June Newsletter

Potential Dissolution of the PCAOB:

Audit Oversight at a Crossroads: The Future of the PCAOB Under Congressional Scrutiny

The Public Company Accounting Oversight Board (PCAOB), established in 2002 following the Enron and WorldCom scandals, is facing potential dissolution under a Republican-led initiative in Congress. The proposal, part of a broader tax bill, seeks to transfer the PCAOB’s responsibilities to the Securities and Exchange Commission (SEC), aiming for increased efficiency and reduced redundancy. Critics argue that this move could undermine audit oversight, as the SEC may lack the PCAOB’s specialized inspection infrastructure and expertise. Concerns also center on the potential voiding of international audit agreements, notably with countries like China and Germany, which could be jeopardized if the PCAOB is dismantled. Defenders of the PCAOB, including current Chair Erica Williams and several former board members, emphasize the board's role in enhancing audit quality and preventing large-scale accounting failures over the past two decades. They caution that eliminating the PCAOB could erode investor confidence and compromise the integrity of financial reporting. While some industry representatives believe the SEC can adapt to assume these responsibilities, others worry about the SEC’s capacity to replicate the PCAOB’s functions effectively. The debate continues as stakeholders weigh the implications of this significant regulatory shift.

Legislative Update: No Tax on Tips Act of 2023:

Relief for the Service Industry: Bill Proposes to Make Tipped Wages Tax-Free

The “No Tax on Tips Act of 2023” (S.129) proposes an amendment to the Internal Revenue Code that would make tip income exempt from federal income tax. Under this bill, income that an employee receives in the form of tips, provided they are properly reported, would not be included in gross income for tax purposes. This aims to provide significant tax relief to workers in industries where tipping is customary, such as

hospitality and personal services. In addition to excluding tip income from taxation, the bill prohibits the Treasury from requiring employers to collect income tax on tips through withholding. The proposed change is intended to simplify reporting requirements and reduce the tax burden on lower-wage workers who rely on tips as a core part of their earnings. The bill reflects a broader effort to recognize the unique nature of tipped income and provide targeted financial relief to service industry employees.

IRS Payment Plans for Taxpayers Available:

Can’t Pay Your Taxes? The IRS Has a Plan for That

The IRS understands that not all taxpayers can pay their full tax bill right away and offers several options to help individuals meet their obligations over time. Short-term payment plans are available for those who can pay their balance within 180 days, and owe less than $100,000. For longer-term needs, installment agreements are available for those who owe $50,000, or less, in combined tax, penalties, and interest. These

plans can be set up online. Low-income taxpayers may qualify for reduced fees or fee waivers. Penalty relief may also be available for those who have filed and paid on time in the past but are currently facing financial challenges. In addition to payment plans, the IRS offers more tailored solutions for individuals in more difficult financial situations. An Offer in Compromise may allow some taxpayers to settle their tax debt for less than the full amount owed, based on their ability to pay. Those unable to pay anything may be temporarily placed in “Currently Not Collectible”. status. To manage tax obligations more easily, the IRS encourages taxpayers to use digital tools such as IRS Direct Pay and Online Account access, which provide secure, user-friendly ways to make payments and monitor account activity.

IRS Reduces the User Fee for Estate Tax Closing:

IRS Lowers Estate Tax Closing Letter Fee Following Cost Review

In a recent update, the IRS announced a reduction in the user fee for estate tax closing letters, lowering the cost from $67 to $56. This change follows the agency’s 2023 biennial review, which determined that the actual cost of issuing these letters had decreased. Estate tax closing letters, formally known as Letter 627, confirm that an estate tax return, usually Form 706, has been accepted by the IRS, either as filed or with agreed-upon adjustments. While the letter provides key details such as the net estate tax and any applicable state or GST taxes, it does not reflect the amount actually paid.

This fee reduction marks a modest but welcome change for estate representatives navigating the complex world of post-death tax administration. Although the letter signals that the IRS’s examination of an estate tax return is complete, it’s important to note that it is not a formal closing agreement. Historically issued free of charge, the IRS began charging a fee in 2019, with regular reviews to ensure it aligns with actual service costs. The new $56 fee will apply to requests received after May 20th, the date that the updated regulations were published in the Federal Register.