The small audit firm from Florida that topped the charts of new Securities and Exchange Commission clients in the third quarter of 2024 got a big boost from another firm ending its SEC practice.

Tampa-based Astra Audit & Advisory brought on 10 new clients in Q3, with seven of them coming from Accell Audit & Compliance, a former mainstay of this list that began telling clients in the fall that it was no longer providing SEC audit services. It was sanctioned by the Public Company Accounting Oversight Board around the same time (see “Net engagement leaders“).

Meanwhile, Big Four firm KPMG came in second overall and led among large audit firms, adding 11 engagements and netting nine (see “Q3 2024 client gains & losses“). Top 25 Firm Crowe followed closely on KPMG’s heels, netting eight new clients in the quarter. Top 10 Firm BDO USA actually added more new clients, with nine, but only netted five.

The total number of new engagements hit 161, a significant drop-off from the previous two quarters (which had been boosted in part by the implosion of audit firm BF Borgers), but still well above the low numbers from the midst of the COVID pandemic.

Clients by filing status, and more

In terms of clients by filing status, KPMG led among new large accelerated filers and regular accelerated filers, while Astra took the lead among non-accelerated filers and small reporting companies (see “Audit leaders“).

KPMG’s big haul of new engagements helped it top the league tables for new market capitalization audited, with TKO Group Holdings — the parent of fighting leagues UFC and WWE — making up a big chunk of that, with $6.7 billion of its total $16 billion (see “New client leaders“). It only came in second in terms of new assets audited and new audit fees. TKO accounted for $12.7 billion of the assets, with small-business bank Live Oak Bancshares just behind at $11.3 billion. Legal financial services provider Burford Capital was the biggest contributor to KPMG’s new audit fees, at $6.1 million.

Deloitte topped the table for both assets and audit fees. Insurer American National Group represented $79.9 billion of its $82 billion assets audited, while 3D printing company 3D System Corp. had the biggest chunk of audit fees, at $10 million.

Data for the quarterly rankings are provided by Ideagen Audit Analytics, a premium online intelligence service delivering audit, regulatory and disclosure analysis. Reach them at (508) 476-7007, [email protected] or www.auditanalytics.com.

H&R Block celebrated its 70th anniversary at an event Thursday in New York as the tax prep chain gets ready for the start of tax season on Monday.

“The tax event for most Americans is the single biggest financial transaction of the year, and it’s true, so we’re here to make sure it’s also the most rewarding,” said Heather Watts, senior vice president of global consumer tax. “We’re thrilled that you’re here to help us kick off the tax season, which also happens to be our 70th anniversary year. In 1955, when brothers Henry and Richard advertised tax preparation services as a courtesy to their business clients, they stumbled upon a need, and by offering tax prep services, they would launch one of the most recognized brands in the country and really birthed an industry. H&R Block has continued to spur innovation in tax, business and technology ever since.”

Over the years, an estimated 950 million tax returns were filed worldwide through Block. She pointed out that over 20 million tax returns were filed through Block last year. The company has 9,000 locations offices nationwide, with 60,000 tax professionals in the U.S. and 70,000 globally. Most locations are within five miles of clients. Approximately 55% of customers will qualify to file with Block’s free software, and the company is encouraging many of them to use its software. The company is hoping to entice away customers from its competitors, offering price matches and discounts to people who switch. It’s also jumping onboard the artificial intelligence trend with a feature called H&R Block AI Tax Assist, which it began offering last tax season.

“When people ask a question, we need to make sure we’ve got content to answer,” said Jody Vanarsdale, director of global consumer tax at H&R Block. “We needed to strengthen our [Chat] GPT. We upgraded from 3.5 to 4.0, and they get stronger and more relevant and understand languages, so really,our work this season was to get it tighter, if you will. It’s more stable and in a place to go live this season.”

Block is expecting to receive a flood of customers after they start receiving the Form 1099-K in the mail from third-party transactions with services such as Venmo, StubHub, eBay, PayPal and more due to the lowered threshold of $5,000 for information reporting to the Internal Revenue Service.

“The most common examples where people are going to get one is they sold something online, or they took payment through a third party app like a PayPal or a Venmo, and they exceeded the threshold for issuance,” said Andy Phillips, vice president of Block’s Tax Institute. “Going back to prior years, the threshold for issuing the 1099-K was you had to have over $20,000 in transactions in gross proceeds and over 200 transactions. That is a super high threshold. It is now $5,000 for 2024, meaning a lot of more people are going to get a 1099-K and not know what to do with it. We’re now in 2025. The threshold for this year is down to $2,500. Starting next year in 2026 and then every year after that, it’s going to be $600, meaning a lot more people are going to get a 1099-K.”

Many taxpayers who were affected by natural disasters such as the wildfires in California and hurricanes in North Carolina, Florida and other states. They too will need help with disaster relief and casualty losses. 

“Each one of those natural disasters, for the people impacted by it, it’s a life event,” said Phillips. “They have tax impacts. People in Southern California that are impacted by the current wildfires have gotten an extension until October 15 to file their taxes for this year. That is all of Los Angeles County. In another example, people in areas impacted by Hurricane Helene and Milton generally are going to have until May 1, 2025 to file their taxes. That’s within IRS discretion that when an area is a federally declared disaster, they can do certain things, including extending deadlines. Those are two examples that people may need to know about.”

For people who invest in cryptocurrency and other digital assets, they may want to talk with their tax professional about the upcoming Form 1099-DA that they can expect to receive next year or even this year.

“Starting in 2025, digital assets traded through a brokerage are going to get reported to investors on a Form 1099-DA,” said Phillips. “Some platforms are already issuing the 1099-DA. What we’re really talking about here is virtual currencies, digital assets. Starting in 2025, if you have a transaction in a digital asset on one of these platforms, you are going to get a 1099-DA. The IRS has put out estimates that they expect to receive up to 8 billion 1099-DA’s for 2025 alone coming from these platforms. As you can imagine, a lot of people are going to be getting these for the first time.”

The forms may not just be going out to people who have invested in cryptocurrencies like BItcoin and Ethereum. Even some gaming platforms like Roblox issue a kind of digital currency  known as Robux that may be taxable in some circumstances. 

“A lot of those just stay within the environment of the game,” said Phillips. “You just get points or coins or whatever. There’s no taxable transaction in those instances. But some games allow you to actually take what you’re winning in the game in those awards and turn them into actual currency. For example, the game Roblox, they have Robux. You can earn those for certain things you do within the game. And if certain requirements are met, you may be able to exchange those Robux for U.S. dollars. At that point, that is then a taxable transaction. That is going to rock some people’s world when they realize, ‘Oh my gosh, Roblox, I now have a taxable transaction from this.’ But that’s the reality.”

Phillips previewed an upcoming partnership for H&R Block with both Roblox and another popular game, Minecraft. “A quick peek ahead before I move on,” he said. “Stay tuned for an announcement that we will be making soon for a partnership with both Roblox and Minecraft in the coming weeks. You heard it here first.”

Accounting Today asked about how Block would be able to deal with some of the tax proposals made by President Trump during the campaign, such as exempting income from tips, overtime and Social Security from taxes.

“Look, in 70 years, we’ve seen all kinds of different legislative packages,” he responded. “We saw a huge tax change in 2017, in fact, in 2018. Going back to the huge Tax Code change of 1986, no matter what happens with the changes in the Tax Code, we will always be ready to serve taxpayers and help them. So depending on what happens, it may be a bigger lift than others. Either way, we’ll be ready, and it’s really going to vary based on the specific change.”

Accounting Today also asked about how Block might deal with changes if provisions in the Tax Cuts and Jobs Act don’t get extended this year, such as the 20% tax deduction for qualified business income under Section 199A.

“Looking a little bit more broadly, so many business owners say, ‘Hey, give me certainty. What’s it going to look like, not just for this year, but for years to come,'” said Kris Thiessen, a senior small business partner at Block Advisors who was recently named a member of the IRS Advisory Council. “I think it’s going to be a fascinating year to be able to spend more time in Washington, D.C. I would imagine that we’re going to see a lot, and there’s many folks who are starting to ask about these Tax Cuts and Jobs Act provisions expiring at the end of the year. What does that mean for me? What does that mean for my situation? The qualified business income deduction is super powerful in helping to even out the difference between the new corporate income tax rate as of a few years ago, 21%, and what can be 37% for individuals and small business owners to bridge that gap.”

“That’s why tax planning is so important, because we can do that forward looking for you,” said Latsaha Randle, a strategy and small business program manager at Block Advisors. “We can do some what-if calculations and say if this does not get extended, what does that look like for your specific business, your unique situation, so that you can better plan and be prepared.”

Following the Republican victory in the 2024 election and the reelection of President Donald Trump, tax reform and political changes are at the forefront of every accountant’s agenda. 

The inauguration of Trump signals a dramatic shift in the tax landscape, with significant reforms expected to impact businesses and individuals. Accountants must remain vigilant, understanding how proposed changes may affect their clients and their own advisory strategies. 

Tax considerations for construction project timing

Accountants must carefully evaluate how potential tax reforms under Trump’s presidency could affect the timing of taxpayer construction projects. Trump has expressed potential intent to cut Inflation Reduction Act spending and to roll back President Biden’s climate and energy policies. Changes to IRA credits, particularly those tied to renewable energy and infrastructure investments, may alter their availability or size, prompting the need for accelerated project completion to maximize benefits before credits phase out. 

Potential tax change: For qualified assets, 100% accelerated bonus depreciation may return. Currently, the ability to claim a full depreciation deduction is being phased down and will be eliminated for most properties placed in service starting in 2027.

Adjustments to the bonus depreciation rates could provide further incentives to change the timing of construction projects, allowing taxpayers to take advantage of expanded accelerated depreciation for such projects in the future. Additionally, accountants should help clients weigh the trade-off between immediate cash tax savings from deductions, such as accelerated depreciation, and the long-term value of tax credits. 

Accountants and taxpayers should weigh the potential for changes to existing credits and future depreciation rates and model these scenarios when considering the timing of substantial construction projects.

Considerations for business entity selection and pending tax reform

Proposed changes, including a reduced corporate tax rate, raise critical questions about entity selection and tax structure. 

Potential tax change: Trump has proposed decreasing the corporate tax rate from 21% to 20%, and potentially to as low as 15% for companies that manufacture in the U.S.

The possibility of a flat 15% corporate tax rate has significant implications. Accountants should evaluate the tax impact of potential changes to the corporate tax rate when reviewing current pass-through entity tax structures and consider the total effective tax rate and other compliance issues.  For example, lower corporate federal rates may offset the complexity of state taxes with varying pass-through entity tax regimes.  Additionally, pass-through owner capital gains rates — including the net investment tax, potential limitations on deductions such as pass-through owner health insurance expenses, and payroll taxes, among other tax considerations — may necessitate a closer look at current tax entity selections.

The tax rate implications above also must factor in Section 199A, which offers a 20% deduction for qualified business income. Personal rate adjustments could affect the overall value of the deduction. Clients engaged in specified service trade or business activities generally are excluded above certain income thresholds. Those businesses that are not included in the SSTB category still must satisfy certain W-2 wage and or basis in property metrics to claim the deduction.

Tax reform hurdles: Political and policy challenges

The path to tax reform is full of obstacles that could shape the timing and substance of the legislation. A single comprehensive bill may face greater political resistance but offers holistic reform, while dividing reform into smaller bills could address priorities piecemeal but delay broader implementation.

Potential tax change: Trump indicated that he would reverse a provision of his 2017 tax cut package that limited Americans’ ability to deduct state and local taxes on their federal returns.

Negotiations around the state and local tax deduction are an example of policy differences that could shape both the legislation but also the timing. Beyond the political debate, reconciliation rules limit provisions to those directly affecting the federal budget as well as other limitations.  Certain items on the tax reform agenda could be limited by the budget reconciliation process.  Lastly, shifts in Congressional Budget Office scoring methods may impact tax reform dynamics.  

Tax planning for a decreasing rate environment

A reduction in corporate tax rates offers planning opportunities and challenges. Accountants should model scenarios to recommend strategies to defer income or accelerate expenses to take advantage of rate reductions. Timing differences, such as accelerated deductions or deferred income recognition, can create permanent tax savings in changing rate environments.

Accountants must consider the impact of these adjustments on financial statements. Accountants should prepare for the revaluation of deferred tax assets and liabilities under new tax rates and communicate potential impacts on earnings and disclosures to stakeholders.  Additionally, timing considerations will be at the forefront as the enactment date of potential future legislation will need to be considered for financial statement purposes.  

Opportunities for accountants

The shifting tax landscape following the presidency of Trump presents numerous opportunities and challenges for tax professionals. By adopting a proactive, advisory-focused approach, accountants can add significant value to their clients. By not only understanding the intricacies of new tax laws but also providing strategic tax planning that aligns with clients’ financial goals.