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Tax Section Odyssey
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Keep your finger on the pulse of the dynamic and evolving tax landscape with insights from tax thought leaders in the AICPA Tax Section. The Tax Section Odyssey podcast includes a digest of tax developments, trending issues and practice management tips that you need to be aware of to elevate your professional development and your firm practices.
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Tax talk 2025 — Policies, provisions and perspectives
Dec 13, 202400:25:22Tap to summarizeNote: This podcast episode was recorded Nov. 20, 2024, and since then, the U.S. House of Representatives races have been called, giving the Republicans 220 congressional members and the Democrats 215. This balance could change depending on potential special elections if some members of the House are appointed to positions within President-Elect Trump’s administration. In this episode of the AICPA's Tax Section Odyssey podcast, Kasey Pittman, CPA, MST, Director of Tax Policy — Baker Tilly US LLP, discusses potential upcoming tax legislation for 2025, focusing on the complexities and challenges of extending the Tax Cuts and Jobs Act (TCJA) and other tax provisions. What you’ll learn from this episode: The potential complexities and challenges of extending provisions of the TCJA and other tax legislation. The implications of a unified government and the reconciliation process for passing tax legislation. The financial constraints posed by the national debt and the importance of managing the deficit. The influence of individual policymakers and the importance of state and local tax (SALT) deductions. Potential revenue raisers like tariffs and ending the employee retention credit early, and their impact on the overall tax legislation. AICPA resources Planning for tax changes — CPAs need to not only brace for tax law changes such as the TCJA and expiring provisions but also be proactive in planning for them. Tax advocacy — Advocacy is a core element of our purpose and value proposition. It is a strong mechanism for promoting trust and confidence in the CPA and CGMA credentials around the world. Transcript April Walker: Hello, everyone, and welcome back to the AICPA's Tax Section Odyssey podcast, where we offer thought leadership on all things tax facing the profession. I'm April Walker, a lead manager from the tax section, and I'm here today with Kasey Pittman. Kasey is the director of Tax Policy with Baker Tilly's National Tax Office. Welcome, Kasey. Kasey Pittman: Thank you for having me. April Walker: I thought we'd spend a few minutes today setting expectations for tax legislation for 2025. First, a little bit of a spoiler, tax legislation is likely, right, but what it will actually entail is probably a lot more complicated than just a straight status quo extension of TCJA. Kasey, let's set the stage a little bit and talk about what we know about the makeup of the government and what that will mean for upcoming legislation. Kasey Pittman: I think going into the election, the vast majority of people assumed we were going to wind up in some divided government. We knew it was very likely that Republicans would capture the Senate. The math there was not very good for Democrats, just in terms of how many seats were up, and one of the Democratic-turned-independent retiring senators from a deep red state was almost a certainty to flip. I think the general thinking was that either Democrats would capture the White House or the House, and neither of those things came to fruition. We are sitting here in the 2024 election was a Republican sweep. We've done a lot of worrying about things that we can let go of, and I think probably we'll touch on that a little bit later in the podcast. But the margins aren't very big. Trump captured the White House actually by a good margin in terms of both electoral votes and total votes in the country. It looks like Senate Republicans will have the majority with a 53-47 split between Republicans and Democrats. The house is currently unknown. We know that the House has captured 218, and that's what you need for the majority. There's 435 seats. 218 is literally a one seat majority. There are five races outstanding, and probably threeish, maybe four of those are likely to go Republican. We're just waiting on final vote counts. In the House, we're looking at a few vote margin, in the Senate, we're looking at a few vote margin, and that can make legislating really difficult. One of the themes we touch on here as we go through is reconciliation. When you have a unified government, and a unified government is one where one party has both chambers in Congress, and the White House, which is what we're going into in 2025, there's this process that you can use for certain types of legislation, fiscal legislation called reconciliation. What reconciliation does is it allows you to overcome the filibuster in the Senate. You actually only need a simple majority, like 51 votes in the Senate to pass a bill, but anybody can hold up a bill with a filibuster, and you need 60 votes to end debate and force the vote on the floor. But this type of legislation doesn't require that, so we can move forward with a simple majority. However, there are a lot of limitations to the reconciliation process. Everything in a reconciliation bill has to be financial. It needs to deal with spending or revenues and it can't be incidentally related to those. That has to be its primary purpose. Tax provisions are perfect for this. It cannot increase the deficit outside of the budget window. The budget window is typically 10 years. Then inside that budget window, you can only increase or decrease the deficit by the amount in the reconciliation instructions. Reconciliation instructions are set again, by a simple majority on a budget resolution in the House and in the Senate. That number can be hard to define. We also can't touch Social Security, by the way, which is why you never see Social Security in a reconciliation bill. However, that number is really difficult to come to an agreement on sometimes, and I predict that we're going to face some issues just in getting to that budget reconciliation number before we even start to put together the bill. April Walker: That's a great summary, and we used reconciliation before to actually pass TCJA and some other legislation in the past few years, but it's still not how I grew up learning how law was passed. It's a little bit interesting and that's a great summary. Kasey, I led with saying, we don't think it's going to be a straight extension of TCJA and some of the other proposals that have been thrown out throughout campaigns. Talk through a little bit about specific provisions, what they're scoring out at, why they may or may not be included in this legislation. Again, I don't think we have to say this. This is all just speculation on our part. We will have to see what we will see once it turns to 2025. Kasey Pittman: Some of it is really speculative. We're guessing, they are educated guesses based on history and based on what influential policymakers are telling us. For many months, Republicans have really optimistically been planning for reconciliation, hoping to capture both chambers, hoping that Trump would be in the White House. They've been planning. Honestly, there's been a ton of organization inside the House Ways and Means Committee around it. What I said just a minute ago was that I think we're going to have trouble getting to that number, and here's why. If we want a blanket 10-year extension of the Tax Cuts and Jobs Act, all these taxpayer-favorable provisions, they're mostly taxpayer-favorable and we'll get into that in a second too. It's going to cost $4.6 trillion. Just for benchmarking for everybody, our national debt, which is the sum accumulation of all the deficits we've ever run right now is $35 trillion. That's really impactful because each year, honestly, I believe since Clinton, we've run at a deficit and some of the Clinton years too. But each year, since I was in middle school, we've run at a deficit, which means we're spending more money than we're bringing in, and part of the reason we're spending more money than we're bringing in is because we have to pay interest on all this debt. It's really come to a head over the last couple of years for two reasons. One, our debt skyrocketed. Recently, TCJA added to it. COVID certainly didn't help it at all. Then additionally, because we've had such high inflation, the Fed has increased interest rates and that's the rate that we pay to service the debt. In FY 24, which ended at the end of September. This year, we paid over a trillion dollars just to service our debt, not paying down our debt, just paying the interest on our debt. That's more than we spent on defense spending for the entire year. It becomes a liability if our debt is too large. Particularly, we like to compare it to our GDP. This year we ran a $1.8 trillion deficit. Over a trillion of that we could say is attributable to interest co...
Transcribe →2025 tax preview: Perspective from an AICPA tax policy advocate
Nov 26, 202400:18:07Tap to summarizeIn this joint episode with the JofA podcast, host Neil Amato discusses with Melanie Lauridsen, Vice President of Tax Policy & Advocacy for the AICPA, what tax practitioners can expect regarding tax legislation. The conversation covers key tax topics following the 2024 election, including the future of the Tax Cuts and Jobs Act (TCJA), beneficial ownership information (BOI) reporting, and disaster relief efforts. Melanie provides insights into the challenges and opportunities facing tax professionals in 2025, emphasizing the importance of staying informed. What you’ll learn from this episode: The latest updates on disaster relief for BOI reporting. Melanie’s insights about the potential future of the TCJA provisions. How IRS funding might be impacted by the new administration AICPA resources Planning for tax changes – CPAs need to not only brace for tax law changes such as the Tax Cuts and Jobs Act (TCJA) and expiring provisions but also be proactive in planning for them. Tax Advocacy – Advocacy is a core element of our purpose and value proposition. It is a strong mechanism for promoting trust and confidence in the CPA and CGMA credentials around the world. Transcript April Walker: Welcome back to the AICPA’s Tax Section Odyssey podcast, where we offer thought leadership on all things tax facing the profession. I'm April Walker, lead manager from the Tax section, and today we have a joint episode with the JOA, providing information on several important tax topics, such as BOI, disaster relief, and also upcoming potential tax legislation. Let's hear more. Neil Amato: Welcome to the Journal of Accountancy podcast. This is Neil Amato with the JofA. This episode is a special collaboration between the JofA and the Tax Section Odyssey podcast. It's Nov. 19 as we're recording, two weeks since the 2024 election. With the election over, we have results. We also have questions about the future of several tax topics. Here to provide some analysis and clarity on those topics is Melanie Lauridsen, vice president–Tax Policy & Advocacy for the AICPA. Melanie, welcome back to the podcast. Melanie Lauridsen: Thank you for having me back, Neil. Amato: We talk pretty regularly, pretty much a quarterly basis. It's safe to say that even if we keep this discussion fairly narrow in scope, there is plenty to discuss, so we'll get right to it. I'm going to tease for the listeners that there will be discussion of the future of the Tax Cuts and Jobs Act. But first, I'd like to ask about BOI reporting, beneficial ownership information reporting, as that's been in the news lately as well. What's the latest from your lens, the advocacy lens, on the topic of FinCEN's disaster relief for BOI? Lauridsen: Good topic, Neil. Disaster relief is something, regardless of what it is, whether it's tax or BOI, it is critical that people are able to get it as quickly as possible in the largest scope possible. With BOI, we are grateful that FinCEN did offer disaster relief for victims of various hurricanes, most notably Hurricane Milton and Hurricane Helene, which created quite a bit of damage to the areas they hit. But, unfortunately, the scope of the relief, particularly for those victims of Hurricane Helene, is not as broad and as encompassing as we would have liked it to have been. They did offer a filing relief for those victims. However, they didn't extend it to entities that had been created prior to 2024 and therefore had a Jan. 1, 2025, deadline. We know that [for] some of the entities, it took everything away. It destroyed everything, and those entities have years to rebuild, and they really could use an extension. With that in mind, we are actually working with various state CPA societies, and we are also working with FinCEN in order to broaden the scope that was issued, in particular for victims of Hurricane Helene. Of course, we are working with people on the Hill because there are a lot of questions around the Corporate Transparency Act and BOI reporting to begin with, much more so also with disaster relief that they would like to see some expansion of the scope, too. Amato: Yeah, and on that topic of the reports that are in versus the reports that are expected, it's still a pretty small number. I know people like to do things at the last minute, but it's something like 6.5 million of 32 million, so still a long way to go. Lauridsen: There is an awareness issue there, and FinCEN is highly aware that there is an awareness issue because, like you said, 6.5 million filings of 32.6 [million], there's a little bit of a disconnect, especially when we're in November. So we're talking there's a month and a half to file to meet those other — what is it? — 20-plus million filings that we have to go in 1½ months? I don't think they're going to be able to meet those numbers, so, yes. But a couple of things to note about that 6.5 million. Of those 6.5 million, the majority of those filings are for entities that were created in 2024 and had that 90-day deadline, and also for the 30-day corrected and updates that are needed, and that's the 30-day deadline needed. A lot of the existing entities, those that were created prior to 2024, still need to file. Now, FinCEN realizes that their numbers are not where they want them to be, and they are now focusing on awareness and not so much on enforcement. But they are, like I said, making pushes for awareness, and they were even on our AICPA Town Hall, so you can look at the archive there because we did host Phil Lam for that. But also, the other day, I was watching national television, and I saw one of their commercials. I just about fell out of my seat. I didn't think the messaging was as clear as it could have been, but they are trying to make efforts there. Amato: Was this the coffee shop ad that you saw? Lauridsen: Yes, it is. Amato: We wrote about that earlier this year, that the outreach had begun. But still, I guess, a ways to go on that topic. Let's look ahead to one item that was popular at the tax conference. It's popular in the news headlines, and I know it's something you're paying attention to: the Tax Cuts and Jobs Act. It's a very open-ended question, but I'll ask it anyway: What's the future of the Tax Cuts and Jobs Act? Lauridsen: Well, Neil, we would all love to know exactly what the future is. But, the Tax Cuts and Jobs Act, it's interesting because a lot of people said prior to the election, we always knew that tax was going to be on the agenda. People were saying that, it all depended on if it was Democrat or Republican that ended up taking the presidency. Ultimately, the same topics are at stake. TCJA was always something that was going to be debated and discussed, regardless of who ended up being in office and who will be in office. The difference is we definitely know that President-elect Trump would like to see TCJA provisions become permanent. Now, the reality is all those provisions cost money, and there are real dollars associated with it. Even though we are going to be seeing in 2025 the trifecta effect, where the Republicans have swept across the board, it doesn't mean that everybody is in line with the same provisions, and therefore it doesn't mean we know exactly what will be coming. A lot of what is to come becomes an argument of how much things cost and how much things don't cost and what can be included and what can be agreed on. The debate is still very much alive as to what will happen with TCJA. I think, this is my pure speculation, I think we're going to see a hybrid of all the things that are there and not necessarily everything becoming permanent. But who's to say? Things could absolutely change. Amato: Do you want to talk about any of the particulars within that, for example, the SALT cap, estate tax policies, the future of the corporate tax rate? Lauridsen: All of those pieces are very interesting. The SALT cap, let's start with that one. The SALT cap, we have heard that they would like to eliminate the SALT cap. On a personal level, sure. I would love to see that go away. I know quite a few people feel that way about it. But the reality is that it...
Transcribe →Say "I do" to engagement letters
Nov 15, 202400:31:27Tap to summarizeThis podcast discussion with Michael Reese, Risk Control Consulting Director (Accountants) — CNA Insurance, centers around the importance of engagement letters for tax practitioners. Michael emphasizes the role engagement letters play in setting expectations, providing clarity and mitigating risks during engagements. He also reviews the necessity of having clear, documented agreements to minimize disputes and liability issues. What you’ll learn from this episode: The importance of engagement letters Common risks in tax engagements The role of client education and communication in managing risk How to handle quality control under deadline pressure AICPA resources Annual Tax Compliance Kit — Engagement letters, organizers, checklists and practice guides help you manage your tax season workflow. Say "I do" to engagement letters — Uncover the importance of establishing parameters of client relations and detail the scope of services to be provided. Other resources Frequently Asked Engagement Letter Questions — The Accountants Risk Control team at CNA, the endorsed underwriter of the AICPA Professional Liability Insurance Program, summarizes answers to frequently asked questions. Transcript April Walker: On today's podcast, listen to hear how you can manage your risk with engagement letters. Hello, everyone, and welcome to the AICPA’s Tax Section Odyssey Podcast, where we offer thought leadership on all things tax facing the profession. I'm April Walker, a Lead Manager from the Tax Section. And I'm here today with Michael Reese. Michael is a risk control director with CNA. Michael Reese: Good morning, April. April Walker: Thanks for joining me today. Here at the AICPA, we work really closely with Michael and his team on lots of things and lots of projects. But I'm especially grateful for the partnership that we have with his team for Tax engagement letter templates. Speaking of engagement letters, they are now currently available to Tax Section members. Of course, I will put a link in the show notes so that you're able to access those. April Walker: Today, we're going to talk about some common questions that we get, and I'm sure that you also get Michael on Tax Engagement Letters and just generally how to manage your risk as a tax practitioner. Welcome, Michael, and thank you for joining me. Michael Reese: Thank you. Hopefully, what I can provide will be of use to your listeners. These are questions we often get as well. I do want to confirm that, but it's a very important topic. Glad we're talking about it here today. April Walker: I'm positive that they will be helpful. Sometimes people get answers to questions that they don't really want to hear, but they're important for them to hear. Michael Reese: Exactly. April Walker: Just to start off, I'm wondering why you think it's crucial for tax practitioners to have an engagement letter in place not only for every engagement but before they actually start the work. Michael Reese: April, I think there's two primary answers to this question. First, setting expectations and then setting guardrails in case something goes wrong. From a practice standpoint, it's very important for both the practitioner and the client to know what's going to happen and what work is being done. Your engagement letter hopefully is going to clearly state, "This is what you've asked us to do. This is what we're doing. This is what we collectively need to do to get this completed. This is the info we need and when we need it," etc. If a practitioner doesn't have this, then they run the risk of a client coming back later and either adding services, sometimes without the added fee, or complaining that a service has not been performed. There needs to be that clarity upfront. For professional liability reasons, having that clarity helps limit your duty of care to the agreed-upon scope. This way, in the event of a dispute, the practitioner has a strong argument for avoiding liability related to items for which they had no responsibility. That leads me to the second answer involving guardrails. Ideally, the engagement letter is going to set out the agreed-upon rules if something goes wrong. Dispute resolution is not really something CPAs focus on until they are in the middle of one, but we routinely talk to tax practitioners who are in the middle of an engagement with a problem and they don't have the signed letter to fall back on. If that letter is in place before the work starts, you now have options if something goes wrong, whereas without the letter, you don't. Now, I'm not ignoring the fact that getting a signed letter back can be a challenge, especially for 1040 clients. But I know there are practitioners out there that have a strict process. No letter, no work. Remember, the onus is on the client because they do need your help. Otherwise, they aren't showing up to your office. If they want the service, then they need to work with you. April, I would say put it this way. When I go to get work done on my car, even for an oil change, they don't even take my keys until I've signed a piece of paper that says I agree to the service and the terms of service. If I ignore that paper, disappear for some period of time, and then come back like some tax clients, when I come back, my car is still how I left it unrepaired, and I can't now complain that I'm going to be late for work because my car isn't fixed. I can, but I don't know how far it's going to get me. I really would like to think that tax professionals should have no trouble with a similar approach. April Walker: That's a great analogy. That's where we'll talk about this. Mike, you and I have both been in practice before. And sometimes we struggle with the way we've always done things, in a certain way, but it might not be the way the rest of the world operates. If we're thinking about this in a way of managing your risk, this is definitely a best practice. Michael Reese: Yeah, I would agree. April Walker: Great. Let's talk about some common risks that tax practitioners face during engagement. You've got your engagement letter, for sure. Check one. We are in the engagement. How might having that engagement letter help mitigate some of the risks that can happen as things are going on? Michael Reese: I'll give you four. We can talk about these. But the first one and we did touch on it before in the prior question, there's risk when there's no alignment on what the client needs. The client may not understand truly what they need to comply. They just know they need to file a return. Once you have the discussion with your client and identify the extent of the need, that engagement letter is going to provide the clarity that we spoke of, so both you and the client understand - this is what we're doing. Two, once you know what you're doing, there's still a risk that the client doesn't know what's included. Let me give you an example. When I practiced, I had a 1040 business owner client that felt they were paying too much in estimated taxes using the 110% safe harbor method. We ended up doing actual method. They didn't realize that meant doing quarterly drafts for the business and then calculating actual tax in multiple draft 1040s to figure out how much they owed each quarter. Added a lot of time, added a lot of fees. The client thought it was, "Part of the return." But at the time, the engagement letter didn't really break down for ...
Transcribe →Analysis, clarity and a quiz: A preview of the National Tax Conference
Oct 17, 202400:16:20Tap to summarizeThe AICPA & CIMA National Tax Conference will take place on November 11 and 12 in Washington, DC. Join Brandon Lagarde, Tax Partner at EisnerAmper, and April Walker, Lead Manager on AICPA & CIMA’s Tax Practice & Ethics team, to learn more about what to expect from the upcoming conference. Conference sessions will feature topics such as: The impact of election results on tax legislation: Investigate the potential legislative outlook based on the recent election results and how it might affect tax policies. Tax Cuts and Jobs Act (TCJA) expiring provisions: Provisions of the TCJA are scheduled to sunset at the end of 2025; learn more about how to prepare and explore planning opportunities. Practical tax strategies: Sessions at the conference will cover various tax tactics, including gifting and income tax planning strategies, for clients who are not currently subject to estate tax. Ethical dilemmas in tax practice: A session will discuss common ethical dilemmas faced by tax practitioners and provide insights on how to handle them. The future of tax practice: Investigate the importance of transforming tax practices with year-round advisory services and how to implement these changes in a tax firm. AICPA resources AICPA & CIMA National Tax Conference — For tax practitioners, there’s no better place to get immersed in current events than the AICPA & CIMA National Tax Conference; in-person and virtual options are available. Reimagining your tax practice — Join us for free upcoming live roundtable sessions to tackle today’s top practice management issues with insights and tips from pioneers in the tax community. TCJA expiring provisions — This detailed, downloadable resource offers an in-depth look at the expiring provisions under the TCJA and other recent legislation. It categorizes changes across individual tax, estate and gift tax and business tax provisions, organized by year of expiration. Transcript Neil Amato: Welcome back to the Journal of Accountancy podcast. This is Neil Amato with the JofA. I'm excited to be joined for today's episode by two top flight tax experts in this special collaboration episode with the Tax Section Odyssey podcast with our guests, we're discussing the AICPA & CIMA National Tax Conference which begins November 11th in Washington. Those guests, April Walker, lead manager with the tax practice and ethics team and host of the aforementioned Tax Section Odyssey. Also Brandon Lagarde, tax partner at EisnerAmper and Chair of the Tax Conference Planning Committee. We have a lot to get to. We're excited to have you on. First, a quick welcome, April and Brandon, thanks for being repeat guests on the JofA podcasts. April Walker: Thanks so much for having me Neil. I'm excited to be here. Brandon Lagarde: It's very exciting to be here Neil. Thank you for having me. Neil Amato: Yeah, we're glad to have you both on as I said, the Tax Conference is November 11th, less than a week after election day. Brandon for you first, tell me what you're looking forward to about this event which is at the Omni Shoreham Hotel in Washington? Brandon Lagarde: Yeah. I'm looking forward to just go into DC. It's going to be a week after the election, hoping that we know who the president will be and what the makeup of Congress will be at that time. Again, it's going to be a great atmosphere, a great opportunity to go to the nation's capital, to hear from some of the best tax minds out there. Neil Amato: April, I know you're a repeat attendee at that conference. You're also running sessions, recording podcasts, taking part in panels. What do you look forward to from the event? April Walker: It's always a busy conference for me and I love being in DC and it's very exciting for me to be there, like Brandon said right after the election. Speaking of that, really what I'm looking forward to most is hearing more about what the potential legislation outlook could look like based on those results, based on those election results. I think we'll hear more about we've talked a lot about the Tax Cuts and Jobs Act, the TCJA, that it potential expiration, what that means. We'll really be able to dig into that at the conference. I'm excited about that. Neil Amato: It's almost like we planned this. My next thing was going to be the TCJA. Some of the provisions of that Act, the Tax Cuts and Jobs Act, are scheduled to sunset at the end of 2025. Clearly, there is a lot of uncertainty about the provisions right now as we record and the first part of October. But I imagine that topic is going to be a popular one at the conference. Brandon, What do you think? Brandon Lagarde: Yes, absolutely and that's why, again, being there at the heart of it all after the election and getting to hear from presenters and speakers about just what the future holds for tax professionals, end of 2024 is going to be really important for us. 2025 is going to be incredibly important for tax practitioners to understand and remind ourselves of here are all these provisions that we've been dealing with for the last seven years that are going to expire. What's going to happen? Where are we going to be? A lot of planning opportunities, lot of reason to get in front of clients to learn about what we have in the horizon. Again, that's why this conference, particularly just the time of the year. It is in the election cycle, and heading into 2025, 2026. It's probably the most important conference that's ever taken place. This is just a really important time for us to get together and to really try to figure out what's going to happen. Of course, we're not going to know exactly at that time, but at least start to have a better understanding, a clear picture of what we can expect and what should we be talking to clients heading into 2025? What are some things that need to be doing? Because you can't just turn on the switch in November of 2025 and start to really think about this. Right now is really the time to get ahead of it and remind ourselves what provisions are expiring? What do we need to start thinking about planning opportunities to get ahead of it? That's what's at stake at this time. April Walker: I love Brandon that you're setting the bar really high. The most important conference of all time. Here we go. Neil Amato: Yeah, that's great and because it's the most important conference of all time, we will include a link to the conference registration page with the agenda information and all of that in the show notes for this episode. One of the items on that agenda is being led by Marty Finn. He's a previous guest on the podcast. He has a session on tax and financial planning. When estate taxes don't matter. Now not to steal Marty's thunder. But can you give me a little preview of the highlights of that session? Brandon Lagarde: Certainly. We will spend a lot of time at this conference again, learning about the estate tax world and the sunset provisions and trying to navigate that. But the reality is a lot of our clients are not subject to estate tax. A lot of our clients are not having to worry about the sun setting provisions. We thought it was important to have sessions that not just focused on the top 1% of our clients, but to the 99% or to the large majority of our client base. Things like gifting strategies, what we need to be talking to clients about, who aren't necessarily dealing with the estate tax. Income tax planning strategies around that. Really just as practitioners, what do we need to be talking to clients about? We're not super focused on just estate tax and the ultra wealthy or the wealthy. That's one thing that we really try to work hard as committee in this conference is to find sessions that have a very practical application. That we can take away tips and tricks and things to our client base and back to our hometown and not just focused on the very academic discussion that a lot of tax practitioners like to have. That they can relate to. Try to have sessions that are very practical in nature and the Marty session is definitely one of those. He's going to do a great job giving some really good tips and tricks to people to bring home. Neil Amato: I liked the practical part you mentioned, and that leads me into another session that I want to ask you about. This is one that April is taking part in with Dan Moore and Mark Gallegos.The title of the session is Tax Practice makeover, transforming with year-round advisory services. Tell me some more about that session. April Walker: Yeah. I'...
Transcribe →Demystifying IRS guidance on digital assets
Oct 3, 202400:28:16Tap to summarizeThis podcast conversation with digital asset specialist Kirk Phillips, CPA, CMA, CFE & CPB, Managing Director — Global Crypto Advisors, focuses on demystifying IRS Rev. Proc. 2024-28, which provides guidance on transitioning from universal basis tracking for holders of digital assets and a safe harbor deadline of Jan. 1, 2025, to determine how to allocate any unused basis in digital assets. Phillips shares recommendations for tax practitioners around communicating with clients and the need for careful planning and documentation to meet the safe harbor provisions. What you’ll learn from this episode: Understand more about Rev. Proc. 2024-28 and what it means for holders of digital assets. Hear about the safe harbor provisions provided in the revenue procedure. Learn the importance of the Jan. 1, 2025, deadline for making a reasonable allocation of unused basis. Find out about the challenges of documenting and reconciling cost basis related to digital assets. How to communicate and prepare individuals and businesses for the upcoming changes related to reporting of digital asset transactions. AICPA resources Digital assets and virtual currency tax guidance and resources — Sharpen your tax knowledge on digital asset and understand the tax complexities and strategies involved with virtual currency and cryptocurrency. AICPA advocacy resources AICPA makes recommendations for digital asset transactions regulations, March 7, 2024 Other resources Rev. Proc. 2024-28 — Guidance to allocate basis in digital assets to wallets or accounts as of January 1, 2025 Final Regulations 2024-07-09 — Gross proceeds and basis reporting by brokers and determination of amount realized and basis for digital asset transactions Transcript April Walker: Hello everyone, and welcome to the AICPA's Tax Section Odyssey podcast, where we offer thought leadership on all things tax facing the profession. I'm April Walker, a lead manager from the tax section, and I'm here today with Kirk Phillips. Kirk is a CPA and it has a lot of other designations behind his name. But he's also more importantly for today's discussion, a specialist in the world of digital assets and crypto. [He's] been in it for a long time. Our goal today, Kirk, is to demystify some of this latest guidance that we've gotten from the IRS. We're definitely not going to be able to demystify all of it in the time we're just going to spend today. But there are some important deadline related items, so we want to make sure we're covering those. Kirk is on the AICPA's Digital Asset Tax Task Force. And for the past few months, we've actually been meeting weekly, which is unusual for a task force. Because really we've been discussing one thing, Revenue Procedure 2024-28. What it actually said, what it meant. Just really delving into that, the details of all of that. That's going to be the topic of what we're going to talk about today. What that means for tax practitioners and holders of digital assets. Especially like I said, there are deadlines around this safe harbor. Kirk, to start off. Welcome. Let's talk about I mentioned the deadline and let's talk about the significance of that January 1, 2025 deadline for making that reasonable allocation of unused basis. That's what the Rev Proc says. Talk to us a little bit about what that means, what you're thinking about, what practitioners should be doing now to prepare for that date. Kirk Phillips: Sure. Thank you so much April for having me on the podcast. I love talking digital assets and crypto, whether it's tax-related or otherwise. I'm excited to help demystify this Rev Proc. One of the key things here is that and why this is so important is we both have a short timeline. Because we're already nearing the last quarter of the year 2024. It's also very challenging - it's a onetime exercise that we have to go through and on a short timeline. That's why this is critical and that's why we're here today to talk about that. One of the key things here is that prior to this Rev Proc that the taxpayers would do their accounting for the digital asset transactions, which would be their trading or their sales, and it could be other related transactions as well. But basically they would do all the accounting on a universal basis. The question is, what does universal basis mean? Universal basis means that whether you have one wallet or one exchange account or you've got 37 wallets and six exchange accounts or even something more crazy than that, you would for the most part, more than 99% of the time people would use specialized tax software because that's really the only way to get the job done. You would connect all those things and or import your transactions into the software and it would essentially co-mingle all those transactions. I like to say as if it was one wallet or as if it was a single exchange. But it's not simply for the tracking purposes, all the transactions are simply dumped together and you perform one set of accounting. That's what the universal [method] is. Now, you can no longer use universal. You have to do a wallet by wallet, account by account basis. Which means that if you, again using those same numbers I did in my example there. If you had 37 wallets, that means you essentially have to do 37 different sets of accounting for those. I think that without knowing even anything more about it, an accountant hearing that would say, "Wow," immediately that sounds like that could be challenging, that could be a lot more work, and so on. There could be issues around that. And all those things are true. Because of this short timeline between now and the end of 2024 and essentially we're talking here at the end of September, so we got one-quarter left to do this. The important thing here is if you have any channels to communicate with your clients, the first thing to do would be to communicate with them and let them know, "Hey, there's this Rev Proc 2024-28." Maybe, perhaps even provided a link if you want to, and or read that yourself in detail at least once. But there's a lot of other things that you can lean on in AICPA guidance, of course. But just to send that out, in other words, you don't have to know it in detail before communicating. You should start the process communicating right now to say, "Hey, there's a lot to unpack here. I'm just letting you know there's going to be more that's coming. Be on the lookout. We're going to do a series of blogs on this or whatever it is you do or a newsletter, segments, and things like that. I think that's probably the number one thing to start off with is start the communication now, because this is not a one-shot communication thing. This is a series of communications that you're going to need to do. Whether you're just providing value to non-clients or you're working with current clients, you're going to need them to be thinking in steps and increments along the way. April Walker: Yeah. That's a lot of what we've been talking about over the past couple of months. Who this actually applies to you and who needs to really take notice of this? I think that's a great suggestion. Our listeners might be thinking, "Hey, I didn't know that we are not allowed to use universal method of basis allocation anymore. Did that come from the revenue procedure or where did that come from?" Kirk Phillips: Well, that actually came from the digital asset broker regulations. But then what happened is in the process of those becoming final and the fact that universal [tracking] comes to an end. And we have to do the wallet by wallet approach. What arises from that is a onetime exercise of how do we get from one thing to the other thing? How do we get from point A to point B? April Walker: The Sec. 6045 regs, which are long and complicated. Again, like Kirk said, we'll continue to create resources around all of this information because it's a lot to unpack. In the revenue procedure, it talks about a safe harbor. As we're transitioning between universal and wallet by wallet, the procedure provides a safe harbor. Let's talk about what are the key criteria that qualify you for using that safe harbor and give some of the requirements for it and so talk a little bit about that. Kirk Phillips: Sure. That's one of the big things here is what are those key criteria for the safe harbor? Of course, another thing is we're wondering what is it actually a safe harbor from? There's going to be more to come on that. Because that's actually not super clear and us...
Transcribe →Harnessing Technology: The Future of Tax Advisory
Sep 19, 202400:24:15Tap to summarizeIn this episode David Snider, Founder and CEO — Harness Wealth, discusses the transformative role of technology in tax practices, exploring how tools like practice management software can enhance client relationships and streamline operations. David shares insights on what he sees as three phases of technology adoption in the tax industry and offers practical advice for firms looking to advance their tech capabilities. Tune in to learn how embracing technology can lead to a more efficient, client-focused tax practice. What you’ll learn from this episode: What David thinks are the three phases of a firm’s technology journey. How leveraging technology can streamline tax practice management. How practice management software can enhance efficiency and client experience. Why regularly communicating with clients can strengthen relationships. The importance of allocating time and resources to implement new technologies. AICPA resources Adding AI into your tax practice — Artificial intelligence (AI) is certainly a hot topic of late. Listen to hear Jason Staats and Ashley Francis talk about the latest information in this area and where you should move forward and where you should proceed cautiously in this Reimagining Your Tax Practice archived session. Transitioning to a tax-focused CPA financial planner — Tax return compliance is continuing to become more of a commodity. Your clients see you as their trusted adviser and ask about a range of topics that affect their financial well-being. In this Reimagining Your Tax Practice archived session, learn more about practitioners who offer financial planning services and how that has impacted their practices. Transforming Your Business Model…Technology — The Private Companies Practice Section (PCPS) is developing tools around technology designed to help firms not only identify elements of their current business model that may be holding them back but also offering solutions to help them adapt in this changing environment. Upcoming event Tech stack wars in 2024 — With the amount of technology products out in the market, how do they perform in reality? Join our next tech stack wars challenge on Oct. 16, 2024, to hear about the latest in technology for tax practices. Other resources Harness Wealth — Learn more about how Harness Wealth strives to provide the next generation of builders confidence in the path to their best financial future. Transcript April Walker: On today's podcast, listen to hear more about leaning into technology for your tax practice. Hi everyone and welcome to the AICPA Tax Section Odyssey podcast, where we offer thought leadership on all things tax facing the profession. I'm April Walker, a lead manager from the Tax Section and I'm here today with a repeat guest. His name is David Snider. He's the Founder and CEO of Harness Tax. Welcome back, David. David Snider: It's a pleasure to be here. Thank you April. April Walker: David, I'd love for you to start. Tell us a little bit about yourself and tell us a little bit about Harness Tax and where you see yourself in this world of tax. David Snider: Thank you for having me. Yes, so Harness has a platform for routine tax advisors that are looking to make their relationship with their clients more seamless and insightful. What that really means is a practice management solution that's tied into a much broader set of offerings. That includes business development to help advisors with leads, a concierge team to help with support, as well as a broader network of resources to help guide advisors and give them the resources of bigger firms. April Walker: Wonderful. I feel since we talked in Spring of 2022, if it's possible, I feel like the importance of technology is even more important. Maybe that's just me being dramatic, but let's start off just by pretty broad question like, how do you see technology transforming the way tax advisors interact with their clients? David Snider: Absolutely. I think about it being in the second of three inevitable phases. I think the first was the first stage, which is very typical across industries. My background was spending, now 12 years, building tech enabled services, software solutions, first at Compass, a real estate advisory firm, and now at Harness. Before that in the middle, spent a lot of time at Bain Capital looking at different disruptive technologies. And so that first phase that we went through, very similar to a lot of industries, adoption of email, adoption of technologies that clients can actually submit core documents digitally and not just in paper. The ability with the early software to actually complete and file electronically. That really is table stakes. If you look at the data, it's 99% of advisors have an Efin, etc. The second phase that we're really still in the early to mid innings of is the software collaboration phase. What that looks like is work-flow automation, ways of interacting with clients to create leverage for advisors and scale. It's not just, hey, I typed an email, send it to one, or I create an engagement letter sent to one. It's using the efficiencies of technology that can, at the vanguard be AI, but really doesn't need to be. In the vast majority of cases, it's just having good practice management software to create efficiencies for the advisor that end up, ironically, even though you have to spend less time, creating a better client experience and one that's more customized to the individual. It gives them more visibility into what's going on, what's coming next. The third phase, which I think only a handful of firms are really investing in, fully tapping into, which is totally fine. I don't think the client expectation is there, is around customized insights. How do you not just deliver an efficient workflow? But how do you, at the outset of a tax season, demonstrate to your client that you already know some stuff about them from prior years, here's why we really need just to tweak that. Showing your work. Here is all the different analysis that we ran in the completion of your return or the discussions that we had and at the end of the process, Yes, here's a completed tax document or analysis that you requested, but also here's what it means. I think that ability to both give insights to people and leave clients like they actually understand tax, the tax process, the work that you did, is going to create massive benefits in terms of client's willingness to pay, their retention, their happiness, etc. Very few firms are at a Phase 3 in our opinion. You don't need to be concerned if you're not. Because there are a few, if any are. But certainly making sure that you've put in place or have the opportunities to go into next tax season and really nail Phase 2. I think will put advisors in a great place to really capture what is happening on the vanguard in Phase 3. April Walker: We definitely hear from people and when I'm out talking to firms, people who are definitely still in that Phase 1. Where they transferred to Cloud. That seemed like a huge deal and leaning into some technology, but maybe taking that next step into two, even is difficult. Do you have any advice or thoughts on that? Because everyone is so busy and it's hard to figure out, especially if you're really small, it's hard to figure out how to take that time and really invest in trying to get to that next step. Any ideas or suggestions there? David Snider: I think the good news is there are a lot of very good practice management software that did not exist or did not have the robustness that they do today, five years ago. One of the things to consider in evaluating the different choices is, ensuring that you price in the value of your time as a practice leader. In that there is a learning curve on anything, no matter how good the technology is. There are some that I think are much cheaper and may have the technologies you want to check the box on. But I think really understanding what is the on-boarding team look like? What does the client success infrastructure of that solution look like? Who's going to make it as easy as possible to set you and in many cases your team up to use it successfully? And to answer issues that will inevitably arise from any change. I think we have over-invested in those resources, because ...
Transcribe →Global Tax Trends: What CPAs Need to Know Now
Sep 5, 202400:25:09Tap to summarizeThis Tax Section Odyssey podcast episode takes a deeper dive into the Organisation for Economic Co-operation and Development’s (OECD) initiative on Base Erosion Profit Sharing (BEPS) 2.0 which sets to reform the internation tax system with Pillar 1 and 2 tax regimes. In addition to the complexity of such international regulations, the political landscape for U.S. implementation is uncertain, and potential action is needed from Congress. Cory Perry, Principal, National Tax — Grant Thorton Advisors, and Vice Chair of the AICPA’s International Technical Resource Panel (TRP), highlights that while many U.S. companies may not face larger tax bills if these regimes are adopted in the U.S., the administrative and compliance challenges are significant. The AICPA has submitted comment letters to the OECD, Treasury, and the IRS, focusing on simplification and clarification of rules. AICPA resources OECD BEPS 2.0 - Pillar One and Pillar Two — The OECD BEPS 2.0 sets out to provide a tax reform framework allowing for more transparency in the global tax environment. What you need to know about BEPS 2.0: Pillar One and Pillar Two | Tax Section Odyssey — The OECD BEPS 2.0 project is an international effort to reform the international tax system that addresses transfer pricing, profit allocation and tax avoidance. Advocacy Comments to Treasury on tax issues of OECD Pillar Two, Feb. 14, 2024 Comments to Treasury on Amount B of OECD Pillar One, Dec. 12, 2023 Other resources OECD BEPS — Inclusive Framework on Base Erosion and Profit Sharing Transcript April Walker: Hello everyone and welcome to the AICPA's Tax Section Odyssey podcast, where we offer thought leadership on all things tax facing the profession. I'm April Walker, a lead manager from the tax section and I'm here today with my colleagues Reema Patel and Lauren Pfingstag. They are colleagues here with me at the AICPA. They are international experts and legislative experts. We'll get into more of that as we're discussing. I'm also delighted to have with me Cory Perry. Cory is a principal with Grant Thornton Advisors and their national tax office. He's also, and more importantly for our discussion today but probably not more importantly for his day-to-day, the Vice Chair of the AICPA's International Tax Resource panel and Chair of the OECD taskforce. That's what we're going to be talking about today. If you are a follower and listener of this podcast, you might recall a few episodes ago we did a higher-level background on OECD's tax regimes — Pillar 1 and Pillar 2 — just laying the groundwork. Today we're going to talk more about why we think you need to be familiar with these concepts. Even though for today they may not be relevant for any of your current clients. We're also going to delve into the political landscape and where we are today and what that could mean for the US tax system related to international tax legislation. Reema, I'm going to let you take it away for the next little bit. Reema Patel: Thanks, April, Cory, welcome. I know a lot of us have been hearing about the OECD Pillar 1 and Pillar 2 for awhile now. Many countries have also implemented it this year and some are implementing it next year. I guess the most basic question we can start with is, who should care and pay attention to this? Cory Perry: Absolutely. It's a wide impact in tax, but it only impacts the largest of the large companies. I would say it has a high threshold, 750 million of consolidated revenue and two of the four preceding years and you have to be taxed, want more than one jurisdiction. We are talking about very large companies but these days, even middle market companies are easily starting to bump up against that threshold. We're not just talking about the Fortune 100. We're talking about middle market and above companies that should care and think about these rules. Obviously accountants that serve those types of companies, those larger companies. I think many of those companies themselves not even be fully aware that they're subject to these rules or may not have fully thought through how they're going to comply. The other thing I would add, there is a bit of a misconception out there that this is a corporate multinational problem. Although that is primarily where it is, it also impacts pass-throughs, partnerships and S corps that are parents within these groups can be equally subject to these rules. Rules don't always necessarily apply at that level, but they are applied to the group as a whole. I know there's a number of practitioners out there that have clients that have grown over time and might have reached this level. It's by no means going to be the majority, certainly going to be a large minority, but I suspect many will have clients out there that might be impacted or if you're in-house at your company might be impacted. Reema Patel: Like you said, it is for large corporations currently with consolidated revenues at 750 million euros and more. What are you seeing with the clients right now? Any challenges that they're being faced by technology? Gathering data points? I know you have to comply with many foreign jurisdictions as well as the US. Can you speak a little bit to the challenges that you're seeing just as a practitioner as well as from a client perspective as well for them. Cory Perry: Absolutely. Companies are really still trying to get their hands around this as are practitioners. Even the rules aren't fully baked. The OECD is still releasing new guidance every couple of months on quite a frequent cadence. So the rules continue to evolve and how companies are approaching it continue to evolve as well. As far as challenges, interestingly enough, from what we're seeing, many companies are not actually seeing larger tax bills. You'd think tax legislation, tax change like this is going to hit the bottom line and there are certainly companies out there with lower/no taxed pockets of income or that are in low-tax jurisdictions. But what I've found is the vast majority, particularly of middle market companies, are generally not in many of these low-tax jurisdictions, if at all. They are in higher tax jurisdictions, think of the US's top five trading partners- for example, Canada, Mexico, China, and Japan and the UK all have rates above or even some cases well above 15%. The idea is to reach a minimum level of 15% and once you're above that, there may not be additional top-up tax to be paid. It may not be necessarily for all taxpayers an item that's going to really be a cash tax impact. But where we're really seeing the challenge is more on the administrative and compliance side to this. It is a very significant undertaking to comply with these rules. It's just a massive effort that's required in order to get your hands around what needs to be done, get your systems updated so that you can comply and collect the information or the data at the right level, clean the data, so on and so forth. There was a lot of complex calculations that need to be done. In some cases there may be even third or four sets of books that need to be kept that you may not have been keeping our tracking in the past. The rule started out with a simple premise. It was going to be a book tax based on books. That sounds simple. But it quickly evolved into a very complex tax regimes that sits on top of all the other global tax regimes that are already in place. If it wasn't complicated enough before, now we have another layer over the top making it quite complex. That's certainly been the biggest challenge is how do you deal with all of this change and international tax complexity when you're operating across borders. Reema Patel: Definitely, I guess it just keeps piling all the time. Three sets of books, four sets of books. We don't even have CAMTI [rules] out yet. Speaking of which currently, it looks like, as we mentioned it's for large corporations, but what do smaller firms and CPAs in the industry need to know? I'm sure they're not getting into the nitty-gritty details of how to calculate pillar two taxes and all the top up taxes on different regimes. But we don't know if the threshold does get lowered, more companies will get pulled in, possibly. What should they know? How can they keep up with and at least be aware that it's out there? Cory Perry: I think at this point I would say it's more of a client service point. It's being aware of the potential risks in an area where your client might be subject to these rules. I don't expect many firms will have many clients that are going to be impacted. In fact, many firms might not have any clients that are impacted. But it's making that identification and helping those clients understand whether they are impacted. It is getting a lot of press and it's in the Wall Street Journal, it's on NPR in the morning, it's certainly in the mainstream news....
Transcribe →Chevron doctrine overturned: Implications for tax professionals
Aug 22, 202400:14:34Tap to summarizeIn this joint episode, Neil Amato, host of the Journal of Accountancy podcast and Melanie Lauridsen, VP of AICPA Tax Policy and Advocacy discuss two recent Supreme Court decisions. The Supreme Court ruling in Loper Bright Enterprises v. Raimondo overturned a 40-year-old precedent of deference referred to as the Chevron doctrine, affecting future rulemaking by eliminating the need for judges to defer to agency interpretations of ambiguous statutes. In Corner Post, Inc. v. Board of Governors of the Federal Reserve System, the Supreme Court ruled to alter the statute of limitations for challenging regulations, starting the clock when a plaintiff is injured rather than when the regulation is enforced. These decisions introduce significant uncertainty for the accounting profession, particularly regarding IRS regulations and long-standing rules and emphasize the need for CPAs to stay informed and adaptable as the implications of these rulings unfold. AICPA Resources Melancon: Supreme Court decisions are ‘big deal’ for tax pros, The Tax Adviser, Aug. 1, 2024 Supreme Court overrules 40-year-old Chevron doctrine, The Tax Adviser, June 28, 2024 Supreme Court decision on Chevron doctrine will affect tax pros, Journal of Accountancy, June 24, 2024 For a full transcript of the episode, see Tax Section Odyssey on the AICPA & CIMA website.
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