← AICPA Town Hall
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- [00:01]
A
Welcome to the AICPA Town Hall Series, your resource for the latest news and updates on pressing issues facing the accounting profession.
- [00:10]
B
Good afternoon and welcome to the AICPA Town Hall. I'm Eric Ouskerson, one of your hosts for today. Today is February 13th, and Mark, you haven't been on the job yet 45 days. You can see we've got Mark Koziel, the new CEO of the aicpa, with us here in the New York studio. Great to have you, Mark. We've got another power hour in store.
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C
Yeah, thanks for having me. I'm excited for it. Let's get going.
- [00:33]
B
Let's get going. So here, let's take a look at today's agenda. So we're going to start things off with a profession update with Mark Koziel. And then the DC team, which is led by Mark Peterson, is going to give us a DC update. Plenty going on there. Melanie Lauritsen is going to join for a portion of that and then provide the technical update section. We then are going to do an overview on the Quality Management Standard, which has an effective date of December 15th of this year. And that's going to be led by Bob Dirac and Mike Brand, and I'll be introducing them when they join us. Mark, it's a pretty busy news cycle that we're living in right now. This is just over the past couple of days, the start of this week, actually. Yesterday, the inflation numbers came out a little bit hot. That was right after Powell had stated that he feels that rates are going to stay consistent for a little while. Then last night, the House Republicans dropped their tax proposal. 4.5 trillion in tax cuts. And then a lot going on with the profession. Mark, you've been very, very active, giving a lot of talks, meeting with the press, an important announcement related to the PCAOB withdrawing their rules on the firm and engagement metric. And then this final article. Mark, pretty exciting to see the enrollments up at the highest level since 2020.
- [02:09]
C
Yeah, 12% increase. About 28,000 in additional students that we're seeing this year over 2020. I was doing a presentation earlier this week. I said I was in my 41st day at the time. Enrollment's up 12%. You're welcome. Mission accomplished. But it actually has nothing to do with me. And I think it really, you know, we've always seen these ebbs and flows based on the economy. Right. And so, and even if we were going to say, wow, this is really encouraging news, it's still only taking us back to 2020 numbers, which were still much lighter than where we'd want to see them. So the job is not done. The NPEG and the pipeline and things that we've been working on there. We still have a lot more work to do, but it is encouraging to see that news early.
- [02:55]
B
Well, the economic climate always has a big, big influence.
- [02:58]
C
Yeah, yeah, absolutely. I mean, I think when you start to see a softening in other types of roles and people start to hear that maybe we didn't hear something happening in finance, marketing, business, management, some other type of major, that there's been a softening, usually others pick up. So we may have some of that as the economy changes, as people's sentiments of the economy changes. I think that has something to do with it too.
- [03:25]
B
Well, Mark, this is a slide that we are regularly updating. We've had this on the past couple of town halls. I mean, it's a period of significant and rapid change in particular around the administration change. Mark Peterson will be talking about that. I mean, on the last town hall we were talking a lot about the executive orders. I think everybody's feeling the impact of the Department of Government Efficiency led by Elon Musk. So we'll be talking a little bit about that. But when you look, this is a slide that you can use your, your clients or your employers. There's just a lot, lot going on. A very, very important time for the profession, firms to be providing guidance.
- [04:06]
C
Yeah, I'm looking forward to hearing from Mark and Melanie on this. You know, they've kept me up to date on what's happening there. They have, they're very busy right now trying to keep up with all the things that are happening in D.C. you know, we've said, you and I, one of the major tenants of creating this town hall is for us to help provide this information to our members as fast as we possibly can, knowing what we know and don't know. And it's going to continue to come fast and furious and for our members you're going to hear just a lot of press, a lot of hearsay and things. And so I do think that this is a good source to try and stay kind of level set on what we should be talking to our clients about.
- [04:48]
B
And we say it's probably good to not live in the 24 hour news cycle and to think about business outlook and client activity as you have all of these changes occurring driven out of Washington D.C. so Mark, this is your listening tor. I know this is something that is very important to you. You've been receiving a tremendous Amount of feedback. We want to continue to encourage the town hall community to look at this question. You can leverage the town hall Q and A with any suggestions you may have or this email address that you've created. Ask markicpa-cima.com and I think this is early results on what you're hearing.
- [05:31]
C
It is. And you know, it's. What's interesting is so on January 16th, town hall, that's where we announced it. And we asked people right there in the Q and A to provide feedback. And they did. Some asked what was the email address so they can go deeper. And you have that email address on screen now. And what's interesting is especially coming out of the town hall and maybe there was a little more leaning towards small firms. We do have a lot of small firm participation on this town hall, but we do have a number of larger firms and business, business and industry. And, you know, that's the ultimate thing for me is to be able to listen and hear from our members and be member driven in what it is that we do. And we're going to continue that. You know, as I came in, some of the team members, our staff, were worried that I'm just going to come in and completely change the strategic plan pipeline is still important. The dynamic audit solution you've talked about is still important. What DC does, still incredibly important. And so all of those strategic initiatives will continue. The question is, as we ramp up the next year, what else should we be focused on? And interestingly enough, these are the key themes. And of the nearly 500 questions and things that I've received, I will say that at this point, some things are everything that's old is new again. So being able to see small firm support, don't forget about the small firm. I heard that when I was on the road a lot when I was with AICPA before leaving in 2000, that will continue to be a focal point for us. We do have a number of initiatives. And I'm always asking, okay, specifically, what is it that you need? Feel free to send that to me. Lisa Simpson, she's been on these town halls. She's always highlighting where the small firm tools are for people to use going forward. Bob, I don't want to give away your presentation a little bit later today on the QM standards, but you know, there are tools already for that and it's written in the voice for the sole practitioner and for the small firm. And it's constantly. We had, Eric, you and I, we were in a meeting the other day. We're getting an update on the dynamic audit solution. And we were talking a lot about scalability and making sure that the small firm is going to be able to scale that product as we go forward. And so that is always top of mind. I want to make sure it stays top of mind for the association as we go forward. Which gets us to the next one. Because audit needs in local governments. Mark Peterson said, as I said this, he's like, well, we need auditors in government. Yep, we do. We need that governmental expertise. But we also need. Local governments tend to not have the most qualified of personnel doing the accounting for them. It makes local government auditing hard and with all of the standards we have around it and the governmental standards that sit on top of it makes it really difficult. I know Mary Foalster and her team, they've been working on this with the government Audit Quality Center. And so I told her we need to highlight this more. I'm getting this feedback, you know, maybe it's a future segment or, you know, looking at other things again, where I think das, when we talk about the dynamic audit solution, there will be efficiencies built into that tool that I think will really help with firms getting back into local government auditing. Local governments need to be audited. You know, there were some failures that happened along the way, back 15, 20 years ago. So we need to make sure we stay on top of that legislative support. You're going to hear from Mark, you're going to hear from Melanie. They work incredibly hard. I've been saying that time and again. And as I've been on these town halls, as I've been out talking in the marketplace, it is a tough job being there in D.C. and they're on top of it. So we will continue to push for that legislative support. I think some of what they'll talk about with this Taxpayer Assistance act that's being discussed, there's going to be a lot. There's some positives in there to hopefully, hopefully that we'll see those positive impact going forward. Talent to pipeline. I talked about it in January 16th. There's discussion out in the marketplace of alternative pathways. Our team is on that. They are working with nasba. There's the Uniform Accountancy Act. The UAA Committee has met recently that I know. I think there will be information out on that in the near term as we watch and assist. We've been in active conversations with the states because we all want the same thing. We all want to see that pipeline. We want to be able to produce CPAs for the future, we're going to continue on that. And then finally CPA branding, you know, and the CPA brand making sure it's strong in the branding. There were others who wanted to focus on individual credentials, that we have specialty credentials around that we need to advertise more in that specialty credential. The challenge always with trying to brand cpa. CPA means so many different things to so many different people. There is no one answer. We can't do one ad advertisement campaign. And it always happens this time of year. I did get a number of emails through this mechanism and through some social media while the super bowl is coming up and some of the large tax companies out there are going to be advertising against CPAs. We need to have a CPA brand ad in the super bowl, which I don't even know, Eric, what the pricing of that is anymore. It's got to be millions upon millions. But we can't afford to be in the battle of advertising at the Super Bowl. But there are things I think every one of us can do. I think every one of us talking about how great the profession is, trying to attract others to come into it. You know, those are the things we can really tackle.
- [11:22]
B
Yeah, Mark, it's a great list. Some, some, you know, a lot of, lot of good feedback coming into you right now. One thing, one question just came in. How, how does the AICB or how do you define a small firm?
- [11:35]
C
That's a great question. I mean, you know, as we look at how firms have grown in size, for me and typically so when I was here with PCPs before, one of the things that we had stratified, the firms, you have your sole practitioner, you have your two to five person firm, you have your five to ten person firm. For me, a small firm is anyone under 20 employees. We're 20 professionals. When you hit 20 professionals, you're at that point where you kind of know where you want to be when you grow up in a 20 professional firm in a small town. I live in Nebo, North Carolina. That's a small town. 20 person firm could be the largest CPA firm in that town. Right. And so I do think that we are a small firm community. And I was asked a question earlier today on an interview. You know what, how many firms are there and how many are small firm? Back in the day of PCPs, we used to say, I don't know, 30,000 firms or so we have in the US of the 30,000, probably about 25, 27,000 are small firms.
- [12:39]
B
Well, we want to pull Mark up, Mark Peterson up, get in D.C. but one additional question, I mean we're the town halls. We have, we have a huge business and industry audience out there, actually one third and we've got over 11,000 on. So we have, we have a few thousand members in business and industry. So I did your listening tour. You're out there with the corporations as well and that maybe that it's a topic for us to hit on a, on a future session.
- [13:03]
C
Absolutely. Upskilling. Is it upskilling? And I even had that. I didn't have CPE or training as part of that. That probably number six on that list. Right. But upskilling definitely is something that's top of mind inside a business and industry. And how do we get our young professionals, our analysts doing more faster getting them to be able to communicate with the sales team and the manufacturing team and all those pieces as we go forward.
- [13:27]
B
So we're right on time.
- [13:28]
C
And that's it.
- [13:29]
B
So the business and industry members give Mark some input and that will be on the next slide for the next town hall. So hey Mark Peterson, great to see you. Busy time to be here. So hopping right into it with you. Starts with funding.
- [13:48]
D
Well, you know, Mark said it, what's old is new again. We're talking about government funding and shutdowns. Right. So we've got 29 days until, you know, we're dealing with the potential of another shutdown. They've been working on this since the last funding gap funding proposal that they, they cut a deal on December 20, I believe the date was. I have some concerns each week that goes by that they don't come to some resolution or narrow the gap about how they're going to fund the government lead to the potential of a shutdown. And obviously the date of March 14th would be really tough on the IRS and tax practitioners as well as Department of Labor and the SEC and the other agencies as well that we deal with. But this is kind of the first thing that they're trying to figure out. And as we've discussed in the past, Mark and Eric, it's a couple things. It's what's the size of the funding? Do they increase the size of the funding? Do they just keep current levels and kick it out a period of time? Do they add things to it? In the past they've added non controversial things like disaster relief, but sometimes they will add other things to it because there are so few legislative vehicles that pass. They got to find some low hanging fruit to gather some votes to grow the votes and then there's a length of time. There's a big dispute about how long should it be? Should it be a couple weeks in order to cut a deal that's more long term or do you just do current level until the end of the fiscal year, you get to October 1st. The other thing to keep in mind that we're watching closely is the last few of these have been controversial. There's been a lot of drama. They've been very challenging for the speaker of the House to pull the votes together on the Republican side, which means the Democrats have crossed the aisle in order to vote for these continuing resolutions to keep the government funding. Now, in the current circumstances, will the Democrats, this is the House Democrats, will they cross the aisle to do that? And if they, if they don't, can Speaker Johnson find the votes on his own side of the aisle? And remember, until there's a couple specials special elections that are done in April, there's only a one seat majority. So we'll watch this closely. You know, a lot of, there's a lot of tension right now because of the executive orders. There's a lot of frustration on the Democratic side that there's been suspension of some of the funding that has been appropriated and so concern about, okay, if we move forward with a continuing resolution and approve funding to go out, what happens to it and does it go where it's supposed to, supposed to end up? And so we'll watch this closely. But each week that goes by, and by the way, they're not in next week, they're in their congressional districts for recess. You get closer to that end date of March 14th.
- [16:35]
B
Well, Mark, here's it seems that the administration is taking shape.
- [16:41]
D
It's filling up. It's filling up. This is the other thing that we watch closely kind of at the beginning of a new administration. And I said this, there's some controversial nominees that are here, but for the most part, regardless of party, the president usually gets their, their cabinet put together. It's coming together. It's helpful for us because we can once they're in place, they'll start to give us feedback about agendas. They will make their senior leadership decisions. We'll have kind of a better path forward still a couple that have not been scheduled. And part of that is the tyranny of the calendar, the process and the background efforts that go around. So we haven't seen the potential chair of commissioner of the SEC or the IRS commissioner scheduled yet. We anticipate that to happen in the.
- [17:34]
C
Very near Future, Mark, with that said, you know, we don't have someone confirmed as IRS commissioner. We have a interim commissioner right now is acting have already left. Does that change anything inside the IRS or what is the commissioner impact, if any?
- [17:53]
D
We still work with them very closely and our team, Melanie and the team, we talk to them constantly. You know, in the current environment, we're going to talk a little about the, you know, federal hiring freeze going on. You know, they do shut down, you know, their promulgation of regs. And so things do slow down until they can move to the, to the, you know, the new confirmed head. But as far as like, you know, on a daily basis we still have the ability to work with them. And by the way, this list is just cabinet level. There are still hundreds of others that have to go through a confirmation process that aren't, you know, at cabinet level. But that still takes a period of time. So setting up a government takes a while.
- [18:39]
B
Well, Mark, there was these slides are hopping a little bit today for some reason. We this was last night, 45 page document dropped by the House and the Senate's advancing their plan.
- [18:54]
D
Yeah. So again, an interesting story coming together and it's on the Republican side and it's more two versions of how to handle reconciliation. Just to remind everybody, reconciliation is the process that they're going to do a tax package through. But there are also other initiatives, the border and defense spending and you know, a focus on the Republican side to kind of dismantle a lot of the energy tax credits that's being done through the reconciliation process because that means you only need a simple majority. You don't need a 60 vote margin in the Senate. But there's two views about how to do reconciliation. Reconciliation starts with a budget resolution and the budget gives basically the parameters, the size of the bills that can go through this reconciliation process. So it's the size of the bills and the House and the Senate have a different view of that. And then it's whether they do one big package which is the House is more focused on doing one big package that includes border and defense and tax or what the Senate is saying, which is two packages, let's do defense and border and addressing those energy tax credits and then come back and do the TCGA extension bill that would have the other things in it. Again, the kickoff for all of this is getting the budget done. The Senate proposal got voted out of committee yesterday. It was 11 to 10. So it was partisan vote. Still has to go to the Senate floor. As I mentioned, they're out next week. So that'll take a little while. And again, that sets up the idea of one bill that would push the tax conversation later into the year. Okay. The House is meeting right now. The House Budget Committee is meeting as we speak to try and get theirs done. And as I mentioned, their perspective is one big bill that includes everything and they have different issues to deal with. Some of the budget hawks are concerned that the deficit reduction that's included in the package is not enough. And so we think as of today going into this, there were some challenges to whether they would have enough votes. There's, I think, a two vote majority that they margin that they have to overcome. Whether it would hold or not. Some concessions were made. The amount that they are going to find in deficit reduction in spending cuts was increased from 1.5 trillion to 2, which should get the votes they need to get it out of the Budget Committee still has to go to the floor. So then we'll have basically these, you know, two packages, one in the House, one in the Senate moving forward and then they'll see if they can get them off the House and Senate floor and then they've got to reconcile them to figure out which one's going to actually, you know, be the plan moving forward. I think the big thing for us to watch is going to be whether it's one package or two packages because as I mentioned, if it's, if it's a tax package second, that gets us way late in the year and potentially into the beginning of next year.
- [22:04]
B
We got to keep going. But Mark, it sounds like it's gonna be a long, winding road.
- [22:08]
D
It is, it is.
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B
Long, winding road. So this is a lot to correct.
- [22:13]
C
Mark, you said it's one big bill. It's one big beautiful bill.
- [22:16]
D
Beautiful bill.
- [22:17]
C
That is what we're looking, that's what they're focused on in the House, the marketing.
- [22:21]
B
So Mark, other, other announcements here regarding hiring freezes. And we're going to, there's a lot of comments coming in just actually kind of to unpack a little bit what's happening with the, the efficiency, you know, group that Musk is leading. But.
- [22:35]
D
Right, right. And so, you know, we've talked about a little bit about the Department of Government Efficiency and their advisory. For one thing. They're not, they don't have actual power to do any of these, but they can make references and they are making references to the authorities within these agencies to move these things forward. Although, as everybody knows, there's also been court challenges. So a lot of this is unprecedented. And, you know, the agencies are trying to figure out how to deal with it. A lot of the federal employees that are, you know, potentially, you know, had offers that were rescinded or offers that have been delayed are trying to figure out how it impacts them. We've also seen how, you know, there was court challenge to it. There was also the, you know, looking at the irs, for example, and saying, well, let's, let's not put this offer forward until we get past tax season, you know, for critical employees. Now, what's the definition of critical? So we have a lot of questions. You know, the impact on the federal workforce, yet to be determined. There is definitely a focus, and it's one of the mandates of this, of doge, in order to shrink the size of the federal workforce. So that's coming now. What does it look like and how does it impact things like tax season? But it's also Department of Labor and the SEC and the other agencies yet to be determined. We're raising concerns about what tax season will look like, and we will continue to do that because for taxpayers and preparers, we've got to figure that out. Yeah, I mean, again, they've made several exemptions from this. Things like the border and the military, law enforcement, those areas. We've seen that kind of move in. Again, I mentioned the irs, the ultimate impact of this and whether the courts will withhold challenge, yet to be determined. They did delay the date that federal employees were supposed to. Were supposed to address whether they were going to take a buyout challenge or not to give them a little more time. You know, again, we'll see how that all plays out. The numbers are not what the new administration had expected from federal employees taking the early outs. And so they are moving in now to kind of look through reduction. And how that will be targeted is yet to be determined.
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C
So on the early buyout, too, Mark, I think what's happening at the IRS with that?
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D
Well, they've delayed it. That was the point I said, is that they've moved that for critical employees into May in order to give them more time and less disruption to filing season. But you still have. You still had people that had offers, so new employees, not current employees that were frozen. You had hiring freezes that were going on. You know, we've had discussions about temporary hiring for, you know, the filing season, and we've been told that they could handle it. So it's kind of conversation we're having on a daily basis.
- [25:51]
B
Well, Mark, a lot of feedback coming in here. I mean, there's some feedback. People are encouraged by some of the ways and maybe issues going on with some of the spending in D.C. that's being uncovered by the DOGE efforts. There's obviously concerns related to kind of the process. I mean, David Walker was on a member of the profession, former control general. It was on the news last night talking about this and he actually similar comments. You know, there's. We've been trying to find these inefficiencies for many years. So that's good. And then we need to work on transparency.
- [26:32]
D
Right. And again, there's a pendulum swinging because you can see these executive orders have been extremely aggressive, unprecedented in some ways. And we've seen a court response to that. And so, you know, the hope is, is that the pendulum swings and we get to some balance and a little of both, you know, some, some, you know, responsible addressing of waste, fraud and abuse. But on the other hand, making sure that government works for the funct needs.
- [26:58]
B
To so more to come. So now we're going to get into some more specifics on the irs.
- [27:07]
D
Yeah, well, it's been a busy week. It's always a busy week. But earlier this week, the Houseways and Means Committee held a hearing that had several issues really focused on IRS administration. Some of these initiatives, there are things that we've been proponents of for years, have been working with the, the committee on. It's also an opportunity to talk about things like, you know, how would DOGE have an impact on the IRS and their ability to fulfill their mission. So that came up at a hearing like this. But also, I would say on a good note, there was bipartisan consensus around a need for modernization in a very positive sense. We had, you know, the former taxpayer advocate, Nina Olson testifying. You know, we've been very involved in contributing our thoughts around IRS modernization. So there was some area of bipartisan agreement and focus which was very, you know, very welcome. There's also, you know, disagreement. I'd say the other area is someplace that we have been which is, you know, all of the money that came through the IRA bill related to enforcement and bringing some balance to enforcement versus IRS service. So there was a good discussion around kind of reconciling the funding around enforcement and in the appropriate level of funding for service for obviously for taxpayers and preparers. Yeah. And then, you know, we are, we talked about this on the last town hall and we have over the last few years, and even though they've, you know, there's been challenges whether the legislative process would work or not, spending Time with Ways and Means and Finance in a bipartisan way, setting up the ability for us to have our issues which are not inherently partisan, but they do have to cut through the noise and the dysfunction in a way that they could be positioned for this reconciliation bill. And we're seeing a lot of opportunity there with this bipartisan discussion draft that was announced by Republican and Senate leaders on the Senate Finance Committee. So again, good news, great progress and we're going to continue those discussions. This is a discussion draft which will gain input, but the fact that it is positioned like this gives it a running start at an ultimate tax vehicle.
- [29:33]
B
Yeah, Very, very positive.
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D
Yeah.
- [29:39]
B
And this is another bill here that actually has a lot of positive elements. Go ahead.
- [29:44]
D
Yes, long list, long list of issues that we have, we have aligned on and that we have discussed in the past. The mailbox rule really just reconciles the difference between paper and electronic. But there is an issue related to that. SAFE act is hopefully would help busy season a little bit. You know, with the safe harbor for extensions at 125% of the previous year, disaster relief triggers. Anything we can do around disaster relief is welcome. And again, broad, broad support for these proposals.
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B
Well, now we're going to bring Melanie up here to join us. I mean this and this. Melanie, you know, I think this is a very kind of strategic high level slide that kind of talks about the tax preparer space. So I'll let you review this with the audience. Diane, welcome, welcome, welcome.
- [30:39]
E
So as Mark was covering, he was discussing the discussion draft and one of the proposals in that discussion draft is preparer regulations. And to really understand the tax return preparer regulation, you have to understand the ecosystem of the tax return preparers. So as you can see on this slide, at the end of last year at the filing season, there were over 800,000 total PTIN holders. And of those holders, CPAs are the largest majority stakeholder. And we are truly considered the bureau of the preparer community. Also to note, the CPAs enrolled agents and attorneys are circular 230 legacy preparers because we're all bound by the entirety of Treasury Circular 230 which allows us to have unlimited practice rights before the irs. Now after the Loving case, and we'll talk about what that means soon, the IRS created a new program called the Annual filing Season program. And this program was geared towards preparers that are un credentialed but are willing to take take 18 hours of CE per year and they would have limited ability to represent before the irs. So on the slide you can See, there's a variety of types of repairs, and this creates confusion for taxpayers as to why and what these different types of repairs can do. And that's called marketplace confusion. And we'll touch on it in a little bit. Also, we need to talk about the ghost repairs, because these are the repairs that have no ptin. They're simply unknown. They pop up, they encourage credits which taxpayers shouldn't be taking and don't qualify for, and then they disappear. And it's because of those ghost preparers that Congress is motivated to allow the IRS to regulate the tax return preparers. And we do believe that the IRS should have the ability to regulate tax return preparers, but with guardrails, not with unlimited power. So on this next slide, in the first box, that box is pre2013, which is in reference to the way things were prior to the Loving case. And the 11 case determined that the IRS had no authority to regulate return prepares. So in other words, the IRS couldn't force basic competency tests, CE background checks, or make people bound to circular 230 ethical standards. Now, with a Loving case, we entered into what is now the current state of what the IRS can do, which is require that a return include a PTIN of a paid preparer. However, incompetent preparers can obtain a PTIN and they can prepare returns without being subject to IRS oversight. And the IRS is not currently authorized to deny, revoke or suspend a preparer's patent, even if that preparer has demonstrated incompetence or that they're unfit to prepare returns. That means they can still continue preparing returns. And so on the right box, what you see is what we would like prepaid prepare regulation to look like. So essentially it's going back to the pre loving with additional components. So we believe that the IRS should have the authority to revoke a ptin. So give the IRS some teeth here. And we also think that the supervised non signing preparers, they shouldn't have to get a ptin. And finally, we want there to be a GAO study that looks like the the exchange of information with the state authorities. Now, on this next slide, we show what the discussion draft proposes. And in a nutshell, the IRS was granted the authority to revoke PTINs, subject of course to procedural protections in due process. And there's also an exception for supervised non signing preparers. There is a requirement for 18 hours of CE, which CPAs are exempted from. And the discussion draft also included the GAO step ready. What isn't included is the marketplace confusion language which required uncredentialed preparers to educate taxpayers to the types of preparers that exist. And that's something we're actually going to continue and we have done continued pushing and having conversations about so that there isn't marketplace confusion. But that would be separate from this proposal and of course this proposal because it's in the discussion draft, we do believe it has the support it needs. And overall if this were to be passed it would just be a huge win.
- [35:16]
D
And Melanie, just to point out the non signing preparer issue is a significant cost savings for.
- [35:22]
E
It is. Yes, it definitely is for our members. Okay, moving on.
- [35:29]
B
Yeah. Now we've already, we've had some BOI questions coming in.
- [35:33]
D
So look at I told you Melody.
- [35:35]
B
408 to 0. Mark, this looks like this is partisan.
- [35:41]
D
It is. Go ahead, Melanie.
- [35:44]
E
Okay, so as you all know, we have the Samantha Smith case and it is making its way through the court system but the House of Representatives have actually taken action and on Monday, February 10th, the House of Representatives passed HR 736 unanimously and it was just really impressive at 408 to 0. So this bill now needs to go to the Senate and separately the Senate has introduced a companion Bill which is S505 which was introduced by Senator Tim Scott. Now these bills support the AICPA's long standing position of having a significant delay to really help the small businesses. So one thing that while this is hopeful, the Samantha Smith case. The Samantha Smith case injunction could be lifted at any moment. And both bills are applicable to companies Pre existing to 2024 and under the bills all the other companies formed after 2024, they aren't affected.
- [36:50]
D
Yeah, listen, it is hopeful but I never advise anybody to make a decision based on Congress acting.
- [36:56]
E
Right.
- [36:57]
D
And so we will probably be doing an action alert related to the Senate package to gather co sponsors for that. That but there is not an apparent vehicle to move it. Even with that phenomenal unanimous vote they would have to figure out if they could do it through expedited procedures in the Senate which is not impossible but it would mean have to unanimous consent, meaning one objector would stop it. So we're going to continue to work that and be hopeful.
- [37:22]
B
Mark, you've got, you got you know, 408 to 0. You got the Senate advancing it. Scott Bessen kind of had lukewarm comments about this during his testimony.
- [37:33]
C
So yeah, I think Mark also with that reminding our members that you were awfully close in December of getting this in the continuing resolution and you know that ended up on the cutting room floor. So there, there will be continual things. But also is there any call to action or will there be a call to action of our members if you could get this Senate bill to get moving?
- [38:01]
D
Yes.
- [38:01]
C
Yep.
- [38:02]
D
We will be putting out a call to action very specifically to all of the different communities, including the state societies and the town hall community and the firms in order to gather support. We've already reached out to Senator Scott's office. So we're there and you know, we will multitrack, see if we can figure find a vehicle to attach it to or expedited procedure. But in the meantime gather as much support as possible. And to your point about the Secretary of Treasury and Melanie and I talk about this all the time because you've got the precarious nature of the court case. You've got legislation which you can't count on because of the process, but then you got an agency that may not enforce it. But it's tough when you have something on the books that's required. They're just not enforcing it. So we hope we can get it resolved.
- [38:45]
B
So progress there? Well, Melanie, we got you can now lead us through technical updates and then we're going to close with the QM standard discussion.
- [38:53]
E
So yeah, so we're actually going to continue with the BOI saga. So there have been recent notices that were filed by the Department of Justice on behalf of FinCEN in the Samantha Smith case. Then that was just not surprising. And the notices filed appeal the BOI ruling and request a stay of the current injunction. And given the recent Supreme Court decisions we actually my guess is I would expect the injunction to be similarly lifted. Now fincen also postponed posted a statement saying that they would intend to provide a 30 day filing extension for the BOI report in the event that the injunction was lifted. And those 30 days would start at that time once injunction is lifted. Now we do appreciate the 30 days. It's better than the 12 days they gave us last time. But 30 days, given the timing of this, it could overlap with the tax filing season due dates, March 15th and April 15th. And so we've actually drilled down really hard with FinCEN, made them very aware of this issue and the burden that could create. Also FinCEN stated in that same post that in keeping with Treasury's commitment to reducing regulatory burden on businesses, FinCEN during that 30 day period of extension, they were going to look to see how they could further modify the deadlines or reporting requirements for the lower risk entities and prioritize the reporting requirements for the most significant security risk. Now, we've reached out to Svenson, asking them, what exactly does this mean? What are your intentions? And right now, they just don't have information to share. Also, meanwhile, penalties for the BOI reporting violations and unauthorized disclosures increased to $606 a day from 591, and that took effect on January 17th. So moving on IRS operations, you know, both Marks and Eric touched base upon it. You've already heard the IRS employ that were critical, seasoned employees have an extension or they've been postponed until May 15th. And that really means that if, even if they do resign, they can't actually resign. They have to continue working through May 15, while everyone else, not everyone else, but the majority of others can stop working and still be compensated for that. Now, again, like Mark said, we've reached out to the IRS to understand what critical means, because there are various definitions of critical. And so far, the IRS has not given insight as to what that officially means. And they have unofficially kind of said, well, it's those that are helping with processing of tax returns. But that, again, is very ambiguous. Also in a February 7 memo, the Department of Homeland Security, Christine Yeom, asked Treasury Secretary Bessant to deputize qualified IRS agents for certain immigration enforcement efforts, efforts. And they kind of give a list of the things that they can do. And it includes apprehension, monitoring, detention, removal of unauthorized immigrants. Now, where are all these IRS agents going to come from? That really is the question of the day. Well, the IRS has a criminal investigation division of over 3,000 people that serve as the agency's laws enforcement. And that includes 2,100 special agents who investigate financial crimes like tax fraud and money laundering. And it's those agents. It's that pool, the 2,100 agents that would be pooled for and asked to be deputized. And of course, there's the thinking that if you deputize IRS agents for deportations, it would likely limit the agency's ability to focus on financial crimes. So moving on with the IRS financial season, we're well into the filing season, and so far the IRS has seen approximately 14% less returns filed at this time in comparison to prior years. So that's about 2 million less returns for this time of the year. But regardless, IRS is really focusing on online tools and options for people, and they have a list there. They've also encouraged and really pushed for E filing and direct deposits versus paper filing because it's 16 times more likely to get lost, missing, or have an issue with it if it's paper filed and they've also set reminders for new electronic filings for information returns. And on the next slide we have a good resource as we start going to get deeper into the tax reform. The Washington Tax Brief is a 1 hour CPE credit worthy webcast that provides updates on tax legislative and regulatory advocacy initiatives and it is included with AICPA membership. And the next session is February 19th at 1pm and also on this next slide we have another February 19th at 3pm eastern time we have the reimagining your practice webcast series for an insightful session designed for those looking to integrate tax advisory services with financial planning services into their practice. And with that Eric, I turn it back over to you.
- [44:06]
B
Thank you Melanie, that was a great update and look forward to having you back in open forum. So now I'm thrilled to have Bob Dirac join the town hall. It feels like you've been on this town hall before, but you do lead the ANA Focus Quarterly meetings or not quarterly, they're monthly meetings. So Bob is the Director of Audit and Accounting Technical Services at aicpa. He also leads the center for Plain English Accounting Accounting. And with Bob is Mike Brand. And probably many of you who are in the audit insurance area know Mike Brand. He's currently one of the co chairs of engage. He's been very involved with nats, the audit assurance track of engage and he's been on numerous committees. So Bob and Mike, great to have you with us and looking forward to providing the town hall refresher on the quality management standards and a little bit of the why behind it. And Mark's going to join us for that discussion as well.
- [45:06]
F
Yeah, it's great to be here. Thanks Eric. Quality management standards obviously a very big topic for firms and that's because these are the standards that set the quality requirements over a firm's accounting and auditing practice. So if your firm is performing audits, test engagements, reviews, compilations, these standards will have to to be implemented. And you can see on this slide over to the right there's actually a suite of standards, SQMS Number one statement on Quality management Standards Number one. That's the primary standard. That's where you'll find the requirements, the guidance for setting up a statement of system of quality management at your firm. And over on the left here on the slide you can see the main changes that these standards introduce and these standards replace the existing quality control control standards. Probably the biggest change is the adoption of a risk based approach to quality management. The effective date, as you can see, is 12-15-2025. And that means that a firm has to have a system of quality management that complies with these standards in place by December 15, 2025. And on the next slide, you can see that we have a graphic there that covers the eight components of a system of quality management. So these standards discuss eight components. Many of these components existed in our prior quality standards, but as you can see, they're not linear. They're all integrated together. You have governance and leadership there at the core. We've got that risk assessment now, which is a very big deal on the outside, as well as on ongoing monitoring and remediation procedures. So when these standards came out, the first thing that I asked, and I'm sure many of you are asking right now, is why? Why are we changing the quality standards? There's so much going on out there. Why do we need this change? And as I looked at the standards and got to know them, it became quickly clear to me that boy, these standards needed to change. And these changes are going to be very good for ANA practices. If you think about quality, it's really foundational to the CPA profession. One of the main reasons people trust CPAs is because they perceive us as doing high quality work. But the quality standards haven't changed significantly for 10 years. And think about how A and A practices have changed over the last 10 years. The change is dramatic. Firms are using new technologies, new resources. The way they perform in A and A engagement is very different over the last 10 years. So we can have firms evolving over these years and have the quality standards which sit on top of them becoming more and more antiquated.
- [48:17]
B
So just a couple. I know Mike's going to be taking the next slide, but there's a number of. A couple of questions coming in here, Bob, and it's related to are the quality standards for audit assurances only, do they apply to the. To the tax area? I'm a small firm and I just do compilations. Right, right.
- [48:36]
F
They apply to engagements that are under the sasses the SSA is and the sars. So if you're doing audits, if you're doing attestation engagements, if you're doing reviews, compilations, they apply. So that encompasses quite a few firms are included.
- [48:52]
C
Compilation.
- [48:53]
B
Just doing. If you're doing accounting services, you know, client accounting services, you're okay. And if tax services correct, the company.
- [48:59]
C
Accounting services, as long as it's not under SARS 21.
- [49:03]
B
That's right.
- [49:03]
C
But that's a story for another day.
- [49:05]
D
Yeah.
- [49:06]
F
Right. So basically these standards modernize the quality management, right. They, they allow a firm also to scale their quality management system, which was just generally acknowledged something that needed to happen there. So these standards allow a firm to build a system of quality management that allows them to, allows it to fit their circumstances, the kind of clients that they serve, the kind of engagements that they conduct. But Mike, you're implementing it at your firm, you're working with tons of folks who are implementing it. I'll let you talk more about it.
- [49:44]
G
Yeah, I've been waiting for my time. I'm just sitting back here itching to go because I'm a practitioner. These are things that I'm working on in my own firm and I know a lot of people, people are other working in their firms too. And anytime practitioners such as myself and others see change, don't let it scare you. Change in this case I think is really good. My good friend Ahava Goldman talked before and says, hey, you know, you're going from something that was to something that's much better. It goes from something that quality control was the old thing and announced quality management. And that's what we do in our practice, right? We manage our product practice. We don't, you know, we control our dog, we control things, we manage our practice. So it's very scalable. Both Bob talked about scalability, Mark talked about scalability. Again, all sorts of questions about that. And this one is, you see the timeline up there. I'm not going to go step by step through here, but the important process is start working on. You're working on your own system currently as it is, right? Look at your system. You've got a written document, you're still required to have a written document. I would be willing to bet that a lot of you all probably have a risk based system somewhat anyway when we looked at ours.
- [51:00]
B
It does.
- [51:01]
G
We're risk based. Why don't we do some of the things that we do? Well, it's based on risk, so that's not really a big change. So it's very scalable. If all you do are compilations, scale it down. If you look at the standard itself, you don't have to apply every, you're not going to have every quality objective because you don't work in a regulated industry, you don't work with yellow book engagements. So you can scale it down. So that's great. I think that's one of the better aspects of the new quality management system is the fact it's very scalable. It's not a cut and paste where we take our practice Aid and we cut it and we paste it in and that's what we have. And rigid. This one is not rigid, it's fluid, it's proactive, it's not reactive. And so it's a very good system. You can see here, you can early adopt. We've been working on ours and by December 15 it needs to be in place. Now just one of the things that we've looked at in our firms and probably is really important for you to look at in your firm if you're working on implementation, is the fact to see when your peer review year is. And if this has an effective date of 1215 and you've got a peer review period, you know, that ends June 30th, maybe you want to implement this a little early so that you don't have have split periods. Practitioners, we've got a lot of questions about that. And so that's one of those aspects that with implementation I think is really important within this timeline. You have to do this thing, you can see that middle slot right there that talks about performing this annual evaluation. That's one of the new concepts within SQMs is annually the firm is required to evaluate itself system. Is it giving us reasonable assurance that it's put in place to do. And so the managing partner, the CEO, that person is responsible for that annual evaluation. Now they can work with their quality control people. But that's a very important aspect. You step back and look at your processes anyway. So I'm not going to say it's something new, but it's something formalized that you'll need to do. And of course we talked about when the effective data is, it's 12:15. And after that period you can see what engagements might be subject to and what engagements will be going through this quality control review that is sqms 2. And if we move to the next slide, we'll talk about maybe some practice A's because this is a big deal. This helps us through the process. I was on the task force that was quality control standards number seven. So even before the 10 year period. Right, because this is QC10. Now we're talking QC back then. But there were always practice aides. And that's the great thing that we have here. You're a sole practitioner, no professional staff. There's a practice aid just for you, very scalable to your practice. You're a small to medium sized firm, you got two or more professionals. There's a practice aid specific to that. Now you'll take this, you'll go through this process now it's iterative. Right. The good thing about these practice aids is they list what the quality objectives are. The quality objectives, what the firm wants to get out of quality. Right. And so then you'll go through what, what are the risks specific to your firm and then you have processes in place to address those risks. So you're a small firm, you're basically a tax practice that does a few compilations just like came through. Well, your process of getting this in place is a lot less work than a firm that's a larger size, that works in multiple industries and does audits require fused compilations. SOC engagements, other attestation engagements. It works in regulated industries. It's a little tougher pool. These are great, these are great tools to use. I've used them in my practice. I've pulled in the Excel spreadsheet and you can use these in conjunction with implementing this as you are working on implementing the quality management standard.
- [54:58]
B
We're running short.
- [54:59]
G
I'm gonna let you.
- [55:02]
B
Yeah, Mike, that was fantastic. A lot of really positive feedback coming in regarding your overview there. And some of the comments coming in is like, how am I going to document this? How do I do this? Well, technology and solutions are definitely going to play a role here. There is an Excel based tool that the AICPA has produced that can get you started. We always look at Excel as a tool that can do many things. There are limitations in using an Excel based tool and then there'll be issues with the ongoing monitoring and maintenance. There's these other applications that are coming out. There's some standalone applications that are really focused to helping firms comply with this need. They're going to be geared to small firms as well as midsize and large firms. There's other things besides just the, the SQMS standard you need to manage. You've got, if you're PCLB registered, you have the QC1000, you might have some things related to ISO. So you can look at this from a broader perspective at a future town hall, we're going to do a review of these different solutions. We don't have time to do that today. And here's more resources related to the quality management standards. So I'm going to go to Open Forum, but I'm going to start our questions. We've just got a couple of minutes, but there are, I'm going to go first to you, Bob. There's, you know, one is a couple people, you know, peer review ending June 30th of this year. Does this apply? Right. Wait till 2028 and then there is just, just on the preparation discussion we had here maybe a little. And we. This is again, we can maybe dig into this a little bit more because there is this Update related to SARS21 that impacts it. So maybe just adjust the peer review and then maybe a comment on someone who's doing financial statement preparation work.
- [57:01]
C
Right.
- [57:01]
F
Well, as we said, the system has to be designed and implemented by December 15, 2025. And then you need to have that system evaluated within one year of that date. So you're talking.
- [57:13]
B
So if you're this June, then you're okay. You're okay.
- [57:16]
G
Yeah, right, right, exactly.
- [57:18]
B
So then on the financial statement preparation, you're doing financial statement preparation. The thing here is right right now it's about the SARS 21 update is in an exposure draft. The feedback's been coming in, I understand, has been very positive. So ARCS is going to be potentially finalizing that once that's finalized, you actually can move your financial statement preparation under the consulting services standards. So that's completely outside the SARS purview.
- [57:47]
C
Right. But until then, you know, we need to know where it is and do. I don't know if we have an answer on when that'll happen, but I do think it's going to be fairly soon.
- [57:56]
B
It's in the next 60 days.
- [57:58]
D
Yes.
- [57:58]
C
So within the next 60 days we'll have the definitive answer on that. If that were to, let's say, pass, then Financial Prep would be under the consulting standards. It would not be subject to the quality management. It doesn't mean that you shouldn't have. Still, some level of quality management over financial statement preparation just wouldn't be mandated. And I think the equipment Excel template that's there is fantastic for any kind of practice.
- [58:25]
B
So more to come on that this refresher has been very helpful. A lot of good questions have come in. We'll be continuing to have this discussion throughout the year and talk more about how the practical side of how firms are getting this implemented. So we're kind of here at the end of our Mark Kozild end of the power hour. A lot of good feedback for you. Right before we go to the resources section. Any closing comment?
- [58:50]
C
Just great to be here. I see we're running up on time. I'm sorry I'm here and I failed in trying to keep us on time with my comments here and there. But I think there's so much going on in D.C. i'm really privileged and I will special shout out to Melanie. Like I said, I was on the road this week when I mentioned Melody's name, there was were actual applause in the audience.
- [59:12]
B
So job very well done. And only thing, one of the top questions, IRS service levels. That's something that Melanie, you think about every day. Mark Peterson Marcosio. So that is, I mean, and you're going to be down there in D.C. you know, I'm meeting with the IRS sometime soon, let's hope.
- [59:27]
C
Yep.
- [59:27]
B
Okay. Well, thank you for Mike. Thank you, Bob. Look forward to having you both back on the Town hall sometime soon. Here. This is a tool, a tool that we talked about recently that is getting a lot of positive reception from from small firms as well as large firms. So if you want to learn more about a tool that can help you with tax research, here's an on demand webinar that you can access. We do have the holiday It's President's Holiday coming up on Monday, so the rebroadcast will be Tuesday, February 18th at 1pm you also can leverage all of our Town hall resources at this URL. Make sure that you're signed up for our calendar. We've got our next Town hall coming up at the end of this month on February 27th. As we've stated, we will always do a special edition if there's some breaking news, but it's been great being with you today. Have a good end of the week and look forward to being back with you again sometime soon. And Mark, fantastic having you here in.
- [60:33]
C
New York with us.
- [60:34]
B
Thank you Eric.
- [60:34]
C
And thank you everyone for being a member. Appreciate, appreciate it.
- [60:37]
A
Thank you for your participation. You can now subscribe to the AICPA Town hall series on your favorite podcast platform, as well as watch archives on YouTube and AICPA TV. Tune in for live broadcasts Thursdays at 3pm Eastern Time.
- [60:55]
H
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