Accounting

TCJA extensions or revisions: What lies ahead for 2025

Published

2 hours ago

November 25, 2024

Business Finance News

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Many accountants were doubtful of Donald Trump’s chances for a successful reelection on Nov. 5, despite the fact that many also thought he would be a better candidate for the profession. With his return to the White House now confirmed, the waiting game begins to see which promises of wide-sweeping change to the tax landscape come to life.

The Republican majorities in the Senate and House of Representatives will grant President-elect Trump an easier time in refreshing many of the expiring provisions in his 2017 Tax Cuts and Jobs Act, including priorities such as the Qualified Business Income Deduction and 100% bonus depreciation.

“These changes reshaped tax planning for both individuals and businesses, creating new opportunities for savings,” said Arron Bennett, CEO of the Oak Ridge, Tennessee-based tax planning firm Bennett Financials.

It’s increasingly likely that Trump will seek to make certain provisions of the TCJA like the QBID permanent, as was put forward in the Republican party platform earlier this year. Further goals included eliminating taxes on tips for restaurant and hospitality workers and other additional tax cuts.

Mark Luscombe, principal analyst in Wolters Kluwer Tax and Accounting, said cementing the sunsetting provisions of the TCJA “would be very expensive” and that a more beneficial compromise for addressing deficit concerns would be “to just extend them for a few more years.”

“An extension would benefit almost all taxpayers; however, the bulk of the tax benefit would go to higher-income taxpayers,” Luscombe said.

Regulatory uncertainty is just one question looming across the profession, however. With control of both houses of Congress, Republican efforts to cut the Internal Revenue Service’s funding that once saw limited success might now gain more ground.

Much of the funding granted to the IRS under the Inflation Reduction Act of 2022 has gone towards strengthening the agency’s enforcement capabilities, which in turn generate revenue. Other funds have been used to bolster taxpayer services and to support regular operations.Andrea Harrington, a CPA and partner at the Glastonbury, Connecticut-based accounting firm Fiondella Milone & Lasaracina, said she hopes funding for the IRS is maintained, specifically directing resources towards “processing amended returns related to COVID relief provisions.””The uncertainty over what exactly will happen makes planning a bit more challenging. … We’ll be watching legislative proposals even more closely so we can pivot in our recommendations as needed,” Harrington said.

Below is a compilation of expert insight and predictions into what the tax landscape could look like in 2025 and what professionals need to start considering during planning discussions.

IRS funding in limbo following Trump win

President Donald Trump listens during a meeting with the National Association of Manufacturers in the White House

In the wake of Trump’s successful bid for reelection, many accountants predict the new administration will seek to cut the IRS’s funding more so than in recent years.

Republican legislators have already seen success in efforts to claw back some of the $80 billion in extra funding from the IRA, and have continued to push for further reductions in the IRS’s enforcement budget. Increased funding brought in from expanded enforcement goes towards easing the cost of the IRA, while other IRA funding is earmarked for strengthening the enforcement capabilities of the IRS among other improvements.

“I think IRS funding is at significant risk right now, both the annual appropriation funding as well as the remaining IRA funding,” Rochelle Hodes, Washington National Tax Office principal at the Top 25 Firm Crowe, said in an interview with AT’s Michael Cohn. “The only question for me on funding is, will any portion of the funding remain available for taxpayer service-related improvements at the IRS?”

A look at Trump promises for the 2025 tax landscape

Trump’s campaign promises on taxes were numerous and sweeping, ranging from lowering the corporate tax rate and tax credits for caregivers and those purchasing domestically made automobiles, to the return of 100% bonus depreciation.

As the countdown to his second term continues, along with the approaching deadline for many parts of the Tax Cuts and Jobs Act of 2017, much is up in the air.

“No one has a crystal ball on what’s going to happen here, but certainly it’s a little bit clearer based on a Trump victory than it would have been based on a Harris victory,” Brian Newman, a tax partner at Top 25 Firm CohnReznick in Hartford, Connecticut, said in an interview with AT’s Michael Cohn. “Obviously the big point is going to be either to extend or to make permanent TCJA provisions.”

What are preparers worried about in the coming administration?

Donald Trump listens to a question while speaking to members of the media before boarding Marine One on the South Lawn of the White House in Washington, D.C.

Accounting professionals and preparers say that a new but not wholly unfamiliar Trump administration, will bring new approaches to taxes and the surrounding regulatory environment with it.

Kelly Myers, an advisor with Myers Consulting Group, and formerly a career IRS officer with 30-plus years of experience, told AT’s Roger Russell in an interview that he’s “curious to see how much the balance shifts” as the lack of a Republican super-majority means, “There will still be a give and take in their congressional negotiations.”

“People will be watching as they move forward on the Tax Cuts and Jobs Act; the biggest thing is the SALT limitation with its $10,000 cap,” Myers said.

The provisions of the TCJA are top of mind for Trump, as issues like the qualified business income deduction and a renewed R&D credit operating on a dollar-for-dollar basis are up for change.

What is Trump focused on when it comes to taxes?

Donald Trump (center) speaking before a crowd on the night of Nov. 6. A series of American flags are in the background.

President-elect Trump had an eventful first term when it came to tax policies, implementing the likes of the 2017 Tax Cuts and Jobs Act and more. Amid expiring provisions, and a host of new tax proposals, the question now is which promises he can deliver on.

The estimated price tag for extending all the provisions of the TCJA amounts to roughly $4.6 trillion, according to Rochelle Hodes, Washington National Tax Office principal at the Top 25 Firm Crowe.

“If they are allowed to expire, that would raise the tax for many individuals, which is an unattractive proposition for any president or for Congress,” Hodes said in an interview with AT. “The decision will have to be made about which will be allowed to expire, whether or not some of the provisions will be changed in order to accommodate whatever budget goals are agreed upon, then the decision and consensus will have to be made concerning offsets to pay for the resolution of expiring provisions.”

Approaching the impending tax quagmire in 2025

Industry professionals achieved a small measure of TCJA relief following Trump’s successful bid for reelection, as many expiring provisions are now much more likely to be renewed.

But where other legislative efforts are concerned, a recent report on policy implications under a Trump administration published by Deloitte Tax’s Tax Policy Group highlighted the regulatory hurdles and other holdups that could hamper future campaigns.

Jonathan Traub, the leader of the group, said on a panel this month that discussions in the House surrounding the current limit on the deduction for state and local taxes is an important barometer for measuring how talks could go over the coming years.

“You will need almost perfect unity — more so in the House than the Senate,” Traub said. “This really gives a lot of power, I think, to any small group of House members who decide that they will lie down on the train tracks to block a bill they don’t like or to enforce the inclusion of a provision that they really want.”

Accounting

How to Mastering Accounts Receivable Management to Maximize Cash Flow

Published

2 days ago

November 23, 2024

Business Finance News

Accounts Receivable Management for Maximum Cash Flow

Effective accounts receivable (AR) management is vital for maintaining a company’s cash flow, profitability, overall financial stability and is considered to be best practice for accounting management . By implementing strategic AR practices, businesses can reduce payment delays, minimize financial risks, and improve relationships with customers. Below are in-depth strategies for enhancing AR performance, ensuring financial health, and maintaining strong client relationships.

Establishing Formal Policies and Procedures

A well-defined set of policies and procedures is the foundation of effective accounts receivable management. Clear guidelines ensure consistency across the entire order-to-cash cycle, from invoicing to collection. These guidelines should outline the specific steps involved in generating invoices, tracking payments, and handling overdue accounts. Clearly defined roles and responsibilities for team members contribute to accountability, while setting payment terms and due dates helps streamline the process.

Creating a documented standard operating procedure (SOP) that employees can refer to ensures that everyone follows the same approach, minimizing errors and reducing confusion. Policies should also specify the consequences for late payments, including any penalties or fees. Establishing escalation protocols—such as follow-up reminders, late payment notices, and legal actions if necessary—keeps the collection process organized and efficient.

Leveraging Advanced Technology for Efficiency

Incorporating technology into accounts receivable management can significantly enhance efficiency. Advanced AR software platforms offer a range of features designed to automate and optimize the process, reducing the manual workload and minimizing errors. These platforms often include automated invoicing, payment tracking, customer communication, and collections management.

Automated systems can send reminders for upcoming payments and follow up on overdue accounts without human intervention. This automation saves time and ensures consistency in communication with clients. Many platforms also offer integrated billing systems that sync with existing account receivable software, providing a seamless flow of information across financial operations. Customer portals allow clients to access statements, make payments online, and review their payment history, fostering a more convenient and user-friendly experience. Some of the best account receivable software are: QuickBooks Online, Xero, Sage Intacct and NetSuite ERP.

Implementing Regular Accounts Receivable Reviews and Aging Analyses

Regular reviews of accounts receivable are essential to maintain a healthy cash flow. Implementing a schedule for periodic AR reviews allows businesses to monitor the status of outstanding balances and identify potential problems early. Aging analyses categorize receivables based on how long they have been outstanding—30, 60, or 90+ days—highlighting overdue accounts that require immediate action. These reports are valuable tools for assessing the health of cash flow and making informed decisions about which accounts to prioritize for follow-up.

Analyzing AR data helps identify patterns and trends that may indicate broader issues, such as recurring late payments from specific clients or seasonal fluctuations in cash flow. Businesses can use this data to refine their credit policies and improve collection strategies. A disciplined review process also enables organizations to proactively address cash flow challenges before they escalate, ensuring financial stability.

Strengthening Customer Relationships for Improved Collections

Maintaining positive relationships with customers is a crucial aspect of effective AR management. Accurate and up-to-date customer information, including contact details and payment histories, enables personalized service and facilitates smoother transactions. Keeping comprehensive customer profiles with relevant data helps businesses address issues quickly and negotiate payment plans when necessary.

Clear and transparent communication builds trust with clients, making them more likely to prioritize timely payments. Sending invoices promptly, following up with friendly reminders, and providing clear payment instructions are all practices that enhance client relationships. By understanding customers’ payment behaviors and preferences, businesses can tailor their approach to improve cash flow without jeopardizing long-term partnerships.

Implementing Credit Risk Management Strategies

For companies that extend credit to customers, managing credit risk is a critical part of AR management. Implementing structured credit assessment processes allows businesses to evaluate the risk associated with each customer before offering credit terms. Conducting thorough credit checks and setting credit limits based on each client’s financial history and creditworthiness can significantly reduce the likelihood of non-payment.

Businesses should regularly review credit terms and limits to ensure they remain aligned with evolving market conditions and customer circumstances. Implementing dynamic credit policies that adapt to changes in a customer’s payment behavior or overall economic environment helps minimize risks and protect cash flow. A well-executed credit management strategy reduces the impact of late payments and uncollected debts on the company’s finances.

Utilizing Aging Reports for Strategic Analysis

Aging reports are essential tools for understanding the status of outstanding invoices. These reports categorize receivables based on the duration since the invoice was issued, making it easier to identify overdue accounts. Regularly analyzing aging reports helps businesses prioritize follow-up efforts, allocate resources effectively, and take targeted actions to minimize delinquencies.

A data-driven approach to AR management not only enhances the efficiency of collections but also provides valuable insights into the company’s financial health. Recognizing patterns in payment behavior can inform adjustments to invoicing procedures, credit policies, and follow-up strategies. Accurate and timely aging reports are crucial for maintaining cash flow and ensuring that overdue accounts are addressed promptly.

Balancing Automation with Human Oversight

While automation offers numerous benefits for accounts receivable management, human oversight remains indispensable. Automated systems excel at handling routine tasks like invoicing, sending reminders, and updating payment statuses, but they cannot replace the expertise and judgment of experienced professionals. Human involvement is necessary for analyzing data, handling complex payment disputes, and maintaining customer relationships.

Businesses should strike a balance between automation and manual oversight. Leveraging automation for repetitive tasks allows AR teams to focus on higher-value activities, such as negotiating payment plans and resolving disputes. A well-rounded approach that combines technology with human expertise ensures that AR management remains adaptable and responsive to changing circumstances.

Proactive Collections and Follow-Up Procedures

A proactive approach to collections is crucial for maintaining healthy cash flow. Sending invoices as soon as work is completed and issuing payment reminders well before the due date can significantly reduce payment delays. Establishing a structured follow-up schedule for overdue accounts—such as sending gentle reminders at 15 days and more assertive notices at 30 days—helps businesses maintain consistent cash flow.

Maintaining detailed records of all payment communications provides a clear audit trail and ensures that the collection process remains professional and well-documented. Professional yet firm follow-up procedures demonstrate the company’s commitment to timely payments while preserving the relationship with clients.

Monitoring Key Performance Indicators (KPIs) for Continuous Improvement

Tracking key performance indicators (KPIs) is essential for assessing the effectiveness of AR management strategies. Metrics such as Days Sales Outstanding (DSO), average collection period, and the percentage of overdue accounts provide valuable insights into cash flow health. Setting specific goals for these KPIs encourages continuous improvement and helps identify areas where adjustments are needed.

By regularly monitoring and analyzing these metrics, businesses can refine their AR processes, implement targeted strategies, and optimize collections. Effective AR management not only improves cash flow but also strengthens the organization’s financial foundation, supporting sustainable growth and long-term success.

Accounts receivable management services

Several reputable accounts receivable management services are available to help businesses enhance cash flow and streamline collections. TSI (Transworld Systems Inc.) specializes in customized debt collection and payment reminders, reducing delinquency rates through targeted analytics. Atradius Collections offers global AR management, focusing on credit insurance and tailored solutions for international clients. Dun & Bradstreet Receivable Management Services provides comprehensive AR solutions, including credit risk assessments and data-driven strategies. Gulf Coast Collection Bureau supports industries like healthcare and utilities with services ranging from AR outsourcing to debt recovery. ABC-Amega delivers global commercial debt collection and AR outsourcing, assisting clients in managing complex cases and reducing payment delays. These services are designed to enhance financial stability and improve payment practices across various industries.

Conclusion

Optimizing accounts receivable management is a critical step toward ensuring consistent cash flow and financial stability. By establishing clear policies, leveraging technology, conducting regular reviews, and maintaining strong customer relationships, businesses can minimize risks and improve payment efficiency. A combination of automated tools and human oversight, alongside a proactive collections strategy, allows organizations to manage their receivables effectively. Prioritizing AR management is not just about getting paid—it’s about securing the financial health and longevity of the business.

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Accounting

Tax Fraud Blotter: Partners in crime

Published

3 days ago

November 22, 2024

Business Finance News

Captive audience; some disagreement; game of 21; and other highlights of recent tax cases.

Barrington, Illinois: Tax preparer Gary Sandiego has been sentenced to 16 months in prison for preparing and filing false returns for clients.

He owned and operated the tax prep business G. Sandiego and Associates and for 2014 through 2017 prepared and filed false income tax returns for clients. Instead of relying on information provided by the clients, Sandiego either inflated or entirely fabricated expenses to falsely claim residential energy credits and employment-related expense deductions.

Sandiego, who previously pleaded guilty, caused a tax loss to the IRS of some $4,586,154.

He was also ordered to serve a year of supervised release and pay $2,910,442 in restitution to the IRS.

Ft. Worth, Texas: A federal district court has entered permanent injunctions against CPA Charles Dombek and The Optimal Financial Group LLC, barring them from promoting any tax plan that involves creating or using sham management companies, deducting personal non-deductible expenses as business expenses or assisting in the creation of “captive” insurance companies.

The injunctions also prohibit Dombek from preparing any federal returns for anyone other than himself and Optimal from preparing certain federal returns reflecting such tax plans. Dombek and Optimal consented to entry of the injunctions.

According to the complaint, Dombek is a licensed CPA and served as Optimal’s manager and president. Allegedly, Dombek and Optimal promoted a scheme throughout the U.S. to illegally reduce clients’ income tax liabilities by using sham management companies to improperly shift income to be taxed at lower tax rates, improperly defer taxable income or improperly claim personal expenses as business deductions. As alleged by the government, Dombek also promoted himself as the “premier dental CPA” in America.

The complaint further alleges that in promoting the schemes, Dombek and Optimal made false statements about the tax benefits of the scheme that they knew or had reason to know were false, then prepared and signed clients’ returns reflecting the sham transactions, expenses and deductions.

The government contended that the total harm to the Treasury could be $10 million or more.

Kansas City, Missouri: Former IRS employee Sandra D. Mondaine, of Grandview, Missouri, has pleaded guilty to preparing returns that illegally claimed more than $200,000 in refunds for clients.

Mondaine previously worked for the IRS as a contact representative before retiring. She admitted that she prepared federal income tax returns for clients that contained false and fraudulent claims; the indictment charged her with helping at least 11 individuals file at least 39 false and fraudulent income tax returns for 2019 through 2021. Mondaine was able to manufacture substantial refunds for her clients that they would not have been entitled to if the returns had been accurately prepared. She charged clients either a fixed dollar amount or a percentage of the refund or both.

The tax loss associated with those false returns is some $237,329, though the parties disagree on the total.

Mondaine must pay restitution to the IRS and consents to a permanent injunction in a separate civil action, under which she will be permanently enjoined from preparing, assisting in, directing or supervising the preparation or filing of federal returns for any person or entity other than herself. She is also subject to up to three years in prison.

Los Angeles: Long-time lawyer Milton C. Grimes has pleaded guilty to evading more than $4 million in federal taxes over 21 years.

Grimes pleaded guilty to one count of tax evasion relating to his 2014 taxes, admitting that he failed to pay $1,690,922 to the IRS. He did not pay federal income taxes for 23 years — 2002 through 2005, 2007, 2009 through 2011, and 2014 through 2023 — a total of $4,071,215 owed to the IRS. Grimes also admitted he did not file a 2013 federal return.

From at least September 2011, the IRS issued more than 30 levies on his personal bank accounts. From at least May 2014 to April 2020, Grimes evaded payment of the outstanding income tax by not depositing income he earned from his clients into those accounts. Instead, he bought some 238 cashier’s checks totaling $16 million to keep the money out of the reach of the IRS, withdrawing cash from his client trust account, his interest on lawyers’ trust accounts and his law firm’s bank account.

Sentencing is Feb. 11. Grimes faces up to five years in federal prison, though prosecutors have agreed to seek no more than 22 months.

Sacramento, California: Residents Dominic Davis and Sharitia Wright have pleaded guilty to conspiracy to file false claims with the IRS.

Between March 2019 and April 2022, they caused at least nine fraudulent income tax returns to be filed with the IRS claiming more than $2 million in refunds. The returns were filed in the names of Davis, Wright and family members and listed wages that the taxpayers had not earned and often listed the taxpayers’ employer as one of the various LLCs created by Davis, Wright and their family members. Many of the returns also falsely claimed charitable contributions.

Davis prepared and filed the false returns; Wright provided him information and contacted the IRS to check on the status of the refunds claimed.

Davis and Wright agreed to pay restitution. Sentencing is Feb. 3, when each faces up to 10 years in prison and a $250,000 fine.

St. Louis: Tax attorneys Michael Elliott Kohn and Catherine Elizabeth Chollet and insurance agent David Shane Simmons have been sentenced to prison for conspiring to defraud the U.S. and helping clients file false returns based on their promotion and operation of a fraudulent tax shelter.

Kohn was sentenced to seven years in prison and Chollet to four years. Simmons was sentenced to five years in prison.

From 2011 to November 2022, Kohn and Chollet, both of St. Louis, and Simmons, who is based out of Jefferson, North Carolina, promoted, marketed and sold to clients the Gain Elimination Plan, a fraudulent tax scheme. They designed the plan to conceal clients’ income from the IRS by inflating business expenses through fictitious royalties and management fees. These fictitious fees were paid, on paper, to a limited partnership largely owned by a charity. Kohn and Chollet fabricated the fees.

Kohn and Chollet advised clients that the plan’s limited partnership was required to obtain insurance on the life of the clients to cover the income allocated to the charitable organization. The death benefit was directly tied to the anticipated profitability of the clients’ businesses and how much of the clients’ taxable income was intended to be sheltered.

Simmons earned more than $2.3 million in commissions for selling the insurance policies, splitting the commissions with Kohn and Chollet. Kohn and Chollet received more than $1 million from Simmons.

Simmons also filed false personal returns that underreported his business income and inflated his business expenses, resulting in a tax loss of more than $480,000.

In total, the defendants caused a tax loss to the IRS of more than $22 million.

Each was also ordered to serve three years’ supervised release and to pay $22,515,615 in restitution to the United States.