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IRS lays off thousands of employees during tax season

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The threatened layoffs of Internal Revenue Service employees appeared to be underway Thursday, with estimates of between 6,000 and 7,000 employees being laid off at the agency in the middle of tax-filing season.

The total includes over 3,500 probationary hires from the Small Business/Self-Employed division, according to an email Wednesday from SB/SE commissioner Lia Colbert and deputy commissioner Maha Williams, per CBS News. The Large Business and International division is also seeing job cuts, with managers asked in an email Wednesday to report to the office to “support offboarding activities.”

Up to 1,000 employees are expected to be laid off in the IRS’s processing facility in Ogden, Utah, according to local news outlet KSL. There were also mass layoffs of up to 100 probationary employees at IRS facilities in the Kansas City area, according to local news outlet KCTV, with some employees being escorted from the premises. The affected employees there mainly worked in audits, compliance and collections. Up to 6% of the IRS workforce are expected to be laid off as part of the cutbacks.

The head of the IRS’s main labor union, the National Treasury Employees Union, expressed concern about the widespread layoffs, with employees being escorted from the premises. 

“Indiscriminate firings of IRS employees around the country are a recipe for economic disaster,” said NTEU national president Doreen Greenwald in a statement. “In the middle of a tax filing season, when taxpayers expect prompt customer service and smooth processing of their tax returns, the administration has chosen to decimate the whole operation by sending dedicated civil servants to the unemployment lines. These layoffs are arbitrary and unlawful, and NTEU will keep fighting until every wrongful termination is reversed.”

“It is especially devastating that removing probationary employees impacts so many young people who chose to start their career in public service,” Greenwald continued. “They passed the IRS’ extensive background checks, received extensive training at taxpayer expense, delivering for the American people, and are now being told they are no longer valued. Much of the IRS workforce is outside of the Washington, D.C. area, which means these layoffs are disrupting their local economies and hurting middle-income families in every state. We have multiple legal challenges now pending over the administration’s mass layoffs and other attacks on federal workers because of the severe damage that is being done to civil servants and the valuable services their agencies are tasked by Congress to provide.”

The top Democrat on the tax-writing House Ways and Means Committee, Rep. Richard Neal, D-Massachusetts, blasted the firings, which came after employees from Elon Musk’s Department of Government Efficiency reportedly visited IRS headquarters to talk with top officials and seek access to sensitive taxpayer information.

“In the middle of tax season, under the deceitful guise of ‘efficiency,’ the President and his reckless billionaire Cabinet are purging the agency responsible for processing Americans’ returns, issuing timely refunds, and holding wealthy tax cheats accountable,” Neal said in a statement Thursday. “This isn’t about efficiency; it’s about giving a free pass for the Administration’s rich friends while leaving everyday Americans to suffer from strained services. When the IRS is adequately staffed and funded, the American people benefit. After the Biden administration and Congressional Democrats made historic investments in the IRS, the agency collected over $1 billion from rich tax dodgers. Now, the Trump-Musk Administration is tearing down that progress to roll out the red carpet for their wealthy interests. This isn’t efficiency — it’s a billionaire bailout. Republicans might be silent, but their hypocrisy is deafening.”

A small business advocacy group pointed to the problems the SB/SE division layoffs could cause for business owners. 

“Reports that the Trump administration will fire 3,500 IRS agents working in the division that oversees small businesses and the self-employed shows once again that the administration and Elon Musk remain at odds with what small businesses want and need,” said Small Business Majority CEO John Arensmeyer in a statement. “Our research has found that small business owners agree that the IRS needs continued additional funding to support them, and a large majority believe that additional funding is needed to properly audit large corporations and wealthy taxpayers, as well as offer improved customer service overall. The timing, of course, could not be worse. The IRS is in the midst of tax season, and an agency that serves more than 57 million small businesses and self-employed individuals will surely be unable to offer better service with less staff. Small businesses have the right to timely tax return processing, and feel strongly that big corporations should pay their fair share of taxes. Both seem impossible without an IRS that is well-funded and staffed.”

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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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