Accounting NEWS 2022

Here are some of the latest and hottest news in the accounting industry today.

The IRS’s Somber Predictions for the 2022 Tax Filing Season

Not long ago, the Internal Revenue Service appeared to be on the mend (IRS). With Democrats in control of Congress and the Presidency, it appeared as though budgeting for the IRS was on the rise after years of decrease. President Trump’s tax proposals included a promise to generate income by providing the IRS with an additional $80 billion to expand its enforcement efforts. The IRS was looking to expand its auditing staff.

However, the IRS has issued an uncharacteristically pessimistic forecast for the 2022 tax filing season.

The IRS has publicly predicted huge difficulties in processing tax returns, delivering refunds, and responding to taxpayer inquiries in a timely manner. It blamed a variety of issues, including the epidemic, years of budget cuts, and the obligation to devote time and resources to economic impact payments and advance child tax credit payments.

The IRS announced a relatively normal tax filing season, beginning on January 24, 2022, and ending on April 18, 2022; however, it stated that it will begin the 2022 tax filing season with a significantly larger backlog from the 2021 tax filing season than is customary, with over six million unprocessed individual 2021 tax returns and two million amended tax returns at the end of 2021.

According to the National Taxpayer Advocate, the IRS telephone service was the worst it had ever been in 2021, with an answer rate of less than 10%. The IRS has seen a 25% reduction in manpower and a 20% reduction in money as its workload has increased. The burden has expanded not only as the US population has grown, but also as the IRS has been charged with distributing COVID-related payments.

Over the last two filing seasons, tax professionals have encountered these issues. The IRS continued to send out computer-generated warnings lamenting the lack of taxpayer responses, while truckloads of IRS mail lay unprocessed at IRS facilities due to IRS employees being compelled to work from home. Even special phone lines for tax practitioners encountered the same issues as taxpayer phone lines.

The House has requested a 14% increase in the IRS budget for the current fiscal year, but the Senate has not yet approved it. Due to Republican resistance, the planned additional $80 billion for the IRS to ramp up enforcement and assist in closing the tax gap was omitted from the infrastructure measure. It is included in the House-passed version of the Build Back Better bill, but the bill’s future in the Senate remains uncertain.

While the IRS encourages taxpayers to file returns as soon as possible and electronically, approximately 10% of tax returns are still filed on paper (occasionally owing to restrictions on filing certain statements and forms online), necessitating an excessive length of time to process.

The IRS has attempted to remove some of the requirements for in-person contact during the pandemic by allowing for more e-signatures and lowering notary standards, but this comes with the danger of increased fraud and identity theft.

New Tools For Audit Quality

Auditing payroll can be a long, cumbersome task that most young auditors need to go through before they get promoted. As they say, it is a small price to pay. However, someone at the PwC decided to bypass tradition and instead designed a model to quickly assess a given payroll expense’s appropriateness. 

Instead of warning against deviating from conventional standards, PwC sent the workflow and visualization tool created by the associate to its Digital Lab for vetting. Afterward, they rolled it out for all its audit teams to use. 

Such is the new world of auditing, where auditors and technology are inextricably linked. Audits now are faster and more efficient. The last decade has witnessed a substantial rise in the audit profession’s adoption of various software and hardware solutions that have cut down or disposed of a vast amount of manual tasks, consolidated data collection, and other audit processes. 

These improvements have given auditors a unique level of flexibility. Whether willful or not, the natural result of this broadened adoption has been efficiency gains, with enterprises now able to conduct audits more promptly and with fewer people.

Businesses have been spending heavily on various advanced technologies in the past years to be able to work on basic tasks remotely. Utilizing smart glasses or drones to monitor inventory without physically going to a client’s warehouse is a prime example of using technology to streamline audits. 

With regards to improving audits, experts believe they do. According to Tim Landry, assurance technology leader at Marcum, automating mundane processes enables teams to maximize their brainpower and knowledge. They can use their expertise on higher-value work on the audit and even allow companies to perform more audits. 

Automation also reduces the need to work on manual, redundant tasks, which is where most errors occur. Fewer fat-finger errors, consistency of calculation, and tabulation are big pluses.

Efficiency technologies likewise empower audit teams and support their abilities, producing positive results for quality.