2024: A Tumultuous Year in Tax and Accounting
The year 2024 proved to be a whirlwind of changes and challenges in the tax and accounting landscape. From a pivotal presidential election to natural disasters, IRS overhauls, legal battles, and industry shifts, taxpayers and professionals alike navigated a complex and ever-evolving environment. This article delves into the key events that shaped the tax and accounting world in 2024, providing a comprehensive overview of the year’s most impactful storylines.
A New Administration and Shifting Tax Policies: The 2024 presidential election saw Donald Trump return to the White House, accompanied by a Republican majority in both the Senate and the House. This shift in power sparked speculation about potential tax cuts, with discussions focusing on the expiring provisions of the Tax Cuts and Jobs Act. However, the timeline for implementing these changes remained uncertain due to the complexities of the reconciliation process. The election also brought renewed attention to state-level tax measures, with numerous states addressing issues ranging from property tax relief to cannabis taxation.
Navigating Natural Disasters and IRS Relief: 2024 witnessed a series of natural disasters, including multiple hurricanes, severe storms, floods, and wildfires. The widespread damage prompted the IRS to extend tax filing deadlines for affected individuals and businesses, providing much-needed relief in times of crisis. The Financial Crimes Enforcement Network (FinCEN) followed suit, extending deadlines for Reports of Foreign Bank and Financial Accounts (FBARs) and Beneficial Ownership Information (BOI) reporting. Congress also stepped in to offer tax relief specifically for wildfire victims.
The IRS Resurgence: Enhanced Service and Increased Enforcement: Bolstered by funding from the Inflation Reduction Act, the IRS underwent significant changes in 2024. The agency ramped up its enforcement efforts, targeting high-income taxpayers with a new compliance initiative. This involved sending out compliance letters to over 125,000 individuals who had not filed tax returns since 2017, including those with incomes exceeding $1 million and those earning between $400,000 and $1 million. The IRS also focused on large corporations, partnerships, and high-income individuals regarding business aircraft usage, launching audits to ensure compliance.
Data Breach, Apology, and Reporting Changes at the IRS: The IRS faced scrutiny following a data breach involving the unauthorized disclosure of tax returns, including that of Donald Trump. Former IRS contractor Charles Littlejohn was sentenced to prison for the leak, and the IRS issued notifications to affected taxpayers. The agency also settled a lawsuit with hedge fund CEO Kenneth C. Griffin, issuing a public apology for the breach. In other news, the IRS again delayed the implementation of the new $600 reporting threshold for Form 1099-K, providing temporary relief for taxpayers and third-party settlement organizations.
Supreme Court Rulings and International Tax Disputes: The Supreme Court upheld the constitutionality of a 2017 Tax Cuts and Jobs Act provision requiring companies to pay tax on previously untaxed foreign profits. This decision, impacting U.S. shareholders of foreign corporations, paved the way for significant tax revenue generation. In a separate international tax battle, Apple faced a ruling from the European Union’s top court, requiring the company to pay billions in back taxes related to tax benefits received in Ireland. This long-standing dispute highlighted the complexities of international tax law and the ongoing efforts to address tax avoidance.
Industry Shifts: Accounting Talent Shortage and Private Equity’s Rise: The accounting industry grappled with a shrinking talent pool as retirements outpaced new entrants, leading to heavier workloads for existing CPAs and discussions about alternative career paths. Conversely, the IRS experienced a hiring surge, adding thousands of employees to bolster enforcement and taxpayer services. Private equity firms made significant inroads into the accounting world, recognizing the industry’s growth potential and investing in several large accounting firms. The influx of private equity capital signaled a shift in the industry landscape, with implications for firm structure and service delivery.
Employee Retention Credit Fraud and Beneficial Ownership Reporting: The IRS addressed concerns about widespread fraud related to the Employee Retention Credit (ERC) program. The agency implemented measures to deny improper claims and offered amnesty programs for businesses that had submitted incorrect information. The rollout of beneficial ownership information (BOI) reporting faced legal challenges, with a lawsuit in Texas leading to a nationwide injunction against enforcement. Subsequent appeals and court decisions created uncertainty for businesses, highlighting the evolving regulatory environment.
Bench Accounting’s Temporary Closure and Acquisition: The abrupt shutdown of online bookkeeping service Bench Accounting sent shockwaves through the industry. However, the company quickly found a lifeline through an acquisition by Employer.com, averting a potential crisis for its tens of thousands of customers.
Looking Ahead to 2025: The year 2024 left a lasting impact on the tax and accounting world, underscoring the need for adaptability and vigilance in navigating a constantly changing environment. As we move into 2025, taxpayers and professionals alike will face new challenges and opportunities, requiring a proactive approach to stay informed and compliant. The lessons learned in 2024 will undoubtedly shape the future of the industry, driving innovation and prompting further evolution.
