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Tax Strategy: 2024 year-end tax planning

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As was the case in 2023, 2024 has so far not produced significant tax legislation impacting year-end tax planning. However, it continues to be impacted by tax legislation enacted in prior years, including the Tax Cuts and Jobs Act, SECURE 2.0, and the Inflation Reduction Act. Those pieces of legislation included deferred effective dates, some of which become effective in 2024, and/or sunset and phase-out dates that can also impact tax planning in 2024.

Inflation adjustments

Like every year, many of the dollar amounts associated with tax provisions are adjusted for inflation. As the inflation rate has declined over the last couple of years, the inflation adjustments for 2024 are somewhat smaller than they were for 2022 and 2023.

  • Tax brackets: The continued inflation adjustments to the tax brackets will result in reduced taxes on taxable incomes that are at the same level as in 2023.
  • Standard deduction: The significantly increased standard deduction from the Tax Cuts and Jobs Act continues to be adjusted for inflation for 2024 to $14,600 for single filers, $21,900 for head of household filers, and $29,200 for joint filers. This will continue to make the standard deduction more attractive to many taxpayers than itemizing deductions. This simplifies tax return preparation for taxpayers claiming the standard deduction, but may also affect taxpayer behavior since taxpayers claiming the standard deduction no longer get a tax benefit from activities such as charitable giving and home ownership.
  • Estate and gift tax unified credit: The significantly increased unified credit from the Tax Cuts and Jobs Act continues to be adjusted for inflation in 2024 to $13,610,000.
  • Retirement plans: Inflation adjustments for 2024 to retirement provisions include IRA contribution limits to $7,000 from $6,500, with the catch-up amount remaining $1,000. Limits for 401(k) plan contributions increased to $23,000 for 2024, with a limit of $30,500 for those age 50 and over.

Tax Cuts and Jobs Act

The individual provisions of the Tax Cuts and Jobs Act currently expire after 2025. They therefore remain effective for 2024 and 2025. However, some of the expiring provisions may warrant tax planning for 2024 and 2025. If the standard deduction is significantly reduced, taxpayers may consider taking steps to postpone charitable contributions until 2026 when itemized deductions are likely to be more beneficial.

A close up of the capital building with an American flag

Wealthier taxpayers facing a halving of the unified credit in 2026 may wish to consider gifts in 2024 and 2025 to reduce the taxable estate before 2026. The Supreme Court’s decision this year in Connelly holding that a contractual obligation to redeem a deceased shareholder’s shares at fair market value is not necessarily a liability that reduces the corporation’s value for federal estate tax purposes warrants a review, and perhaps restructuring of buy-sell agreements, with even the Supreme Court suggesting the use of cross-purchase agreements between shareholders.

Many of the business provisions of the Tax Cuts and Jobs Act were made permanent. A few, however, have already expired or are phasing out. These include the full expensing of research and experimental costs, the limits on deduction of business interest, and bonus depreciation. Congress has made efforts to restore these provisions in legislation that has passed the House but has so far failed to pass the Senate. Restoration of these provisions was tied to an increase in the Child Tax Credit. For 2024, therefore, these provisions remain in their phase-out status and have not yet been restored. The legislative proposals would have restored them retroactively; however, as time passes, it is not clear that retroactive restoration would be retained.

SECURE 2.0

SECURE 2.0 made many retirement-related changes to the Tax Code, with many phased in over a period of years, including 2024. It added several new provisions for penalty-free distributions from retirement accounts. In addition to terminal illnesses and qualified disasters effective for 2023, it also added, effective for 2024, penalty-free withdrawals up to $1,000 for emergency expenses and withdrawals of the lesser of $10,000 or 50% of the account value in cases of domestic abuse.

The law also added a provision for employer 401(k) matching of employee student loan payments, and made several enhancements to SIMPLE plans, several of which became effective for 2024. Effective 2024 and later, 529 plan beneficiaries can roll over an aggregate of $35,000 in excess funds to a Roth IRA, and starting in 2024, employers without a retirement plan are entitled to a tax break for starter 401(k) plans or 403(b) safe harbor plans.

The act had required beneficiaries of inherited IRAs who were not eligible designated beneficiaries such as spouses to take distributions within 10 years of the IRA owner’s death. The IRS later clarified that, if the IRA owner had started required minimum distributions before death, the beneficiary was required to take the distributions ratably over the 10-year period rather than at the end of the 10-year period. Since many taxpayers and tax practitioners had not anticipated the ratable distribution requirement, the IRS agreed to waive penalties for failure to make required minimum distributions in 2022 and 2023 and has now also waived penalties for failure to make required minimum distributions in 2024 for IRA owners who died in 2023.

Starting in 2024, required minimum distributions are no longer required from designated Roth accounts.

Inflation Reduction Act

Many of the provisions of the Inflation Reduction Act, enacted in 2022, have delayed effective dates. Provisions becoming effective for 2024 include:

  • Clean vehicle credit transfer: The rules for transfer to a dealer of the clean vehicle credit apply to vehicles placed in service after Dec. 31, 2023.
  • Zero-emission nuclear power: The new zero-emission nuclear power production credit applies to electricity produced and sold after Dec. 31, 2023.

Digital asset reporting

The expansion of broker reporting of digital asset transactions on Form 1099-B and the new Form 1099-DA has been proposed and delayed for several years. Currently, the reporting rules for Form 1099-DA do not apply until 2025 and the requirement for cost-basis reporting until 2026.

Third-party reporting

The requirement for third-party payment processor reporting has also been delayed for a few years. For 2024, reporting on Form 1099-K is required if the taxpayer receives $5,000 or more. Under current law, this is still scheduled to phase down to $600, although proposals have been made in Congress to increase the reporting limit.

Summary

In addition to these tax law changes effective for 2024, the usual tax planning strategies remain in effect. These include postponing income and accelerating deductions; bunching itemized deductions every other year and taking the standard deduction in the off year; year-end review of investments for possible offset of capital gains and losses; and maximizing charitable contributions and qualified retirement plan contributions. Proposals from the presidential candidates, even if some are eventually enacted, are not likely to have a direct impact on 2024 tax returns.

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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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