This past year wasn’t short on tax and accounting news impacting taxpayers and tax professionals alike. Here are my picks for the top tax and accounting storylines of 2024:
The 2024 Election Season
Presidential elections always attract attention, and this past year was no different. On November 6, the Associated Press announced that Donald Trump would return to the White House. Additionally, the Republicans won the Senate and the House.
Some believe that the shift might immediately lead to tax cuts. While tax cuts may be in the cards, how quickly they get pushed through is uncertain, thanks to reconciliation.
Some proposals and promises made during the presidential campaign will likely be sidetracked, but others will get consideration, including the provisions set to expire under the Tax Cuts and Jobs Act. Trump will also levy new tariffs, though they may be more modest than he suggested during his campaign.
Additionally, tax measures—from property tax relief to taxes on cannabis—were on the ballot in several states. Overall, about one-third of states had some tax or revenue question on the ballot–and that doesn’t include those in municipalities. (No state had any tax initiatives that would significantly impact the upcoming filing season, which is likely welcome for taxpayers and tax pros alike.)
Natural Disasters
The country was hit by several natural disasters in 2024, including Hurricanes Beryl, Debby, Helene, and Milton. Severe storms in South Dakota, Tropical Storm Ernesto in Puerto Rico, storms and floods in Connecticut and New York, and wildfires in the west all resulted in damage that impacted taxpayers. As a result, the IRS extended due dates for filing federal income tax returns for victims (individuals and businesses affected by Hurricanes Beryl and Debby generally have until February 3, 2025, while those impacted by Helene and Milton have until May 1, 2025, to file).
The Financial Crimes Enforcement Network (FinCEN) also extended filing deadlines for the Reports of Foreign Bank and Financial Accounts (FBARs) and Beneficial Ownership Information (BOI) reporting.
(Congress also passed tax relief for wildfire victims.)
IRS Boosts Service, Ramps Up Enforcement
The IRS used Inflation Reduction Act spending to make some changes in 2024, including a new compliance effort focused on high-income taxpayers. IRS Commissioner Danny Werfel announced that IRS compliance letters were to be mailed out for more than 125,000 cases where tax returns haven’t been filed since 2017. The mailings included more than 25,000 to those with more than $1 million in income and over 100,000 to people with incomes between $400,000 and $1 million between tax years 2017 and 2021.
The initiative was part of a larger effort focused on large corporations, large partnerships, and high-income individual filers to pay the taxes they owe. In January, Werfel reported that the focus on taxpayers with more than $1 million in income and more than $250,000 in recognized tax debt was paying off.
Earlier this year, Werfel also announced that the tax agency would begin dozens of audits on business aircraft involving personal use. Those audits started in the spring of 2024 and focused on aircraft usage by large corporations, large partnerships, and high-income taxpayers.
IRS Apologizes For Tax Leak
In October 2023, former IRS contractor Charles Littlejohn pleaded guilty to unauthorized disclosure of tax return and return information. In January of 2024, Littlejohn was sentenced to five years in prison for disclosing thousands of tax returns—including Donald Trump’s—without authorization.
Early in 2024, the IRS began notifying many taxpayers impacted by the data breach. A month later, Kenneth C. Griffin, the founder and CEO of Miami-based hedge fund Citadel, settled his lawsuit against the IRS—he had sought damages from the agency for “their willful and intentional failure to establish appropriate administrative, technical, and/or physical safeguards over its records system to insure the security and confidentiality of [his] confidential tax return information.” The settlement terms were not made public but did include a public apology from the IRS.
IRS Announces Changes In Information Reporting
The IRS announced that it would (again) delay the new $600 Form 1099-K reporting threshold for third-party settlement organizations. Under the most recent guidance, third-party settlement organization reporting will only be required if the taxpayer receives more than $5,000, regardless of the number of transactions in 2024. The dollar value will scale to $2,500 for transactions in 2025 before hitting the $600 threshold in 2026 and beyond.
That should mean that you will not receive Form 1099-K in early 2025 unless you hit the existing transaction threshold—an exception exists for taxpayers subject to backup withholding. All other taxpayers should see no change in early 2025 when forms go out, consistent with the treatment from last year. It’s worth noting, however, that it’s not unlikely that some Form 1099-K reporting threshold companies could still send the form for totals over $600—there’s no need to panic if you receive a form, as that doesn’t change the tax treatment.
Supreme Court Rules Tax On Previously Untaxed Foreign Profits Is Constitutional
A 2017 Tax Cuts and Jobs Act provision requiring companies to pay tax on previously untaxed foreign profits had the potential to shake up the tax world. But in a closely watched case, a divided Supreme Court ruled that the mandatory repatriation tax (MRT)—which attributes the income of an American-controlled foreign corporation to the entity’s American shareholders and then taxes the American shareholders on their portions of that income—does not exceed Congress’s constitutional authority.
The 2017 law did two things: (1) made clear that when certain foreign corporations, including CFCs, distribute their earnings as dividends to U.S. corporate shareholders, those earnings are generally no longer taxed and (2) included a one-time MRT so that the previously deferred income didn’t escape from ever being taxed.
The result was a one-time tax targeting U.S. shareholders who own 10% or more of foreign corporations primarily owned or controlled by U.S. persons. Under the new law, shareholders had to account for deemed income in proportion to their ownership interest back to 1986. It was a revenue-raiser intended to partially fund the shifting of U.S. corporate taxation from a worldwide system toward a territorial one where U.S. corporations are taxed only on their domestic-source income. According to the government, in 2018, U.S. multinational enterprises distributed approximately $777 billion to U.S. shareholders—the MRT is projected to generate roughly $340 billion in tax revenue.
A married couple sued to invalidate the provision—and lost.
As expected, the Court also found that the decision did not attempt to resolve the disagreement over whether realization is a constitutional requirement for an income tax. (That’s clearly a nod to the proposed wealth tax that became a talking point in the 2024 presidential election.)
Ruling Takes Bite Out Of Apple
The European Union’s top court ruled in an ongoing legal battle over tax benefits that Apple must pay billions in back taxes. Specifically, the Court of Justice of the European Union (CJEU) found that companies belonging to the Apple Group received tax advantages that were “unlawful and incompatible with the internal market, and from which the Apple Group had benefited.”
The case stretches back more than a decade. In 2013, an initial inquiry was launched into whether Apple had engaged in sweetheart deals with Ireland to lower its tax bills. A formal investigation was initiated by the European Commission in 2014. The Commission eventually found that tax rulings issued by Ireland to Apple “substantially and artificially” lowered the tax paid by Apple in Ireland since 1991.
The Commission ordered the recovery of “illegal state aid” for the ten years preceding its first request for information in 2013. That bill totaled €13 billion ($14.5 billion U.S. at the time), plus interest.
The Accounting Talent Pool Is Shrinking
The pool of available CPAs has been shrinking as Baby Boomers (and soon Gen Xers, too) retire and Gen Zers turn their noses up at accounting, particularly the additional training and tests needed to become a licensed CPA. According to the American Institute of Certified Public Accountants’ 2023 Trends Report, 65,305 bachelor’s and master’s degrees were awarded in accounting in the 2021-2022 school year, down 18% from six years before. During the same period, the number of candidates passing the four test sections needed to be licensed as a CPA fell even more dramatically—just 18,847 completed the test in 2022, down 32% from 2016.
Firms are scrambling to add tax professionals, but with a relatively sparse talent pool, that means heavier workloads for existing CPAs. The result is increased discussions about alternative career paths.
Meanwhile, the IRS went on a hiring spree—a stark contrast to previous years when hiring freezes and lack of funding made it difficult for the IRS to add to its workforce. In Fiscal Year 2023, the IRS used 82,990 full-time equivalent (FTE) positions to conduct its work—the highest in a decade. Of those positions, 40.0% were dedicated to enforcement, and 44.8% were dedicated to taxpayer services.
IRS Focuses on Fraudulent Employee Retention Credit (ERC) Claims
Earlier this year, the IRS announced plans to deny tens of thousands of improper high-risk ERC claims. IRS Commissioner Werfel said extra looks “confirmed widespread concerns about a large number of improper claims.”
The ERC program was intended to assist eligible employers in keeping the lights on in their businesses. Eligible employers are those that paid qualified wages to some or all employees after March 12, 2020, and before January 1, 2022. Typically, to qualify, you must demonstrate that a government order shut your business down due to the pandemic during 2020 or the first three calendar quarters of 2021 or that you experienced a specific decline in gross receipts during the eligibility periods during 2020 or the first three calendar quarters of 2021. Some businesses may also qualify as recovery startup businesses for the third or fourth quarters of 2021.
The IRS announced a moratorium on new ERC claims in 2023 due to concerns about fraud. By 2024, the IRS was receiving more than 17,000 ERC claims weekly, and Werfel suggested that many of those claims were inappropriate.
The IRS suggested options for businesses that might have submitted improper claims, including withdrawal and two rounds of an amnesty program (the most recent program closed on November 22, 2024).
Many businesses are still waiting to hear from the IRS about their claims—and investigations are pending for others.
Private Equity Makes Big Move In Accounting
Private equity—investment firms that invest in private companies or buy out public companies—is making its mark in the accounting world.
Private equity firms are eager to make new investments, and in 2024, the accounting world was an attractive target. It’s clear that the demand for accounting services isn’t going away—demand is still strong. That hasn’t gone unnoticed by private equity firms who see the opportunity for sustained, long-term growth.
Investment firms are lining up—as of November 2024, five of the largest 25 U.S. accounting firms, ranked by revenue, have taken private equity money.
Bouncing BOI
Earlier this year, companies began thinking about the deadline to file beneficial ownership information (BOI) returns. As of January 1, 2024, many companies were required to report information to the U.S. government about who ultimately owns and controls them. This is the result of a 2021 law, the Corporate Transparency Act (CTA), which requires reporting companies to file reports with FinCEN.
Without additional extensions, a reporting company created or registered to do business before January 1, 2024, was required to file its initial report on or before January 1, 2025. This is true even if the company was created years before 2024.
A lawsuit shook that up a bit. In Texas Top Cop Shop, Inc., et al. v. Garland, et al., Judge Amos Mazzant granted a request for a preliminary injunction, blocking the U.S. Department of Treasury from enforcing the CTA’s reporting requirements. The judge went one step further, blocking the enforcement of the BOI reporting requirements nationwide.
But then… well, brace yourself. On December 17, Mazzant ruled that a nationwide preliminary injunction barring FinCEN from enforcing the CTA would stand. Days later, on appeal, a unanimous Fifth Circuit bench granted the government’s emergency motion for a stay of a preliminary injunction. The reversal initially meant that businesses required to file BOI reports had to do so while the government’s appeal worked its way through the court system. In response, FinCEN posted a message to its website extending the reporting deadline from January 1, 2025, to January 13, 2025.
But wait—there’s more! On December 26, the Fifth Circuit issued an order vacating the stay. (The court explained that the appeal had been expedited to the next available oral argument panel—which will be in March 2025.)
That means the injunction is now back in effect. Per FinCEN, BOI reporting is currently voluntary.
Last-Minute Extra: Bench Goes Quiet (For A Minute)
Bench Accounting, a Vancouver-based company that provides online bookkeeping services, abruptly shut down last week. This week, the company’s tens of thousands of customers learned the news from a message on Bench’s website: “We regret to inform you that as of December 27, 2024, the Bench platform will no longer be accessible. We know this news is abrupt and may cause disruption, so we’re committed to helping Bench customers navigate through the transition.”
The chatter on social media was loud. But the story took a turn this week. According to a December 30 press release, the company has since been acquired by Employer.com.
2025 Is Almost Here
The 2024 tax year was full of news, twists and turns. What will the 2025 tax year bring? Stay tuned!
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