IRS warns high-income taxpayers about danger of improper art donation deduction promotions.
The IRS has cautioned taxpayers to be alert for promotions involving “exaggerated art donation deductions.” The basics of such a scheme are for unscrupulous promoters to persuade taxpayers, usually high-income earners, to purchase the art, wait to donate the art, and then take an incorrect deduction. As described by the agency, promoters encourage taxpayers to buy artwork at a “discounted” price while promising the art is worth significantly more than the purchase price. They encourage purchasers to donate the art after waiting for at least one year and to claim a tax deduction for an inflated fair market value that is substantially more than the purchase price. Promoters also may arrange for certain charities to take the donations. The IRS made clear that abusive tax schemes are on the agency’s radar. “The IRS has multiple active abusive art donation promoter investigations underway, and questionable art donations by taxpayers have been—and will continue to be—under audit when questions arise. More than 60 taxpayer audits have been completed with more in the works; those audits have produced more than $5 million in additional tax,” the agency stated.
Firms had a strong fiscal 2022, but number of accounting majors drops sharply.
Accounting firms had a good fiscal 2022 with median growth rate of 9.1% in net revenue over fiscal 2021, according to a 2023 survey by AICPA and the Chartered Institute of Management Accountants (CIMA). This eclipses the 4.2% growth rate from two years ago when some firms were struggling with the COVID-19 pandemic. The AICPA’s Private Companies Practice Section (PCPS) and CPA.com undertake a benchmarking survey every two years. The AICPA looked at several key performance indicators of public accounting firms. “Our data shows accounting practices taking steps to improve entry-level pay and firm culture, with some firms, for example, reducing chargeable billing hours for their staffs,” stated Lisa Simpson, AICPA & CIMA’s vice president of firm services. “We’re also seeing strong revenue growth in service areas beyond traditional tax and audit areas, such as client advisory services and business valuation. A sharper focus on business model transformation continues to make the profession more attractive as a career.”
Audit committee chairs worry about accounting staff shortage.
The Great Resignation was frequently mentioned as a topic of concern by public company audit committee chairs, according to a summary of conversations that the PCAOB inspections staff had with 211 audit committee chairs in 2022. Although the staff shortage affected all industries during the COVID-19 pandemic, it has been especially acute in the accounting profession; moreover, there has been a decline in the number of students majoring in accounting. “These audit committee chairs observed that turnover on the audit engagement teams and within the financial reporting roles at their respective public companies were areas of significant discussion, as they both impacted efficiencies in conducting the audit,” according to “Spotlight: 2022 Conversations With Audit Committee Chairs,” published on September 28, 2023. Each year, the staff from the PCAOB’s Division of Registration and Inspections invites audit committee chairs to have conversations in an information setting. The discussions focused on topics related to the 2021 audit of their company’s financial statements. Last year, 85% of the 211 audit committee chairs who talked to PCAOB staff had not spoken with the PCAOB before.