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What tax filers and preparers need to know before 2025

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From the battle against inflation to the election of a new administration and subsequent speculation about what it could mean for financial policy and regulation moving forward, the 2024 financial landscape has been dominated by uncertainty. And as the calendar flips to 2025, arguably no topic is more at center stage than taxes.

With numerous shifts in policy potentially set to be rung in over the course of the next 12 to 18 months, 2025 is set to become perhaps one of the most significant years in modern history when it comes to shaping the tax and financial planning environments over the short and medium term. Whether it’s the extended child tax credit or changes to the state and local tax deduction, numerous provisions hang in the balance and are set to elapse by the end of 2025. And with that, as we edge closer to this period of uncertainty, individuals are understandably eager to find ways to maximize their financial outlook as much as possible.

With that in mind, here are a few key and often overlooked items that individuals should keep in mind as they look ahead and prepare for the 2025 filing season and beyond.

Anticipate cuts to the estate tax and gift exemption

One of the most notable tax-related items that is “up in the air” as we head into 2025 is what will happen to the existing federal estate and gift tax exemption. Particularly impactful for high-net-worth individuals, this exemption allows individuals to pass on assets upon death or during their lifetime — from stock investments to real estate — to beneficiaries without paying federal estate or gift taxes. What makes this exemption even more appealing is that the threshold is set to jump from an existing all-time high of $13.6 million to $13.9 million on Jan. 1, 2025. However, this historic estate tax and gift exclusion is set to elapse on Jan. 1, 2026, and will fall to approximately $7 million if it isn’t extended by Congress. Moreover, navigating this exemption is notoriously complex, with individuals needing to take into consideration everything from the state they live in to the size of their net worth. Therefore, while there might be quiet optimism that the new administration and Congress will extend the exemption, individuals need to be proactive in taking steps to make the most of this exemption and guard against potentially missing out on millions in savings in the case that it does expire. 

Navigating IRA inheritance

In 2022, more than 40% of American households owned an individual retirement account. In addition, given there is no limit to the number of IRAs an individual can have, many households likely have several. This means not only a huge opportunity for beneficiaries to inherit but also leaves them with numerous stipulations that they need to navigate — namely when it comes to required minimum distributions, or the mandated amount that an individual must withdraw on a yearly basis. Most individuals are familiar with RMDs for their own IRA accounts. However, many do not realize they are also required to meet RMDs for inherited accounts as well, and because RMDs from traditional IRAs count toward the beneficiary’s taxable income, it’s imperative for these contingencies to be planned for in advance. What’s more, beneficiaries themselves are subjected to different criteria for managing their inherited IRAs. For example, many adult children who inherit IRAs must withdraw all funds from the account within 10 years of the account holder’s passing, while other beneficiaries such as spouses face different demands. These nuances result in a slew of potential avenues to maximize future management and tax efficiency opportunities, so individuals need to consult with their advisors as soon as possible to make sure they are optimizing their inherited IRAs.

Harvest your losses, sell losing stocks and reinvest

Loss harvesting — or selling off failing stocks where you have lost money — is one of the most powerful tax-saving tools for individuals, allowing them to use their investment losses to negate any taxable gains from strongly performing investments at a dollar-to-dollar ratio. In addition, if individuals have had a particularly bad investment year and have realized losses that exceed their gains, they can deduct up to $3,000 off their ordinary taxable income as well. Furthermore, individuals who have seen more than $3,000 in losses can roll the remaining losses over from year to year until completely written off to further reduce future tax burdens. From there, beyond just the tax benefits, individuals can parlay any returns from the sales of their losing stocks into investments in other better performing alternatives.

Reducing taxable income

Reducing your taxable income may seem like a “no brainer” when it comes to maximizing taxes; however, with so many different avenues available to filers, it isn’t uncommon for individuals to end up missing out on opportunities. For example, while many filers may be familiar with the tax benefits of 401(k) plans, they should know health savings accounts, 529 plans — which allow for tax-friendly savings for educational expenses — and traditional IRAs all allow filers to reap significant tax savings as well. These opportunities offering incredibly appealing contribution limits that can help individuals significantly reduce their taxable income:

  • 401(k) plans: $23,000 ($31,000 if age 50 or older);
  • Traditional IRAs: $7,000 ($8,000 if age 50 or older);
  • 529 plans: $18,000 per person (or $36,000 for a married couple) per recipient without implicating gift tax (individual states set contribution limits);
  • HSAs: $4,150 for self-only coverage and $8,300 for family coverage (those 55 and older can contribute an additional $1,000).

Looking ahead

Navigating tax season can feel like a Herculean effort, especially when so much uncertainty is on the horizon. However, by keeping these key items in mind, individuals can help mitigate headaches as much as possible and optimize their tax opportunities for years to come.

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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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