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Year’s end is fast approaching for preparers and taxpayers alike, making the regulatory clarity from the Internal Revenue Service’s November wave of guidance a welcome addition across the profession. But with notable tax figures set to bow out in the face of new appointees, experts are awaiting the full brunt of changes to come.
One such announcement is President-elect Donald Trump’s nomination of former U.S. Representative Billy Long as the next commissioner of the IRS. “Since leaving Congress, Billy has worked as a business and tax advisor, helping small businesses navigate the complexities of complying with the IRS rules and regulations. … Taxpayers and the wonderful employees of the IRS will love having Billy at the helm,” Trump said in a Truth Social post this month.
Danny Werfel, who was nominated to the position by President Joe Biden last year, said he was ready to stay in the role for the remainder of his term, which is slated to end on Nov. 12, 2027. According to the conditions of the role, however, he serves at the pleasure of the sitting president.
“While much more work remains for the IRS to get where it needs to be, there should be no doubt the agency has accomplished many things during the past two years,” Werfel said in a statement. “These efforts to serve taxpayers and improve tax administration will continue to intensify and accelerate in upcoming months and into the future.”
David Samuel Johnson is another new face, whose nomination to succeed the late J. Russell George as the next Treasury Inspector General for Tax Administration was approved this month by the Senate Finance Committee.
If confirmed, Johnson said during his November confirmation hearing that a core focus of his would be to “provide candid, reliable and pertinent information to Congress, the Treasury Secretary and the IRS Commissioner” to improve the agency’s operational efficiency.
Trump has been active since Nov. 6 in making nominations for various positions with influence over the accounting space, including Paul Atkins to replace outgoing Securities and Exchange Commission Chairman Gary Gensler.
Learn more about the recent noteworthy guidance and final rules published by the IRS last month and how filing benchmarks have changed accordingly.
IRS phasing in new Form 1099-K thresholds
The Internal Revenue Service is helping ease the transitory burden of its Form 1099-K information reporting threshold by issuing Notice 2024-85 last month, setting the benchmark at $2,500 for 2025.
The previous $20,000 and 200 transaction threshold was originally cut to $600 by the American Rescue Plan Act of 2021, prompting outcry from taxpayers and professionals regarding the potential flood of forms. The IRS quelled these worries by gradually rolling out the new threshold, starting with establishing a $5,000 threshold for the 2024 calendar year.
“There are a variety of examples throughout history where the IRS — to protect taxpayers from undue burden or from potentially being overtaxed — where we have either delayed implementation or ramped implementation,” IRS Commissioner Danny Werfel said during a congressional hearing in February.
IRS issues final regs on clean energy partnership credits
The IRS published its final regulations last month for assisting entities that co-own clean energy projects with accessing clean energy tax credits through elective pay.
Set to take effect on Jan. 19 of next year, the new rules allow elective-pay-eligible entities ranging from state and local governments to churches and nonprofit organizations to utilize incentives by deeming specific clean-energy credits as refundable.
The regulations go on to further clarify how eligible organizations can remain compliant when jointly investing in clean energy projects, as well as add further adjustments to how such projects can classify themselves to not be treated as partnerships and take advantage of elective pay.
The transition period for filers revising research and development tax credit claims has been extended through Jan.10, 2026.
The new process, which allows taxpayers 45 days to fine-tune their research credit claim being submitted for refund prior to the IRS’s final decision, comes from an October 2021 initiative to cut down on dubious filings.
The changes require taxpayers to provide the IRS with information regarding the business components to which the Section 41 research credit claim relates for that year, all research activities performed for each business component and the total qualified employee wage expenses, total qualified supply expenses and total qualified contract research expenses for the claim year. These rules apply for any claims posed after June 18 of this year.
IRS to accept duplicate dependent returns with IP PIN
Beginning in the 2025 filing season, the IRS will start accepting electronically filed tax returns claiming dependents featured on another taxpayer’s return, provided the second taxpayer uses a valid Identification Protection Personal Identification Number.
The agency will begin taking Forms 1040, 1040-NR and 1040-SS starting next season, helping cut down on the time between when the IRS receives the forms and when reimbursements are distributed — all while preserving the level of security against identity theft risks.
E-filed returns claiming duplicate dependents will continue to be rejected unless a valid IP PIN is provided.
The IRS has raised its contributions cap for individual 401(k) plans for the 2025 tax year to $23,500 as part of its annual cost-of-living adjustments, while the $7,000 individual retirement account limit remains unchanged.
Guidance issued last month that outlined numerous cost-of-living adjustments highlighted how employees with 401(k), 403(b), governmental 457 plans and the federal government’s Thrift Savings Plan benefit from the increase. Both the annual contribution limit and catch-up contribution limits for IRA plan participants aged 50 and older remain constant at $7,000 and $1,000 for 2025, even with the latter adjusted under the SECURE 2.0 Act of 2022.
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 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.
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.
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.”