ERC, BOI, e-signature relief: 3 focus areas for tax advocacy

Melanie Lauridsen, vice president–Tax Policy & Advocacy for the AICPA, joins the JofA podcast to review 2023’s tax advocacy highlights and look ahead to key issues this year and beyond.

Her team’s focus areas include the employee retention credit claims, beneficial ownership information reporting requirements, along with numerous other issues of concern to tax practitioners.

Resources:

• JofA article on BOI and what it means for CPA firms
• FinCEN news from December on BOI final rule
• Tax Section landing page, with extensive resource library on topics mentioned, including resources specific to the employee retention credit

What you’ll learn from this episode:

• The number of AICPA comment letters sent to legislators in 2023.
• Where things stand regarding e-signature relief.
• Lauridsen’s explanation of why beneficial ownership information requirements, while not specifically related to tax, are applicable to tax practitioners.
• A summary of topics included in the resources section of the Tax Section’s landing page  
• Lauridsen’s closing message to members.

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 back to the Journal of Accountancy podcast. This is your host, Neil Amato. Joining me today on the show is Melanie Lauridsen, VP of Tax Policy & Advocacy for the AICPA. Melanie and I are going to look back on the 2023 year in tax advocacy and also look ahead to some of the key issues that affect practitioners and taxpayers. Melanie, first, welcome to the JofA podcast. Thanks for being on.

Melanie Lauridsen: Thank you, Neil. I appreciate being on.

Amato: I’m going to hit you with a numbers question first, I’m a stat guy, so this is right up my alley. How many comment letters did the Tax Policy & Advocacy team submit last year, 2023?

Lauridsen: Last year the team submitted 66 comment letters. But one thing, Neil, that I definitely want to point out is the comment letters — they’re easy to point to because it’s a comment letter. It’s something tangible that you can address, you can copy from, you have a reference point. But it really is just the tip of the iceberg of the work that the team does, and there’s lots of work that goes into it and oftentimes years of work before a comment letter sometimes goes out.

Amato: That is a good point. It’s definitely more than just a number that you discussed. So, the Tax Policy & Advocacy team did a lot of work in 2023 on some important issues. The employee retention credit, e-signatures, disaster relief, beneficial ownership information. Can you tell me some more about those, I guess starting with the ERC, the employee retention credit? What is it the AICPA advocated for and what is the IRS doing related to the ERC?

Lauridsen: Well, Neil, the ERC is actually a perfect example of what I just said about the tip of the iceberg. So, ERC, as you know, came about with COVID and it was meant to provide relief to businesses that were in need during the pandemic. When you take a look at the history of what we have done on ERC, it actually goes back quite a few years.

When we started to hear about the CARES Act, we immediately requested and asked for immediate guidance and we started to ask different questions on implementation. As a result of that, back then, the IRS actually issued 90-plus FAQs, and it was purely based on our feedback. From there, we started to ask the IRS to turn the FAQs into more formal guidance, and then we got notices that came forward, which contained a lot of those FAQs.

Of course, from there we started to continue pushing with the IRS about clearing the backlog once the claims started to come in. Then back in July, as most recently as July, the IRS commissioner actually stated that they cleared the backlog and expected to be able to take a look and to consider those fraudulent returns. Overall, Neil, I would say that we’ve had over 100 points of contact with the IRS on ERC alone.

It is constant work that we’ve had with the IRS, with Treasury, up on the Hill, where we were talking about the fraudulent ERC mills, what was happening. We made them aware of certain areas and certain issues where the mills could perpetrate fraud. Because of all of those efforts, the ERC made it into the Dirty Dozen list of scams.

Then, of course, most recently this past September, the IRS came forward with an IRS moratorium, which was really shocking to everybody that the IRS actually took such heavy actions, and they completely stopped ERC claims for them to start making the reviews of those claims. Now since then, most people, we’ve seen the withdrawal program, which a lot of our membership hasn’t been as concerned about the withdrawal program. Where they are seeing it is the voluntary disclosure program. Because they’re getting clients that have gone to other mills, getting the claims, and now they need help, and they’re looking to us to be able to help them.

With the ERC, again, it’s been a couple of years that we’ve been working on it. There definitely have been comment letters throughout this process. But the work that has been had has been enormous for many, many years, and it’s paying off because you do see the IRS and the Hill turn to us as being reputable, as people that know what’s happening on the front lines and how to help.

Amato: Thanks for that summary of an important topic and obviously a continuing one. We will mention some related resources on ERC and other topics as we go along. But a quick note now that we’ll include a link to pertinent resources in the show notes for this episode. Another topic: e-signatures, e-signature relief. One, could you just explain what that means, maybe for people who don’t understand it, and what’s new on that front?

Lauridsen: Absolutely. Again, this is something that COVID revolutionized what happens and the need for e-signature. The AICPA has actually been working on e-signature for well before, years before COVID even came along. We were trying to help facilitate [it]. E-signature really is the ability to be able to transact and get those authorization forms so that we can file a tax return electronically without the need for a wet signature from the client.

That’s essentially what the e-signature is. To be very clear, it’s not on the actual tax return. It’s for the authorization of [electronic] filing for those tax returns. Of course, there are other returns that yes, it is for the return. But we started to push through that because years ago, like I said, in order to be able to help taxpayers meet with their clients, we were moving and are moving into a more global environment. Where e-signature became critical was during COVID in that our members couldn’t be meeting face to face with clients. When everything shut down, the tax returns were still due, and the need to be able to meet or interact with the clients was still there.

We continued pushing with the IRS, and what the IRS did is they allowed for e-signature relief. What that meant for a certain series of forms — and it’s online listed of what forms it is — you didn’t need a wet signature and you actually didn’t have to go through this online process. Someone like your client could literally sign a piece of paper, take a picture of it, text it to you, and then you can keep it into your files as an e-signature for that file because people couldn’t meet in person.

That relief was granted during COVID, and of course nobody knew how long COVID was going to be for, so they offered the relief for a period of time, and they extended it and kept extending it. And the last extension they had was through Oct. 31, this past Halloween, which of course we live in this mobile, telecommuting, global environment, which that need was still there. Of course, we had concerns for other types of returns as we moved forward and the IRS, through all the work that we’ve been doing, they actually went ahead and took that temporary relief and they put it into the Internal Revenue Manual, and they didn’t put an end date on that.

The idea is the IRS in the near future will be coming up and developing secure ways for people to transact through e-signatures online. This is definitely moving in the right direction, and it really, really did help millions of Americans, and of course our membership, too.

Amato: Let’s talk also about the BOI reporting requirement. Again, that’s beneficial ownership information. We’ve had coverage in the JofA on what it means for CPA firms and also a news article, I guess late December, on the FinCEN final rule related to BOI reporting requirements, so what’s the latest on that for practitioners and taxpayers to know?

Lauridsen: Let me start by saying that beneficial ownership of information is something broader than tax. It is not just tax. The reason that tax gets pulled into it quite a bit, it’s that clients — whenever there is a form and numbers and something that needs to be reported to the government — they automatically think of the IRS and they, of course, go to their preparers like us CPAs.

The concept behind it is we believe clients will be approaching their preparers and that the preparers are going to have to provide a piece of advice, at least for awareness. Now, the latest to be aware with BOI, first of all, awareness of what it is, is the first thing. When we first started talking about BOI, almost nobody knew what it was and they weren’t paying attention. But now it’s here, and I believe BOI is here to stay. The rest of the world is aware of BOI, and they have BOI measures in place. The United States is just now getting up to speed.

What do people need to know? Well, there are certain issues behind BOI and one of the things — regardless of whether it’s controversial in your opinion, you want to do this engagement with your clients [or not] — there are obligations, regardless of whether you take on the engagement or not. For example, if you choose not to do this engagement, you at a minimum need to make the client aware and explain what BOI is, because you would never want a client to come back to you — given the severe penalties. And the penalties, Neil, are upwards of $10,000 and two years in jail.

You never would want a client to turn around and point their finger at you and say: “It’s your fault. You knew about this, yet you didn’t tell me.” Those conversations need to be had, and of course, if you are taking on the engagement, beginning to document this, you need to look at your risk tolerance. You need to understand the client. You need to understand the structure of the entity, and you need to understand whether or not you can provide that service. And there’s a couple of considerations that you need to have into this before you decide if you’re going to take on this engagement. Just lots of information and, Neil, you’ve mentioned resources. We have great resources for BOI because, honestly, we could talk about BOI for hours on end.

Amato: Yeah, exactly. You were saying, it’s a big topic, yes. I’m glad you pointed out the fact that it’s tax adjacent and the reason that practitioners who maybe focus on tax, why this is an issue for them. It’s not purely tax, but it is important as it relates to practitioners. Tell me this, some of these issues that we’re talking about as far as advocacy success in 2023, many still ongoing as I mentioned. What are some of those that are carrying over into the new year as we record here January 18, 2024?

Lauridsen: It’s interesting because every year we have wins and we have advocacy wins. We’re very proud of those advocacy wins. It’s great to see the wins. But again, those wins are years in the making for something to come through. Like e-signature again, that is clearly something that’s been around at least five, eight years, maybe even 10 to 12 years that we’ve been fighting on.

When you ask what do we see carrying over, we definitely have things that are carrying over. It’s common that we see issues coming forward. What happens is the status of it and where it’s at. A couple of things that we’re looking at. For example, the Safe Act that has to do with simplifying and being able to do estimated tax payments much easier for people. That’s something that was introduced. It became a bill. It is highly favored up on the Hill, and it most likely will be considered in a tax package in 2024. That’s something we have to continue monitoring very closely.

Section 174, the [research and experimental] expenditures. [For] a lot of people that was a big issue for their businesses, whether or not you had to amortize over a certain period of time or if you could just take that deduction. We saw that become introduced into a tax package that’s being considered and it’s going to be marked up tomorrow. Hopefully, good news. Hopefully, Section 174, we’ll be hearing something from our members on that. Hopefully, it’ll be a win early in 2024.

But then there’s other issues that we see over and over through the years — disaster relief. Every year there are new disasters that people touch on and we know that they exist. Again, that’s an issue that just will go on, definitely in 2024 and further. And quick things that people know: IRS shutdown, virtual currency, IRS services. These are all issues that people care about that we are constantly working on. Even if you don’t see a comment letter.

Amato: What other issues does the AICPA Tax Policy & Advocacy team have its eye on for 2024? I know that’s a really open-ended question. There are plenty.

Lauridsen: Yeah. Like I said, some of the issues that we covered earlier. So, every year we know there are certain issues that we have to address and that are coming down the pipeline. For example, virtual currency. We know that regulations have not been pushed through. We just did submit comments. We’re still submitting more comments in order for Congress and the IRS to come up with a structure on how to tax virtual currency. That’s an example of something that we know we’re looking at 2024.

But the interesting thing about tax, and this happens every year, is you can put your best foot forward for planning, and life happens. There’s regulatory changes, there’s legislative bills that come out, which were completely unexpected. Bills can be put together and agreed upon, surprising other people. We oftentimes have to pivot on the work that we’re doing. I think the biggest example would be COVID. We had completely different goals that we were working through, that were full steam ahead and everything had to get dropped. So things can change.

Amato: Yeah, exactly. They can change. They probably will change. That’s the only certainty that there is that there will be change. Another certainty is that we have mentioned and will mention again that in the show notes for this episode are going to be links to resources, some of which we’ve discussed, some of which we have not yet. Melanie, what more would you like to pass on about some of the resources available to members out there?

Lauridsen: We have valuable resources there to members. We have, obviously, a tax section landing page, which has a resource library. But for the big issues, the issues that really impact a lot of people and have deep impact for people, there are landing pages. As you mentioned, BOI has a landing page. ERC has a landing page. Virtual currency or digital assets, what it’s now commonly called, has landing pages. There’s quite a few landing pages out there, and I really encourage people to go through because some of those resources are things that people don’t even realize they have available for them. It’s a lot of work. Like I said, for tax, there’s so much to cover and there’s a lot of information there.

Amato: That’s great. Melanie, thank you very much for the update, for making time for us. Anything else you’d like to add in closing? We appreciate it.

Lauridsen: The last thing I would add is we really do appreciate our members when they reach out to us because they do provide really good feedback. It helps us keep our thumb on the pulse of everything that’s happening so that we know which direction to gear our advocacy on. Just a shout-out to our volunteers and members, because we really do value what they bring to the table for us.