Nicholas Sinigaglia

At the ALI CLE Accountants' Liability 2024 Conference, the first panel after the keynote was comprised of multiple PCAOB personnel, including Christine Gunia, Director of the Divisions and Inspections, Maureen Austin, and Timothy Sikes. Unsurprisingly, given the various PCAOB activity in the last year, they focused on the PCAOB's inspection program over the past few years and they highlighted a concerning trend in declining quality of audits. In 2023, they inspected 223 registered audit firms and reviewed nearly 900 audit engagements across 37 jurisdictions, and what they found is that the audit quality continues to decline. Timothy Sikes commented that it seemed the decline in quality could, at least in part, be attributed to pandemic-era hires/juniors who didn't receive in-person training and exposure to firm culture, which as otherwise discussed is a critical component to success for an audit firm. This may be one of the early signals as to what the future holds for accounting firms' post-COVID WFH/Hybrid/In-Office policies considering that the PCAOB seems to be aware of problems driven by a fully remote environment for juniors. Sikes further noted that 2020 hires are now in more senior positions and are monitoring junior staff, and so the declining trend is continuing. Another important point made was that firms need to implement root cause analysis in addressing deficiencies - something that is not required today but is anticipated to be required shortly. In addition to declining audit quality, there seems to be a trend of recurring problems despite remedial measures. This may seem obvious, but the panel made a point to state it: where a prior year's remedial measure did not solve the problem, the same remedial measure for a second year is likely not sufficient to fix the problem. Root cause analysis should be able to assist firms in remediating problems on a more permanent basis. The panel touched on a lot of interesting topics but the above seemed particularly heightened in importance to me.

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Great blog post from my law partner Ari Yampolsky re: SEC's recent $14M penalty on audit firm BF BORGERS, CPA, PC for allegedly running a "sham auditing mill," falsifying audit documents, and copying prior workpapers without conducting proper reviews. Read on for more details & analysis.

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Auditors have a critical job, verifying the financial reporting that underpins our capital markets. So who audits the auditors? The PCAOB does, and we tell #investors and others what we observe. I urge anyone who cares about U.S. capital markets to check out PCAOB inspection reports, read the inspection-related insights generated by our hardworking staff, and sign up to receive updates on our inspection efforts. #PCAOBprotects

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Crooked accountants are always prime targets for #taxfraud prosecutions. The accountants who just plead guilty to tax crimes appear to have had a business model of helping clients evade income and payroll taxes by generating cash from checks to dummy corporations, with a fee to the accountants deducted, then keeping the unreported cash or paying employees off-the-books. They left a body of clients that could, of course, point the finger at them when audited or prosecuted. Here, the accountants were undone by a client prosecuted for involvement in the scheme. #irsfraud #taxwhistleblower #irswhistleblower #incometaxfraud #payrolltaxfraud

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The IRS has announced that in July, it will extend syndicated conservation easement settlement terms (similar to the intitiatives earlier offered to taxpayers with docketed Tax Court cases) to taxpayers with the same CE issues in NON-DOCKETED cases. This is an important development in the efforts the Service is making to clear the case log of these issues. It may be a way for taxpayers who invested in these deals to resolved their issues with the IRS without having to go to full litigation in the Tax Court, to put these issues behind them.

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IRS WARNING: Charitabe Remainder Annuity Trust As part of the Dirty Dozen campaign, the Internal Revenue Service warned wealthy individuals about tax traps designed for them by dishonest promoters and shady tax practitioners. "Charitable remainder trusts (CRAT) are irrevocable trusts that let persons donate assets to charity and draw annual income for life or for a specific time period. The IRS examines charitable remainder trusts to ensure they correctly report trust income and distributions to beneficiaries, file required tax documents and follow applicable laws and rules. A CRAT pays a specific dollar amount each year." "Unfortunately, these trusts are sometimes misused to eliminate capital gain." "Here’s how it works. The appreciated property is transferred to a CRAT. Taxpayers wrongly claim the transfer of the appreciated assets to the CRAT, which gives those assets a step-up in basis to fair market value as if they had been sold to the trust. The CRAT then sells the property but does not recognize gain due to the claimed step-up in basis. The CRAT then uses the proceeds to purchase a single premium immediate annuity (SPIA). The beneficiary then reports, as income, only a small portion of the annuity received from the SPIA. Through a misapplication of the law relating to CRATs, the beneficiary treats the remaining payment as an excluded portion representing a return of investment for which no tax is due. Taxpayers who seek to achieve this inaccurate result do so by misapplying the rules."

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Considering an entity structure that has tax advantages and protection. Consider options beyond an LLC. An S-corp has many benefits you need to know #S-corp #LLC #alternative #business #structure #taxbenefits #taxstrategy.

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The smoke and mirrors of the New York State budget contends that it is a balanced budget postulating that there will be a 3% increase in tax revenue during the state’s fiscal year ending March 31, 2025. What’s interesting is that the 2024 actual tax collections show a decline from 2023 of 6.3%. So if NYS shows a similar decline in revenue, there will be a $9.0 Billion deficit in tax revenue. Add to it that even on the 3% increase in tax revenue, in the years to come the state has a $16.0 Billion structural budget gap. The only way that the budget can be balanced will be through an increase in taxes, and that will compound the loss of tax revenue as more high earners move out of NYS. #incometaxes

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LeadsMarket.com is caught up in a new TCPA class action and it really highlights the TCPA risk to lead platforms and marketplaces. Marketing Labs® - SEO & Digital Marketing Experts and something called Nesmetaju, LLC are also named. The Wolf's successful fight against QuoteWizard has really opened the door to these sorts of class actions of late. No one in the leadgen chain is immune to risk these days... #tcpa #leadgen #deservetowin

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New Jersey remote workers appeal New York income tax rules  feat. Jason Rosenberg  Attention New Jersey residents! New Jersey is now offering an incentive for remote working residents who successfully win their own legal challenge against New York. Expert Jason Rosenberg tells you more in this News12 article.  #wiss #newjersey #newyork #remote #tax #nytaxes

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My clients have asked many questions about the large operating company exemption in the #CTA. Things like: What are a service business's "gross receipts or sales"? And, what if I am reported on a combined, not consolidated, tax return? And, can a partnership file a consolidated return? And, what if I know I will make $5 million in my first year in existence? No one has asked whether "for" the prior year includes "in" the prior year. And #FinCEN's answer to its latest FAQ still has me wondering if the regulation writers have ever call the IRS, read tax form instructions, or filed a tax return... https://lnkd.in/eXHdH6q4

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