Accounting
The effect of the November presidential election on IRS funding
Like most federal agencies, the Internal Revenue Service is funded through annual appropriations. However, in 2022 the IRS also received $80 billion of multiyear funding under the Inflation Reduction Act of 2022. In the two years since the IRA was enacted, approximately $20 billion was clawed back.
Depending on the outcome of the November presidential and congressional elections, the amount of IRA funding could be reduced further. This article provides a high-level overview of how the IRS is funded and considers how the IRS’s budget might fare after the next election.
Current IRS funding
While IRS funding through the congressional appropriations process has remained relatively constant (fluctuating between around $11 billion to a bit more than $12 billion), since 2010 the amount has decreased in inflation-adjusted dollars. This decrease in funding has resulted in
IRS funding under the IRA was enacted to supplement the agency’s annual appropriations to provide a consistent source of multiyear funding to facilitate improvements and enable better strategic planning. Almost
Under revenue-estimating rules, allocating money to enforcement raised revenue (about $180 billion) that was used to offset the cost of the IRA (which mostly was attributable to clean energy tax benefits). So far, the IRS has used a good portion of the IRA funding, including to help reduce processing backlogs and overall taxpayer service deficits, and it is estimated that after the $20 billion clawback, approximately $40 billion remains. Under the IRS’s strategic operating plan, enforcement funding is focused on large corporations, complex partnerships and high-net-worth individuals, as well as international tax compliance and high-income nonfilers.
Partisan view of IRS funding
The Democrats controlled both chambers of Congress and the White House when the IRA was enacted, but Republicans won control of the House in 2023. While Democrats view the IRS’s IRA funding as separate from the agency’s annual appropriations, Republicans view IRS funding more holistically and have attempted to reduce total agency funding by reducing both IRA funding and IRS appropriations. This effort has been partially successful and likely will continue.
The Biden-Harris administration has proposed increasing the IRS’s annual appropriations, requesting $12.32 billion for fiscal year 2025, and increasing and extending multiyear funding through 2034.
House appropriators have proposed IRS appropriations below the amount requested by the Biden-Harris administration, including a $2 billion reduction in funding for enforcement, but to date have not proposed additional clawbacks of IRA funding. In contrast, Democrats in the Senate support IRA multiyear funding of the IRS and sustained annual appropriations to preserve gains.
Although Donald Trump has not spoken specifically about IRS funding during this campaign cycle, the candidate’s campaign website, campaign staff and surrogates have said that a Trump administration would use impoundment (essentially, not spending appropriated funds) and would continue plans started in 2020 to shrink the federal bureaucracy.
These broader plans could be used to significantly reduce IRS funding and staffing. Budget requests for the IRS for fiscal years 2018 through 2021, when Donald Trump was president, were lower than prior years.
Even if IRS funding survives the fiscal year 2025 congressional budget process relatively unscathed (for instance, agency annual appropriations don’t take too great a hit and there isn’t an additional clawback of IRA money), the fiscal year 2026 budget process begins in February 2025, which gives Congress another opportunity to address IRS funding during the height of discussions about how to address expiring provisions enacted by the Tax Cuts and Jobs Act of 2017.
Extending all TCJA provisions is estimated to cost $4.6 trillion, and differences exist regarding whether offsets should be required. A discussion of offsets surely will include IRS annual appropriations and the agency’s multiyear funding under the IRA. Even if not tapped as an offset for the cost of extending expiring provisions under the TCJA, the IRS’s funding might be an attractive offset to pay for nontax-related priorities. If TCJA negotiations continue into 2026 (or even 2027), which is possible, tax and IRS funding could be an issue in the November 2026 midterm elections.
IRS funding after the election
While no one knows for certain the outcome of the elections in November, four possible outcomes generally exist: Two where one party or the other wins control of the House, Senate and White House, and two where one party or the other controls the White House, but the Congress is either divided or the party that didn’t win the presidency controls each chamber. Each scenario could have an impact on IRS funding, as follows:
- Republicans win the White House, House and Senate: There is a high risk that IRS funding will be reduced below levels appropriated in recent years and remaining IRA funding could be completely rescinded. This conclusion is based on recent appropriations proposals by congressional Republicans and Donald Trump’s campaign pledge to reduce government spending and the number of federal employees.
- Republicans win the White House but lose one or both chambers of Congress: The result here is likely to be the same as above. This is because Donald Trump has pledged to reduce government spending and the number of federal employees. Even if Congress enacts a steady or increased level of annual IRS funding with a veto-proof majority, Donald Trump has stated that he would use impoundment to rescind or defer spending.
- Democrats win the White House, House and Senate: It is highly unlikely that IRA funding will be reduced (and it could even be increased), and the IRS’s appropriations for fiscal year 2025 and 2026 likely will be relatively steady or even increase.
- Democrats win the White House but lose one or both chambers of Congress: Even though the Biden-Harris administration agreed to reductions in IRA funding in 2023 and 2024, the amount remaining after the clawbacks and IRS investments so far leave little room for concessions. However, IRS annual funding levels could be reduced, particularly if Republicans control the House and the Senate.
Based on these possible outcomes, the following matrix illustrates what might happen to IRS funding in 2025 and 2026 in each scenario:
The November elections are fast approaching. While it’s possible that an individual’s view of the IRS and how it spends the money it receives from Congress will affect how they vote, it’s more likely that the converse will be true — how people vote on other issues will influence IRS funding.
President Donald Trump backed a House budget plan calling for a $4.5 trillion tax cut, slapping back Senate Republicans’ efforts to rush through funds to help bolster his immigration crackdown in favor of a larger bill that will likely take months to negotiate.
Trump intervened in the ongoing budget conflict between House and Senate Republicans with a social media post Wednesday just before a key congressional vote.
The Senate plans to vote this week on a budget that would add $150 billion to military spending and increase immigration and border enforcement by $175 billion. Senate Republicans say they prefer to act on those priorities quickly and wait to resolve contentious disputes over tax cuts and the raising the debt ceiling.
Trump instead endorsed a more sweeping House budget plan that raises internecine Republican conflicts over how much to cut federal spending and how large a tax cut should be.
“We need both Chambers to pass the House Budget to ‘kickstart’ the Reconciliation process, and move all of our priorities to the concept of, “ONE BIG BEAUTIFUL BILL,” he said.
Trump’s statement complicates Senate Republicans’ efforts to muster support for a planned budget vote this week.
Senate Republican leader John Thune said the president’s late intervention took him by surprise but he planned to proceed with the scheduled budget vote.
“I did not see that one coming,” Thune said of Trump’s statement.
Trump’s public declaration could help Speaker Mike Johnson gather the votes he needs to pass the budget. Some fiscal conservatives are holding out for deeper spending cuts while some GOP moderates in the House are already expressing reservations about the size of the cuts likely to be directed to Medicaid.
“House Republicans are working to deliver President Trump’s FULL agenda – not just a small part of it,” Johnson
The House is on a one-week break for the President’s Day holiday and Republican leaders are struggling to come up with enough votes for the budget plan because of the party’s narrow majority in the House. The House is planning to hold its budget votes next week, according to a person familiar with the plan.
Adopting the budget is the first step in a special process Republicans intend to use to bypass minority Senate Democrats on tax and spending legislation. A budget plan would allow Republicans to overcome procedural obstacles in the Senate with a simple majority rather than the 60 votes it would otherwise take.
The House has drafted a plan to allow $4.5 trillion in tax cuts in exchange for $2 trillion in spending cuts and a $4 trillion increase in the debt ceiling. The House plan would direct $300 billion to military and border spending but the larger bill is expected to take months to hash out.
The House plans to extend individual and business tax breaks enacted in 2017 that are set to expire at the end of this year. It is also looking to increase the $10,000 limit on the state and local tax deduction, and end taxes on tips and Social Security benefits as called for by President Trump. But the cost of doing all those items for a full decade exceeds $4.5 trillion so lawmakers would either need to find deeper spending cuts or have them expire sooner.
That plan was approved in committee ahead of possible floor votes later this month. House leaders say their tiny majority means it is much easier to pass one bill rather than breaking it into pieces.
Hiring and salaries grew more quickly for accountants than any other job group last year, according to a new report.
The
The shortage of accounting talent and the financial complexity of managing a global workforce resulted in accountants seeing bigger salary gains than software engineers last year.
The report aggregates data from Deel’s more than 1 million contracts and over 35,000 customers across more than 150 countries.
“For most of the past decade, companies couldn’t hire software engineers fast enough,” said the report. “The fierce competition drove up their salaries. While software engineers are still the most-hired occupation for Deel clients, accounting is becoming the new must-have skill for global organizations. Declining interest in the profession from early-career workers and the increasingly complex tax requirements of a global workforce have made accountants a precious, and increasingly pricy, commodity.”
The United States, Australia and Great Britain were the most likely countries to hire accountants abroad. Accountants are most likely to be hired in the Philippines, the United States and Argentina. Mexico and Singapore follow closely. Deel saw a 17% increase in salary over the year for cross-border workers, and 9% increase for domestic workers.
The report also found that while organizations are still hiring globally, there has been an uptick in the number of employers who are favoring candidates closer to home. Companies are especially focused on keeping younger workers happy, with Gen Z receiving bigger raises in 2024 than other generations.
When it comes to the digital asset world, one thing is certain: There’s never a dull moment! Take, for instance, President Trump’s announcement to implement high tariffs on goods from Canada, China and Mexico. This sent shockwaves through the digital asset market, causing bitcoin to fall below $100,000. Although the value eventually rebounded, chances are we’ll continue to see extreme price fluctuations.
As the digital asset landscape becomes increasingly unpredictable, it’s important to encourage clients to diversify their holdings across sectors and digital asset types. Not only will this help with tax planning, but it will also propel you into a more advisory role. Here are four strategies you can recommend to clients to diversify their digital asset portfolio:
Purchase different coin and token types
Perhaps the easiest way clients can diversify their digital asset portfolio is to acquire different types of coins and tokens. Advise clients to start with well-established cryptocurrencies, such as bitcoin and ether. Because these cryptocurrencies have a large market cap, they’re typically considered lower-risk investments.
After that, encourage clients to consider altcoins. These are cryptocurrencies that aren’t bitcoin. Although altcoins are riskier, they have the potential to quickly appreciate in value. But be careful — their values can suddenly plummet as well. As a rule of thumb, when investing in lesser-known altcoins, clients should only put in what they’re willing to lose.
There are other types of coins and tokens that may help with diversification, including the following:
- Stablecoins, which are cryptocurrencies whose value is tied to another asset. USD coin is a popular stablecoin that’s pegged to the U.S. dollar.
- Security tokens, which are tokens that represent ownership or participation in a real-world asset (like stocks, bonds or real estate).
- Nonfungible tokens, or NFTs, which are tokens that represent ownership of a unique digital item, such as art, music, animated GIFs, articles and social media posts.
Many clients will be unfamiliar with these items, so taking the time to explain the benefits and potential risks of each investment will solidify client relationships and elevate your advisory practice.
Invest in a crypto exchange-traded product
A crypto ETP is the digital asset world’s version of a mutual fund. It’s essentially a way to invest in cryptocurrency without purchasing the coins directly. Like other ETPs, crypto ETPs are securities that track the value of underlying assets. However, in this case, the underlying assets are cryptocurrencies, such as bitcoin and ether.
To help get clients started, you can recommend a reputable broker. Most major online brokers offer crypto ETPs; however, ETP types and fees will vary. Also, it’s important to educate clients on the risks of investing in a crypto ETP. One potential drawback is trading can only occur during regular market hours, meaning your client may miss out if cryptocurrency values significantly change during the weekend (which, as we’ve seen, is highly likely). This wouldn’t happen if your client purchased cryptocurrency directly since online exchanges are always open (unless briefly shut down for maintenance).
Try a crypto-related exchange-traded fund
Clients who go down this route have two options to consider: a stock-based ETF and a futures-based ETF. In a stock-based ETF, the client holds a collection of crypto-related stocks. These are the stocks of corporations that operate in the digital asset space, such as Coinbase Global, Inc. If your client decides to invest in a futures-based ETF, they will be exposed to the price movements of cryptocurrency futures contracts, which are agreements to exchange the fiat-equivalent value of a digital asset (or the asset itself) on a future date.
As with ETPs, ETFs won’t give your clients direct ownership of cryptocurrencies — they will simply own units within the funds. This could be a problem if a particular cryptocurrency or company increases in value, but that growth isn’t fully reflected in the ETF. However, crypto-related ETFs are still a great way to diversify a digital asset portfolio.
Hold digital assets in a self-directed IRA
As a tax and accounting professional, you’re probably familiar with self-directed IRAs that hold real estate, precious metals, foreign currencies, commodities or hedge funds. But did you know they can also be used to hold digital assets? There are crypto IRA platforms out there that can help with the administrative burdens typically associated with self-directed IRAs.
Advising clients to establish a self-directed IRA can be a smart move; however, setting one up that invests in cryptocurrency is often complex. In many cases, you will need to direct the client to create an LLC that’s solely owned by the IRA. After that, a checking account should be opened in the LLC’s name. The LLC will also need to acquire a digital wallet. After the IRA is funded, the plan should be directed to transfer the funds to the LLC’s checking account to purchase cryptocurrency through the digital wallet. This isn’t always needed, however, as some account managers allow the IRA to invest directly in cryptocurrency without the need for an LLC. You can help your client find a cryptocurrency exchange that allows IRAs to open accounts.
Don’t forget the tax implications
In addition to advising clients on digital asset diversification, you’ll need to ensure clients fully understand how their investments are taxed. The guiding principle behind digital asset taxation is digital assets are treated as property for federal income tax purposes. This means that every time a digital asset is sold or exchanged for goods or services, gain or loss will be recognized (subject to limitations under the Internal Revenue Code, if applicable). Some clients have the misconception that cryptocurrency is treated just like cash for tax purposes. You can clear that up and, with proper tax planning, help clients efficiently manage their digital asset transactions.
Be strategic
Navigating the ever-evolving digital asset landscape requires a strategic approach to diversification. With your guidance, clients will be able to make informed decisions, mitigate risks and seize opportunities in a dynamic market.
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