‘A big tax year’: What practitioners need to know now

It’s not even five weeks into 2025, and already there’s a bevy of news affecting tax practitioners. Melanie Lauridsen, the AICPA’s vice president–Tax Policy & Advocacy, joined the Journal of Accountancy podcast amid all the tumult to update listeners on several fronts.

Lauridsen discussed the latest on beneficial ownership information (BOI) reporting and the Supreme Court, how IRS service might be affected by various executive orders, and what aspects of a new tax bill or bills are being followed closely by the AICPA.

One bit of related news happened Thursday, one day after recording. The Senate Finance Committee released a discussion draft, the bipartisan Taxpayer Assistance and Service Act, which includes provisions the AICPA strongly supports.

Resources:

• Melanie Lauridsen on LinkedIn
• The AICPA’s BOI resource center
• The AICPA’s resource page devoted to planning for tax changes
• JofA coverage of the IRS rescinding some job offers

What you’ll learn from this episode:

• A recap of court cases related to beneficial ownership information reporting requirements.
• The potential effects of an IRS hiring freeze on tax filing season.
• The role that retirements could play in future IRS service.
• Details of the AICPA’s interest in proposed Circular 230 regulations.
• Why tax legislation this year could come in pieces instead of in one bill.

Play the episode below or read the edited transcript:

— To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.

Transcript

Neil Amato: Welcome to the Journal of Accountancy podcast. This is Neil Amato with the JofA. Thanks for joining us for another episode. It is late January as we record, and news is happening fast on several fronts: tax filing season, an IRS hiring freeze, as well as several other freezes, along with beneficial ownership information reporting requirements.

We’ve been following those and other stories, and we’ll continue to do so. Today we’re going to get an update on each, as well as a look ahead to other tax matters that affect members, from Melanie Lauridsen, the AICPA’s vice president–Tax Policy & Advocacy.

Melanie, there’s a lot going on in your world, so thanks for taking time to be back on the podcast. I’m going to get right to the first question on BOI, beneficial ownership information, and also remind listeners of links to our coverage as well as the AICPA BOI resource center. Melanie, what’s the latest on BOI reporting as it relates to court cases and the Financial Crimes Enforcement Network’s response to those cases?

Melanie Lauridsen: Well, Neil, it’s been a real roller-coaster ride. Let me go ahead and jump in and start at the beginning.

On Dec. 3, in the Texas Top Cop Shop case, where a federal district court actually found the Corporate Transparency Act to be [likely] unconstitutional, and it actually prohibited FinCEN from enforcing the BOI filing requirements. As you can imagine, the Department of Justice appealed [moving for a stay of the injunction] a few days later. And from there, it’s where it really started to take off and became confusing where the injunction was lifted, it was put back. There were appeals, the injunction was lifted again. It was put back, and a lot of motion happened all through the holidays and into the beginning of this year. On Jan. 23, the Supreme Court lifted the injunction in the Texas Top Cop Shop case.

However, there was another case going on, the Samantha Smith case, which if you read all the filings on that, it was thought to be only applicable to the plaintiffs. But in that particular case, the courts actually decided to place a nationwide injunction, which, even though Texas Top Cop Shop lifted the injunction, the Samantha Smith case kept the injunction in place, which brings us to the present. At this moment, the filing for the BOI report still remains voluntary, and our position still maintains the same, and it’s that we advise those that are assisting clients with BOI report filings to gather the required information from their clients and be prepared to file if that injunction is lifted again.

Amato: Yeah, so you’ve talked about that guidance. Continuing on with an AICPA stance, does the AICPA continue to support a delay in BOI reporting requirements but not a repeal of the Corporate Transparency Act?

Lauridsen: Well, Neil, so far, the AICPA has not supported a full repeal because we’ve always held the opinion that we can be helpful to our clients and still uphold an anti-money-laundering policy. But this BOI reporting requirement is deeply flawed, and it’s become needlessly complex for the nation’s smallest businesses. There is a growing momentum that the rule is so complex and with too many unanswered questions, that really it might be best to start over from scratch and to rewrite that legislation into something that isn’t as burdensome.

Amato: To quickly refresh, for the listeners, BOI itself is not a tax issue, but because clients are asking their CPAs about it, it’s become something that those who do tax services are getting questions about. Is that correct?

Lauridsen: That is correct. It is an accounting profession issue. It is not a tax issue, and this reaches a larger scope of people, but like you said, we’re on the front lines, and we work with the clients very closely, and so a lot of people are turning to their tax preparers.

Amato: Now something that truly is a tax issue is tax filing season. It officially kicked off Monday. Again, we are recording Wednesday, Jan. 29. Tax filing season kicked off with an IRS hiring freeze in place. What does that mean for individual income tax filing, delivery of refunds, etc. right now?

Lauridsen: Neil, I have to start by saying that there’s a lot happening. There’s a hiring freeze, the regulatory freeze, the return to office, the buyouts of the federal employees. There’s just a lot that is happening, and all of this is going into unchartered territory, and so a lot is just not immediately known as to how things will play out. And we have to, at this moment in time, we need to continue on a business-as-usual basis until we hear otherwise, and we learn more information. It’s key for people to be able to keep up with this, and there is a lot that’s happening.

Now, let me address the hiring freeze and the start of the filing season. We have been told by the IRS that seasonal employees should have already been hired in the fall, and they should have already received their training to begin working in January, which [filing season] kicked off on Jan. 27 through May. Now, the IRS has also said that they would reallocate workers from other areas to help cover the filing season processing. From that perspective, we’re talking just the seasonal employees. The IRS has said that there really isn’t a concern with that.

However, former Commissioner [Charles] Rettig pointed out that historically, the IRS has not performed great when there has been a hiring freeze, so the impact to the IRS may indirectly affect that tax filing season, and it could trickle into the filing season, and it could jeopardize the improvements of the agency that it’s made in the last couple of years.

We also know one of the big issues that we have is that the IRS has an unusually large percentage of people that can retire at any moment in time. It’s the attrition rate, and a lot of people can choose to retire or leave and so, therefore, this becomes a concern.

Now, there’s also another executive order regarding the grant funding freeze. Now, there aren’t a lot of specifics there, but it did become a concern when [the Office of Management and Budget] dropped a memo where it was saying there would no longer be funding to certain grants and included a lot of credits. We’re talking things like the VITA clinics or low-income taxpayer support. But it also ran the gamut of being able to take your deduction for your mortgage interest rate or the benefits that vets would get. It really ran a large gamut, and there was a lot of confusion around this and, now, they did release two clarifying statements, but those clarifying statements actually created some confusion, and one of those clarifying statements did say it wasn’t meant to impact individuals, but nothing else. There’s still, like I said, a lot of confusion in this, but when you add in the fact that there was an email that went out last night, and by last night, I mean Jan. 28, that went out to all federal employees saying that they can choose to retire by Feb. 6, and they would be paid out through Sept. 30.

Now, not much else is known, and there has been speculation that it may not even be legal, that those employees would not even necessarily be paid out. But what I will say goes back to that attrition concern that we had, where if there was someone who was on the verge of retiring, they may choose to take this buyout, as they’re calling it, and choose to leave. And the IRS has historically struggled in hiring people at the same rate as their attrition. None of that helps with the hiring freeze and then this buyout in place.

Amato: Yeah, thank you for that. Nina Olson’s comments in our Journal of Accountancy article that published Friday, along with the comments of former Commissioner Rettig. Nina Olson, former longtime national taxpayer advocate, said that that tie-in from retirements and attrition could have an effect.

Lauridsen: Yeah.

Amato: We’ll share the link to that story, also other resources as mentioned, but moving forward, with all these different freezes, whether they’re held up by injunctions or not, what’s the effect on members?

Lauridsen: Let me touch base on one more freeze, and that’s the regulatory freeze, which I think a lot of people have a concern on that as to what it means for the regulations that have dropped. Now, historically, there usually is a regulatory freeze whenever a new administration takes over. The new executive order asks to stop or pull any regulations that are going to the Federal Register or that haven’t been published in the Federal Register yet. The IRS, if you noticed, at the end of December and early January, they dropped quite a few pieces of regulation.

The executive order also asked for consideration of a 60-day implementation period, but that is not mandatory. Now, it is our understanding that the IRS will issue comments on a case-by-case basis for recent regulation that was published and how they’re going to approach it. So far, with one exception, we haven’t seen a lot of changes, and some notable regulation that we’re still working on are the proposed changes to Circular 230, and, of course, the partnership basis shifting.

Now, one thing, Neil, that I need to say for all of these things is where does the AICPA stand on all of this. Now, taxpayers, everybody is getting impacted, and we have to understand that things are changing and not all the information is given at the same time. Again, these are unchartered waters that we’re going into and we’re learning quickly. But it’s important to know that for the AICPA, it is top priority for them with IRS services for our members, and taxpayers are. As stated in the past, we believe that there should be a balance at the IRS to deliver those services, and we will continue to monitor this and take action accordingly.

Amato: You brought up Circular 230. Is there anything more to say on what those proposed regulations pertain to specifically and why they matter for AICPA members?

Lauridsen: Well, Neil, let me start by saying that the proposed changes to Circular 230 were published in the Federal Register on Dec. 26, and there’s an open comment period that ends Feb. 24, and the AICPA very much intends to comment on them because Circular 230 is the [set of] regulations that govern the practice before the IRS, which is something that we as CPAs do and represent our clients before the IRS consistently.

Now, there were a couple of updates to the proposed language, the first one being it was an update to account for the Loving case, which is interesting because the Loving case is what said that the IRS did not have the authority to regulate all tax return preparers. That was about 12 years ago or so, so it’s interesting that they’re finally updating Circular 230 for that language. Also, they’re updating the language with regards to contingent fees, and what’s concerning there is even AICPA standards, in general, we don’t allow for contingency fees. There are, however, some exceptions. The way Circular 230, the proposed regulations are, it would have no exceptions whatsoever, even in situations where it’s actually beneficial for the taxpayer. That is of concern, and we will be commenting on that.

Also, Circular 230 has new provisions related to standards and disqualification of appraisers who present evidence or testimony to the IRS. This becomes a concern for us because, from the valuations perspective, we have our own standards that are very thorough and hold a high level of quality. What the IRS did is they excluded our standard in saying it would no longer meet the qualification of appraisal standard requirements, which would require CPAs to adhere to other standards issued by other organizations. It is something that we definitely care about because it is standard setting for us.

Amato: Melanie, thank you for this rundown on a lot of topics. Obviously, we’ve said it’s fast-moving, it’s continuing to change. It’s probably an entirely separate podcast, but I’m going to bring it up as a closing thought. What’s the future of tax legislation to you? We didn’t even talk about this, this whole conversation.

Lauridsen: That’s a really good question. Let me just give you a quick overview so you understand where we’re at. We know that 2025 is going to be a big tax year. Now, the goal that we’ve heard from Congress is that there will be one big tax bill, but of course, we’ve heard discussions of two tax bills. But either way, if there’s one tax bill or one tax bill doesn’t happen, or two, we would expect to see a lot of multiple tax packages coming out.

The reality really comes in — we’ll see the packages depending on what can be passed because from President Trump’s administration, we know that they would like to make the [Tax Cuts and Jobs Act] permanent, but that has a cost. Of course, there are other issues that would have to be negotiated, like no SALT tax or no tax on tips or the car interest deduction. All these things bring in this negotiation as to what that tax bill is going to look at.

Now there are definitely pieces that we’re keeping our eye on, the small business fixes, so we’re talking about Sec. 199A, Sec. 174, Sec. 163, 100% bonus depreciation. There’s also the lifting of the Form 1099-K threshold and, of course, permanent disaster relief. There’s a lot of pieces that we’re seeing in this. One of the pieces that we’re also monitoring is the IRS funding, and, of course, we’re monitoring the high-cost items because the more they cost, the less likely they’ll be in the bill unless they’re a top priority for the administration.

To sum it up, Congress needs to determine if they’re going to do one or two big bills, and if it’s not one or two bills, then we will see multiple smaller bills. But either way, whenever there is a big tax year, there is always the need for cleanup, which means in the future, there will be the opportunity to take another bite out of the apple to help with the tax stuff. So, 2025 is going to be a very exciting year, lots of changes, and a lot of changes for tax.

Amato: So, all that is to say we’re definitely going to be having you, Melanie, back on the podcast again. A reminder to listeners: Give her a follow on LinkedIn. That’s one of several places you can get updates. Check out the AICPA’s BOI resource center; journalofaccountancy.com is going to have regular updates. Again, we’re continuing to follow the story. Melanie, thank you for being on the podcast.

Lauridsen: Thanks, Neil.