Good morning, counterati. It’s Monday again, here is some news for you to start your week.
‘Tis the season to get tax advice from TikTok. p.s. It’s they’re, buddy.
Accountants are too stupid to know about this because after all the schooling they just STOP learning! pic.twitter.com/BuMGHJuKx9
— Jessica Smith, EA 💪🏼, not a CPA (@Taxsavvyjessica) February 9, 2025
Something to chew on as both sides argue about fraud and waste:
My dad was an auditor with The Indiana Department of Revenue. He worked in the Muncie office for a couple of years and then out of the Fort Wayne office for 20 years.
He mostly audited businesses mostly.
He told me many times that most people want to pay their taxes and most…
And on the topic of fraud and waste, I suppose, Tesla’s VP of Finance rejects the assertion that Tesla is committing fraud just because tax rules are easily bested by giant corporations that can afford an army of professionals to best them.
Former Secretary of Labor and Berkeley professor Robert Reich tweeted on February 7:
Tesla earned $2.3 billion in the United States in 2024.
You’d think it paid a lot in taxes, right?
Well it paid precisely $0 in federal income taxes last year.
You want waste and fraud? Look at what some big corporations and the rich are getting away with.
Professor, Respectfully, Tesla’s income taxes are not an example of fraud. Tesla complies with all tax regulations in all of the regions of the world in which we operate. Details about 2024 Income Taxes were disclosed to last month in our 10-K. Notably – we outline our net operating loss carry-forwards, which result from the fact that Tesla has been unprofitable for the significant majority of its 20+ year history. This has been a very, very difficult business to build. Looking at any one recent year in isolation, therefore, will not provide the full picture.
ZDNet brings you 5 ways AI can help with your taxes – and 10 major mistakes to avoid:
In a recent test of ChatGPT’s Deep Research feature, the AI was asked to identify 20 jobs that OpenAI’s new o3 model was likely to replace. As ZDNET’s Sabrina Ortiz reported, “Right in time with tax return season, leading the table was the role of ‘tax preparer’ with a probability of 98% replacement, which ChatGPT deemed as ‘near-certain automation.'”
There is no doubt that retail tax preparation services are using some level of AI to reduce their workload, but while tax preparers may well be replaced by a machine, I’m not convinced that will lead to accurate or reliable tax returns — certainly not yet.
According to an August 2024 report by Boston-based investment banking firm Capstone Partners, there were 70 merger-and-acquisition deals in the accounting services industry through the first half of last year. Activity in the sector peaked post-pandemic in 2023 with 160 deals.
Those numbers will be fun to revisit in a couple years when mid-tier accounting starts to look like grocery store aisles:
What do you do to increase accountant retention at your office?
I believe deep, meaningful connections drive better business outcomes. To strengthen these connections, we have intentionally created team pods that foster relationships from the staff level to partners. Our Los Angeles leadership team recognizes the importance of engagement and has proactively connected with all team members – not just their designated coaches – regardless of project assignments.
Additionally, we established an advisory council composed of professionals from various service lines and experience levels. This group meets to discuss challenges employees face and provides insights and actionable solutions.
One key initiative they introduced was speed networking sessions to enhance cross-service-line connections through specialized discussion topics. They also proposed a reward system for employees who facilitate introductions between colleagues and clients, which not only drives cross-sales but also demonstrates our deep understanding of clients’ businesses and how we can better support their needs.
Elsewhere in LABJ, this guy explains why there’s a dearth of accounting graduates:
Younger people are not drawn to the long hours, lower wages and rigid deadlines of the accounting profession. The repetitive and often tedious tasks involved in preparing a tax return are not enticing for new talent, and we need to make efforts to develop, train and retain the next generation of accountants.
OK but how if none of the things you mention are going to change?
KPMG Canada had multiple deficiencies in five out of 10 audits inspected by the Public Company Accounting Oversight Board in the United States. In a highly detailed inspection report, consisting of 21 pages, the US audit watchdog also flagged 10 instances across three audit engagements in which the firm’s independence may have been impaired.
And independence took a few hits as well:
KPMG Canada self-identified 32 instances across 14 issuers in which the firm or its personnel appeared to have impaired the firm’s independence. In ten audits reviewed and in two other audits, the PCAOB further identified 10 instances across three issuers of potential non-compliance:
“Of these instances, nine related to investments in audit clients and one related to an other financial relationship with an audit client. Four of these financial relationships were instances where a partner in the firm’s chain of command had a financial relationship with an audit client, and three of these financial relationships were instances where a partner in the same office as the engagement partner for an issuer had a financial relationship with that issuer. Three of these instances related to a member of an engagement team.”
[Indiana Society of CPAs CEO Courtney] Kincaid says the program will address the talent pipeline and workforce development issues for the region’s CPA profession and expose Indianapolis-area students from various backgrounds to the profession.
The Indiana CPA Society has worked to address the issue for several years, and Kincaid highlighted their Accounting Careers Awareness Program (ACAP). She says the program targets high school and college students with an in-depth week-long focus on the profession.
Buffett’s Son Defends Occupy Wall Street [Bloomberg]
“I think it takes that to make things happen sometimes,” Howard Buffett, 56, said of the demonstrations in an interview yesterday in Des Moines, Iowa. Over the past 15 years, “we saw large corporations really screw people.”
Oversight board proposes plan to make accountants more accountable [WaPo]
Auditors are supposed shareholders, but from Enron and WorldCom to the Wall Street meltdown of 2008, they have often been criticized for not barking. They are hired and paid by the companies they audit, and policymakers have struggled for decades to strengthen incentives for them to stand up to corporate management when appropriate.
With Just Three 9s, Cain Refigured Math for Taxes [NYT]
Mr. Cain, a former pizza chain chief executive, wanted a proposal to jolt the economy and give his candidacy some definition. “I said, ‘The first fundamental, guys, is we have to throw out the tax code,’ ” Mr. Cain said Wednesday in an interview. “How do we come up with a bolder plan?” he pressed two of his close advisers. From that exchange emerged the plan that Mr. Cain calls 9-9-9: a flat 9 percent individual income tax rate, a 9 percent corporate tax rate and a 9 percent national sales tax. He has uttered the triple digits repeatedly, metronome-like, in speeches and debates, until they have acquired the catchy power of a brand.
JPMorgan Earnings Fall Less Than Expected on Accounting Change [Bloomberg]
JPMorgan would have reported a loss for its investment bank without the debt-valuation adjustment, which added 29 cents a share, under U.S. accounting rules allowed when the market value of a company’s liabilities declines. Chief Executive Officer Jamie Dimon, 55, said in the statement that the gain “does not relate to the underlying operations of the company,” which suffered from a 13 percent decline in investment-banking revenue from the prior quarter.
Buffett Builds His Tax-the-Rich Case [WSJ]
The biggest mystery is the nearly $23 million gap between Mr. Buffett’s adjusted gross income and his taxable income. Without having his tax return it is impossible to know the reason for the gap for sure, tax experts say. One possibility for the gap is that he made large charitable contributions, itemized deductions that are subtracted from adjusted gross income. Another possible element is interest expense. Mr. Buffett is known for not selling investments but rather borrowing money against them. To the extent that he has investment income, any interest paid on such loans would be deductible.
‘Buffett Rule’ May Be Broken by 25% of Millionaire Taxpayers, Study Finds [Bloomberg]
Preferential treatment of investment income and the reduced impact of payroll taxes on high earners lets about 94,500 millionaires pay taxes at a lower rate than 10.4 million “moderate-income taxpayers,” representing about 10 percent of those making less than $100,000 a year, according to the report by the non-partisan Congressional Research Service dated Oct. 7. The findings put the U.S. tax system in conflict with the so-called Buffett Rule, which says households making more than $1 million annually shouldn’t pay a smaller share of their income in taxes than middle class families, says the report, which analyzed 2006 Internal Revenue Service data.
IRS Auditing How Google Shifted Profits Offshore to Avoid Taxes [BBW]
The agency is bringing more than typical scrutiny to how the company valued software rights and other intellectual property it licensed abroad, said the person, who requested anonymity because the audit isn’t public. The IRS has requested information from Google about its offshore deals after three acquisitions, including its $1.65 billion purchase of YouTube, the person said. The transfer overseas of these kinds of rights rights has enabled Google to attribute earnings to foreign units that pay lower taxes, Bloomberg News reported a year ago.
No. 1 Financial-Strength Ranking Spells Doom [Bloomberg]
Jonathan Weil: “Less than three months ago the European Banking Authority said Dexia SA (DEXB) had passed its so- called stress test with ease. The French-Belgian lender’s July 15 news release carried this headline: “2011 EU-wide Stress Test Results: No Need for Dexia to Raise Additional Capital.” Then last weekend, 86 days after getting its clean bill of health, Dexia took a government bailout to avoid collapsing. Nobody was surprised this happened. Nor should anyone have been.”
