Good morning, counterati. It’s Monday again, here is some news for you to start your week.
‘Tis the season to get tax advice from TikTok. p.s. It’s they’re, buddy.
Accountants are too stupid to know about this because after all the schooling they just STOP learning! pic.twitter.com/BuMGHJuKx9
— Jessica Smith, EA 💪🏼, not a CPA (@Taxsavvyjessica) February 9, 2025
Something to chew on as both sides argue about fraud and waste:
My dad was an auditor with The Indiana Department of Revenue. He worked in the Muncie office for a couple of years and then out of the Fort Wayne office for 20 years.
He mostly audited businesses mostly.
He told me many times that most people want to pay their taxes and most…
And on the topic of fraud and waste, I suppose, Tesla’s VP of Finance rejects the assertion that Tesla is committing fraud just because tax rules are easily bested by giant corporations that can afford an army of professionals to best them.
Former Secretary of Labor and Berkeley professor Robert Reich tweeted on February 7:
Tesla earned $2.3 billion in the United States in 2024.
You’d think it paid a lot in taxes, right?
Well it paid precisely $0 in federal income taxes last year.
You want waste and fraud? Look at what some big corporations and the rich are getting away with.
Professor, Respectfully, Tesla’s income taxes are not an example of fraud. Tesla complies with all tax regulations in all of the regions of the world in which we operate. Details about 2024 Income Taxes were disclosed to last month in our 10-K. Notably – we outline our net operating loss carry-forwards, which result from the fact that Tesla has been unprofitable for the significant majority of its 20+ year history. This has been a very, very difficult business to build. Looking at any one recent year in isolation, therefore, will not provide the full picture.
ZDNet brings you 5 ways AI can help with your taxes – and 10 major mistakes to avoid:
In a recent test of ChatGPT’s Deep Research feature, the AI was asked to identify 20 jobs that OpenAI’s new o3 model was likely to replace. As ZDNET’s Sabrina Ortiz reported, “Right in time with tax return season, leading the table was the role of ‘tax preparer’ with a probability of 98% replacement, which ChatGPT deemed as ‘near-certain automation.'”
There is no doubt that retail tax preparation services are using some level of AI to reduce their workload, but while tax preparers may well be replaced by a machine, I’m not convinced that will lead to accurate or reliable tax returns — certainly not yet.
According to an August 2024 report by Boston-based investment banking firm Capstone Partners, there were 70 merger-and-acquisition deals in the accounting services industry through the first half of last year. Activity in the sector peaked post-pandemic in 2023 with 160 deals.
Those numbers will be fun to revisit in a couple years when mid-tier accounting starts to look like grocery store aisles:
What do you do to increase accountant retention at your office?
I believe deep, meaningful connections drive better business outcomes. To strengthen these connections, we have intentionally created team pods that foster relationships from the staff level to partners. Our Los Angeles leadership team recognizes the importance of engagement and has proactively connected with all team members – not just their designated coaches – regardless of project assignments.
Additionally, we established an advisory council composed of professionals from various service lines and experience levels. This group meets to discuss challenges employees face and provides insights and actionable solutions.
One key initiative they introduced was speed networking sessions to enhance cross-service-line connections through specialized discussion topics. They also proposed a reward system for employees who facilitate introductions between colleagues and clients, which not only drives cross-sales but also demonstrates our deep understanding of clients’ businesses and how we can better support their needs.
Elsewhere in LABJ, this guy explains why there’s a dearth of accounting graduates:
Younger people are not drawn to the long hours, lower wages and rigid deadlines of the accounting profession. The repetitive and often tedious tasks involved in preparing a tax return are not enticing for new talent, and we need to make efforts to develop, train and retain the next generation of accountants.
OK but how if none of the things you mention are going to change?
KPMG Canada had multiple deficiencies in five out of 10 audits inspected by the Public Company Accounting Oversight Board in the United States. In a highly detailed inspection report, consisting of 21 pages, the US audit watchdog also flagged 10 instances across three audit engagements in which the firm’s independence may have been impaired.
And independence took a few hits as well:
KPMG Canada self-identified 32 instances across 14 issuers in which the firm or its personnel appeared to have impaired the firm’s independence. In ten audits reviewed and in two other audits, the PCAOB further identified 10 instances across three issuers of potential non-compliance:
“Of these instances, nine related to investments in audit clients and one related to an other financial relationship with an audit client. Four of these financial relationships were instances where a partner in the firm’s chain of command had a financial relationship with an audit client, and three of these financial relationships were instances where a partner in the same office as the engagement partner for an issuer had a financial relationship with that issuer. Three of these instances related to a member of an engagement team.”
[Indiana Society of CPAs CEO Courtney] Kincaid says the program will address the talent pipeline and workforce development issues for the region’s CPA profession and expose Indianapolis-area students from various backgrounds to the profession.
The Indiana CPA Society has worked to address the issue for several years, and Kincaid highlighted their Accounting Careers Awareness Program (ACAP). She says the program targets high school and college students with an in-depth week-long focus on the profession.
Read My Lips: No New Taxes [NYT]
Grover Norquist gets a spot on The New York Times Op-Ed page.
Obama and Boehner Advance Toward Deal to Cut Deficit [WSJ]
Until now, Republicans have shot down every proposal that involved higher taxes. But Democrats could be the major obstacle to this package because they worry that upfront spending cuts would be ironclad while any tax increases would be subject to later agreement. With prospects of a government default looming in early August, leaders on both sides denied Thursda ose. But the White House provided an outline of the deal to Democratic congressional leaders, aides said.
Democrats Recall Reagan’s Tax Increases [Bloomberg]
Reagan, renowned by Republicans as a tax-cutter, also increased revenue about a dozen times when confronted with surging deficits. The Treasury Department has estimated those measures would be the equivalent of $300 billion annually today — more than what many Democrats are now seeking as part of a deal to raise the U.S. debt ceiling. That often-forgotten history has some lawmakers trading places, with Democrats hailing the former Republican president as an example for today’s budget negotiators.
Four More Credit Suisse Bankers Charged in Tax Case [WSJ]
U.S. prosecutors on Thursday charged Credit Suisse Group’s former top offshore banking executive in North America and three other senior bankers with defrauding the U.S. government, increasing pressure on the Swiss bank over U.S. customers’ secret accounts that the officials say were used to evade taxes. The charges add senior-level executives to an indictment filed in February against lower-level bankers who were charged with conspiring to defraud the U.S. by opening and maintaining thousands of offshore accounts for wealthy Americans with as much as $3 billion in hidden assets.
Congress Plans Oversight Hearing on IRS Tax Preparer Regulation [AT]
The House Ways and Means Oversight Subcommittee plans to hold a hearing next Thursday on the Internal Revenue Service’s recent efforts to step up regulation of tax return preparers. “This hearing is a continuation of the Subcommittee’s oversight of the IRS and the alarming rates of tax noncompliance,” Charles W. Boustany Jr., R-La., who chairs the subcommittee, said in announcing the hearing Thursday. “With so many Americans relying on paid professionals to prepare their returns, it is critical that we better understand what the IRS is doing and what impact the new regulations will have on taxpayers, paid tax return preparers, and tax compliance.”
PKF and BDO in hot water over China fraud [Reuters]
The fourth time was the charm for shareholders suing the auditors of Shenzhen-based China Expert Technology. China Expert shareholders have been trying unsuccessfully to sue the company’s accounting firms for failing to detect an alleged $132 million fraud. U.S. District Judge Alvin Hellerstein in New York has previously dismissed the suit three times, saying the shareholders’ claims were inadequate.
Florida Rep. Rivera faces federal probe over casino contract [MH]
Agents with the FBI and the Internal Revenue Service have begun interviewing witnesses knowledgeable about a $1 million consulting contract between Flagler Dog Track — now known as Magic City Casino — and Millennium Marketing, a company co-owned by Rivera’s 70-year-old mother and her business partner, according to sources familiar with the investigation.
Ex-NASA agent pleads guilty in church theft case [AP]
A former NASA special agent pleaded guilty Thursday to failing to report nearly $300,000 he stole from his Southern California church on his tax forms. Alvin Danielle Allen, 42, of Lancaster admitted before U.S. District Judge George H. King that he filed fraudulent tax returns from 2004 to 2008. He faces up to three years in federal prison when he is sentenced Nov. 7.
Accounting Cops Delay New Rule on Leases [WSJ]
The Financial Accounting Standards Board and the International Accounting Standards Board said they will reintroduce a revised lease-accounting proposal for public comment later this year, with changes from their original proposal last year.
‘Nerdy’ accountant ready to lead healthcare merger [Reuters]
For a self-described nerdy accountant who shuns attention, Express Scripts Inc (ESRX.O) chief George Paz just thrust himself into the limelight. With his $29.1 billion planned purchase of rival Medco Health Solutions Inc (MHS.N), Paz would run the clear leader in managing prescription drug benefits for millions of Americans.
IRS Whistleblower Office Issues Annual Report [TaxProf]
It was a banner year!
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