Accounting
IRS proposes banning contingency fees
The Treasury Department and the Internal Revenue Service have proposed amendments to Circular 230, which governs practice before the IRS. The amendments are the most extensive since 2014, and cover significant developments which have affected practice before the service since that time.
The proposed regulations would remove or update the parts of Circular 230 that related to registered tax return preparers and tax return preparation, as well as contingent fees to reflect changes in the law since the prior amendments to Circular 230 in 2011 and 2014. The regs would also revise or eliminate other provisions that are out of date.
The proposed regulations would incorporate new provisions that better align Circular 230 with the current practice environment, such as requiring that practitioners maintain technological competency as part of their practice before the IRS. They would also clarify some provisions, such as confirming that the IRS Office of Professional Responsibility retains jurisdiction over practitioners who have been suspended or disbarred from practice. (The OPR generally is in charge of matters related to practitioner conduct, and is exclusively responsible for discipline, including disciplinary proceedings and sanctions.) And finally, they would provide rules related to appraisers, including the standards for disqualification.
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The provisions regarding tax return preparation and registered tax return preparers are in response to the IRS loss in Loving v. IRS, according to John Sheeley, founder of Tax Practice Pro. The Loving court denied the IRS the authority to regulate tax return preparers. The provisions in Circular 230 eliminate provisions related to registered tax return preparers, and revise standards for tax return preparation tied to IRS representation, while updating the definition of “practice before the IRS.”Â
The proposed revision to Circular 230 establishes that charging contingent fees for preparing returns or refund claims constitutes disreputable conduct. This language, which removes the ability of practitioners to charge contingency fees, will likely generate some opposition, according to Bill Nemeth, NAEA Education foundation trustee and immediate past chair.Â
“If a client gives me a return to do and I discover that their previous year’s return was incorrect and they may be able to get a larger refund, I should be able to amend their previous return for a percentage of the refund,” he said. “I don’t want to do the work for free, and the client has no guarantee that they will collect. So they have nothing to lose, and I can do the additional work knowing that I might get an additional reward.”
“As for contingency fees on first-time abatement, the language in the proposed revision is so murky that I’m not smart enough to figure out if it’s allowed or not,” Nemeth said.Â
The revisions to Circular 230 create a new Subpart D specifically addressing appraiser standards. It establishes a new framework for appraiser disqualification, and eliminates the prerequisite of penalty assessment for appraiser disqualification.Â
The revisions add a requirement for practitioners to maintain technological competence, and require data security policies and incident response plans. They also mandate business continuity and succession planning, and they update written advice standards.Â
The revision expedites suspension by expanding the grounds for expedited suspension, clarifying procedures for reinstatement, and by maintaining IRS jurisdiction over suspended practitioners, said Tax Practice Pro’s Sheeley.
A cohort of about 20 Republican House members from New York, New Jersey and California was invited to meet with President-elect Donald Trump at his Mar-a-Lago estate Saturday ahead of a looming fight over an extension of his 2017 tax cuts.
Much of the group is likely to attend and plans to discuss increasing the $10,000 cap on state and local tax deductions, which has disproportionately hurt voters in the three high-tax states, according to Representative Nick LaLota, who represents eastern Long Island in New York.Â
Republicans in Congress are in the beginning stages of negotiating a package that will extend Trump’s 2017 tax cuts — including the future of the cap on the SALT deduction, which will otherwise expire — and address the other legislative priorities of immigration and energy production. The meeting is a positive sign for lawmakers seeking to expand the deduction, a politically divisive write-off that reduced tax bills for some residents of high-tax states.
In an interview with Bloomberg, LaLota said the group of lawmakers includes four other representatives who are banding with him to push for a “reasonable” adjustment to the cap on so-called SALT deductions. The cap was imposed as part of the 2017 bill.
“There are five very salty Republicans — I would expect that somebody in his position would appreciate that dynamic and would want to provide an accommodation to get the bill passed,” he said. “The five of us have the opportunity to effectuate an even more beautiful, big bill.”
The group, which also includes New Yorkers Andrew Garbarino and Mike Lawler, New Jersey Representative Tom Kean and California’s Young Kim, will push to expand the deduction — currently capped at $10,000 regardless of marital status — that would deliver big savings to their constituents as part of a larger tax package, said LaLota.Â
While he declined to comment on what the group would consider to be an acceptable cap, last month he said that a
Spokespeople for Lawler, Garbarino and Kim confirmed their plans to attend the meeting with Trump, while Kean’s spokesperson didn’t respond to a request for comment. Spokespeople for Trump did not immediately respond to a request to comment.
“I’ve been very clear, and I think my colleagues will understand it, that SALT has to be included” in the bill, Lawler said in a separate interview Tuesday. “There’s already an understanding that that’s the case, so I’m not concerned.”
Because of its slim majority in the House, the GOP can only afford to lose the support of a couple congressional Republicans in order to advance the bill through a process known as budget reconciliation. The process, which would allow the GOP to pass legislation only with Republican votes, depends on near-universal agreement within its narrow majorities in the House and Senate. That puts great pressure on Trump and Republican leaders to negotiate a package that appeases both their far-right flank as well as members from the New York City-area and Southern California, for whom expanding the SALT deduction is a political priority.
“The math dictates that any small group of members can block anything that is going to be Republican,” he said. “And that math isn’t just particular to the SALT discussion, but just about anything and everything we do here in this town. That said, that President Trump is bullish on SALT and wants to provide a fix and is inviting us to Mar-a-Lago to be a part of that fix gives me great optimism.”
While it was Trump who curbed the tax break as part of his signature 2017 legislation, on the campaign trail he vowed to expand the cap. LaLota credited the change of heart to efforts by lawmakers to develop a relationship with Trump.
In addition to taxes, LaLota said that he and Lawler also plan on discussing with Trump New York City’s congestion pricing toll, which went into effect this week and charges drivers $9 for entering Manhattan’s central business district. Trump had said he opposes the fee.
LaLota said the toll especially hurts suburbanites from his and Lawler’s districts, who “should not be a piggy bank to the bloated MTA.”
Job growth and hourly earnings growth moderated in the latter part of 2024, according to the payroll processor Paychex.
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“The pace of job growth among U.S. small businesses downshifted slightly as 2024 progressed, yet small businesses remained resilient throughout the year.” said Paychex president and CEO John Gibson in a statement. “As we head into 2025, small business owners continue to face some challenges such as access to growth capital, rising health care costs, and ability to hire qualified talent. In spite of this, optimism and hiring intentions improved to close the year — both trends that will be worth watching as we begin 2025.”
Weekly earnings growth (2.54%) slowed to a four-year low in December, and weekly hours worked growth (-0.43%) remained in negative territory year-over-year for the 21st consecutive month, hitting its lowest level since July 2022. Three-month annualized hourly earnings growth (3.02%) was above 3% for the first month since April. Tampa (4.56%) topped the rankings among metropolitan areas for hourly earnings growth for the second month in a row.Â
The national small business jobs index averaged 100.22 in 2024, representing modest employment growth. However, the national jobs index slowed 1.32 percentage points from 101.21 in December 2023 to 99.89 in December 2024.
The Midwest ranked as the top region for small business employment growth for the seventh month in a row, at 100.20 in December. Wisconsin, at 100.77, led the way among Midwestern states and ranked in second place among all states for job growth in December, marking its best rank since March 2020.
For the second month in a row, Dallas (101.73) and Houston (101.16) ranked in first and second place, respectively, among metropolitan areas for job growth in December.
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