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Tax season nears its end, but uncertainties linger

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The 2024 filing season, which began with a hint of uncertainty, has progressed into one of the smoothest in recent memory — but the uncertainty still exists, fueled by court decisions and pending legislation. 

The legislation was “pending” at the beginning of filing season and is still pending, while court decisions called into question the Corporate Transparency Act, which, although not a tax issue, is front and center for many accountants that deal with small businesses which come under the purview of the act’s beneficial ownership information reporting requirements. 

Accountants are hesitant to become involved with questions regarding BOI reporting; depending on the jurisdiction they may be charged with practicing law without a license, since they are called on to interpret definitions under the act as to beneficial ownership. Despite this, they routinely are expected to interpret the complexities of the Internal Revenue Code and have done so for decades without the benefit of a law degree. Add to this the fact that their professional liability insurance may or may not protect them — again, depending on the jurisdiction in which charges might be brought against them. 

The American Institute of CPAs, in a letter dated April 3, 2024, to Treasury Secretary Janet Yellen and the director of the Treasury’s Financial Crimes Enforcement Network, Andrea Gacki, voiced its concern that small businesses will be caught off guard with the new filing requirement, and failure to file could result in steep civil and criminal penalties.

1040 forms

“The recent NSBA v. Yellen court case which found the Corporate Transparency Act to be unconstitutional has only compounded confusion, with most entities believing they no longer have a furling requirement,” said the letter.

“Based on these strong concerns,” the letter continued, “we ask that you suspend all enforcement actions until one year after the conclusion of all court cases related to NSBA v. Yellen, and further believe that FinCEN should take no retroactive enforcement for non-compliance during this time. The portal can remain open, and small businesses may voluntarily report BOI, but no small business should be compelled to file nor should any small business face enforcement for failure to comply until after the courts have worked through this complex case.”

Failure to address the situation will lead to “rampant noncompliance” in the small-business sector, according to Roger Harris, president of Padgett Business Services. “And it will not help us catch money launderers or child traffickers.”

Still in limbo

Still pending is the Tax Relief for American Families and Workers Act of 2024, which passed in the House. It contains taxpayer-favorable alterations to the Child Tax Credit and a trio of lapsed business provisions: bonus depreciation, research and experimental expenditures, and the business interest deduction limitation, and is awaiting action in the Senate. The general feeling is that the TRAFWA will be “pending” all the way through the November elections, but will eventually pass in one form or another.

Depending on the client, this could be a pretty significant delay, according to Ryan Losi, executive vice president of Virginia-based CPA firm Piascik. 

“It has caused heartburn for some companies in the tech industry or pharmaceuticals,” he observed. They have to capitalize expenses rather than include them as deductions, which can make the difference between making a profit or paying tax on taxable income that doesn’t exist. It was supposed to pass in February, but Republicans held the bill up because of immigration issues. Now, it looks as though nothing will happen until after the election. So maybe tax season won’t be so smooth because you have to file based on current law, not what you think it will be.”

“Things started to normalize in late February when people recognized that maybe the tax bill would not pass that quickly, and the IRS said not to wait, that they would fix refunds automatically if the bill passed,” he added.

Filing season statistics show that “do-it-yourselfers” were up by 1% over a year ago, as of March 29, but that’s probably not entirely accurate, according to Mark Steber, chief tax officer at Jackson Hewitt. “The IRS is increasingly concerned with ‘ghost preparers,’ those who prepare a return for a fee but don’t sign the return,” he said. 

“The IRS has seen repeat self-prepared returns coming from the same address,” he remarked. “In some cases, the taxpayer doesn’t even know that the person sitting next to them in a tax pro’s office doesn’t even work in the office — they pull out their computer, ask a few questions and agree to meet at a Starbucks around the corner.”

Looking forward

Other than these few issues, the season has been smooth. But it may be the last for a while, according to Steber. “A new 1099-K, the presidential election, expiring Trump provisions all converge, so we may have seen the last of the “normal” seasons for a while,” he said. 

This is an election year and even though tax season is nearly behind us, Congress might make retroactive changes which they may instruct the IRS to implement, or some returns might have to be amended to receive benefits, according to Tom O’Saben, director of tax content & government relations at the National Association of Tax Professionals. “Pay close attention to the news,” he advised. 

April is filing extension time, according to Losi. “Our cutoff is March 25. If they don’t have all their information together by then, they’ll have to extend,” he explained. “We’re in the process of contacting all our clients with large items and will try to get a sense of the taxes they paid in prior years. If the client is in a refund situation, we can file the extension easily and electronically and without needing more information. Or if they have a balance due, we have to decide how much is due. If it’s a large balance due, we have to decide how to pay it. Most have their money tied up in illiquid assets, so they might have to give it a tweak or two.”

Wrapping up

The filing season began with tax professionals thinking they had lost clients to the new IRS Direct File, but they were only waiting in the wings, according to Beanna Whielock, former IRS director of national public liaison, and now executive director of Tax Pro Fellowship.

“Taxpayers hate taxes. Only if they think they are getting a refund, rebate CTC or some other funds do they get in early to file,” she said. “Most have owed, either because they took a second job to make ends meet and were insufficiently withheld or they followed IRS guidance on completing the Form W-4 and were underwithheld. Then the taxpayers who did strange things began to come in. While only energy credits seemed to be a saving grace, they were few and far between because people are hurting in the economy.”

With the end of the season in sight, overall it’s gone pretty well, according to Harris. 

“There have been some minor hiccups here and there, but compared to most recent filing seasons it’s been relatively smooth,” he said. “The problem every year has been late 1099s, and it seems as though there are more corrections this year than in the past. For example, people don’t realize that their financial advisor has invested their money in a limited partnership with an ownership interest in an oil well in Oklahoma. They bring in all their information at the end of March, get their return filed and then show up two weeks later with the additional information. Or they might leave it for the IRS to fix, since the preparer might cost more than the tax that is due. It’s frustrating, because it creates additional work for the preparer and for the IRS.”

Tax season 2024 has mirrored last tax season in that it felt like “business as usual” — essentially what tax season has typically been like, according to Jim Guarino, managing director at Top 100 Firm Baker Newman Noyes. 

“One of the larger surprises was the increase in overall investment income, especially in terms of their interest income and U.S. government interest,” he said. “Interest jumped during 2023 and individuals were the recipients of this increased interest income, but it led to smaller refunds or a balance due on retirement account values at December 31 of the preceding year.”

“Tax professionals at this time of year have come to appreciate one general rule of thumb: Expect the unexpected,” he concluded. “Living by that mantra helps us to navigate and weather the storm that is certain to come every January.”

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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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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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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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