Rule

A best practice for data backup is the 3-2-1 rule, which stands for:

  • 3 copies of your data (one primary and two backups)
  • 2 different types of media (for example, a computer hard drive and an external USB drive)
  • 1 copy stored off-site, such as in a secure cloud-based system

This approach protects your financial data from all types of risks, including physical theft or natural disasters that could destroy all on-site backups.

Use Cloud Backup Solutions

Modern cloud accounting software like QuickBooks Online, Xero, and FreshBooks often include automatic data backup features. These platforms store your information in secure, off-site servers and regularly update your data in real time. While this offers a great layer of protection, businesses should still maintain independent backups—either through cloud storage providers like Google Drive or Dropbox or through physical external drives.

Automate Your Backup Schedule

To avoid the risk of forgetting manual backups, it’s smart to set up automated backup schedules. Most businesses benefit from:

  • Daily incremental backups (to capture changes made each day)
  • Weekly full backups (to maintain a complete and up-to-date copy)

Additionally, consider making extra backups after major financial activities, such as closing the month or completing annual reports. This ensures that your most important financial data is stored securely at critical checkpoints.

Test Your Backup Systems Regularly

Backing up your data is only half the job. The other half is making sure you can successfully restore it when needed. Many businesses make the mistake of assuming their backup systems work, only to discover too late that their files are corrupted or inaccessible. Set a quarterly schedule to test your backup restoration process. Restore files in a test environment and make sure they are complete, accurate, and usable.

Keep Backup Data Secure

Your financial data contains sensitive business information, including banking details, employee records, and customer data. This means your backup system must be just as secure as your main systems. Use strong encryption, require password protection, and enable multi-factor authentication (MFA) on your cloud accounts. Make sure that only authorized personnel have access to backup files, and regularly audit access permissions.

Store Physical Backups Off-Site

If you use external hard drives or USB devices for backup, store at least one copy off-site. Keeping all backups in the same location exposes your data to risks like fires, floods, or theft. Consider storing a copy at a trusted partner’s office, a secure storage facility, or even using a backup vaulting service.

Stay Compliant with Legal and Tax Requirements

In many industries, financial records must be retained for several years to meet legal and tax obligations. Failing to back up your bookkeeping data can result in penalties during audits or investigations. Keeping reliable backups helps you meet these requirements, providing a digital paper trail of your financial activities.

Make Backup Part of Your Financial Strategy

Treat your bookkeeping backup system as an essential part of your business strategy. It’s not just about preventing disaster—it’s about preserving your financial history, supporting compliance, and keeping your business running smoothly. Regular data backups give you peace of mind and a safety net to fall back on when the unexpected happens.

Conclusion: Backup for Long-Term Success

Backing up your bookkeeping data is one of the smartest moves you can make to protect your business. With cyber threats rising and unexpected issues always a possibility, a strong data backup system ensures your financial records are always safe, accessible, and intact. By following best practices like the 3-2-1 rule, automating schedules, securing your data, and regularly testing your system, you build a reliable foundation for your financial operations. Make data backup a non-negotiable part of your bookkeeping routine, and you’ll be well-prepared for whatever challenges come your way.

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13 firms combine to form Sorren

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Thirteen accounting firms have united to form Sorren, a national firm backed by private equity firm DFW Capital Partners that will have over a thousand employees and 20 offices across the country.

Operating in an alternative practice structure as Sorren CPAs PC for attest services and Sorren Inc. for business advisory and non-attest services, the combined firms have 85 partners and approximately $170 million in revenue, with plans to add more firms going forwards.

Many of the founding firms met as members of the BDO Alliance, and their leaders had gotten to know one another as attendees at alliance meetings and managing partner roundtables, according to Josh Tyree, the president of Sorren, who was previously president of Harris CPAs, an Idaho-based firm that was the first of the group to go the PE route, signing up with DFW in January 2024.

Sorren's headquarters in Boise, Idaho

Sorren’s headquarters in Boise, Idaho

“Harris had started looking at that process with DFW for a good chunk of 2023,” Tyree recalled, “and I remember we were having a managing partner roundtable meeting in Nashville that year in the fall, and they were all there and I raised my hand after two hours of talking about PE and I said, ‘Hey guys, I think I’m going to jump in feet first and you guys should all come and join us.'”

And they did — with individual firms joining up with DFW over the course of 2024, and a large group in January 2025.

“There was a level of comfort,” he explained. “We knew all of our firms and our people and what we do and how we do it because we’d shared so much information over the years.”

Apart from Harris, the other firms currently comprising Sorren are:

  • Acuity (Georgia);
  • Aycock & Co. (Texas);
  • Capital Nomics Valuations (California);
  • Chigbrow Ryan Murata (Idaho);
  • Hoerber Tillman & Co. (Florida);
  • JRJBF (Illinois);
  • KDP Advisors (Oregon);
  • KMA Advisors (Wisconsin);
  • Pisenti & Brinker (California);
  • Roeser Accountancy (California).
  • SBF Advisors (Florida);
  • Stockman Kast Ryan & Co. (Colorado).

Allan Koltin, CEO of Koltin Consulting Group, said in a statement, “What makes Sorren stand out is the way these firms came together — with intention, shared values, and a commitment to staying deeply connected to their local markets. This group didn’t just merge for size; they united around a common purpose. It’s a blueprint for how innovative firms can grow, while staying true to who they are.”

Tyree-Josh-Sorren

Josh Tyree

The firms all have a strong focus on small and middle-market businesses and nonprofits that want a local firm feel and relationship, even if they need services across the country. As it adds new firms, Sorren will prioritizing those that are a fit with their current culture.

“If we go into another region, we want to start with leadership and good people; we’re not just randomly going out to try and find any firm that meets [a client need],” Tyree explained. “It really has to fit our culture and it has to have a leader in that area for us to go into that services.”

He also made the point that Sorren is still very much a work in progress — relying on current firm expertise to build national practices in tax, assurance, CAS and advisory.

“One goal when we originally started was we wanted to get to enough mass size that we could really start to build this by using leadership from and talent from all the firms that came on board,” Tyree said.

“It’s going to be super fun, but it’s a lot of work,” he added. “If all you’re looking to do is do a rollup or something like that, that’s probably not our style. We’re trying to create this for our type of client and our type of cultures. And we think there’s a little void there where we can do it.”

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Trump’s ex-IRS commissioner pushes back on Harvard tax attack

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Donald Trump’s promise to strip Harvard University of its tax-exempt status prompted criticism Friday from a former Internal Revenue Service commissioner in the president’s first term, who said the process would take years and need a judge’s approval. 

“The IRS will not allow itself to be weaponized,” former IRS Commissioner Charles Rettig said in an emailed statement to Bloomberg News. Rettig, who oversaw the agency from 2018 to 2022, was asked to respond to Trump’s social media post early Friday that said: “We are going to be taking away Harvard’s Tax Exempt Status. It’s what they deserve!” 

Trump made the announcement after weeks of threatening a change to the school’s tax-exempt treatment, stepping up his attack on the Ivy League school.

Federal criminal law bars President Trump or the vice president from ordering the IRS to punish his political opponents or reward his allies. Rettig said the Treasury Department’s Inspector General for Tax Administration “closely monitors and investigates efforts to possibly influence IRS operations.”

The IRS cannot take any action on an organization’s tax-exempt status “without conducting an appropriate examination that would provide relevant information objectively supporting such an action,” Rettig said. “The IRS does not and should not conduct a ‘fishing expedition’ designed to hopefully uncover a relevant issue.” 

Organizations also have administrative and judicial appeal rights that can take years to resolve before a federal judge approves a change in tax-exempt status, he said. “Throughout that process, there are many opportunities for resolution that would not result in the removal of the tax-exempt status of an organization,” he wrote. 

Trump’s fight with Harvard escalated after it rejected his administration’s demands to reform campus policies to combat antisemitism and promote viewpoint diversity. The administration has frozen $2.2 billion in funding that supported projects including ALS and tuberculosis research. 

On April 21, Harvard sued the U.S., claiming the funding freeze violated its free speech rights, and the government cannot dictate what it teaches, who it hires, and which students it admits. 

In Trump’s second term, four people have held the IRS commissioner’s job on an acting basis.

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