Our Thoughts on the IRS’s $80 Billion Plan

Our Thoughts on the IRS’s $80 Billion Plan

Since April 6, the Internal Revenue Service’s (IRS’s) $80 billion plan – funded under the Inflation Reduction Act (IRA) – has fueled a lot of analysis and speculation among media sources, industry groups, political parties, and American taxpayers in general.

While numerous resources sharing their opinions cater to certain demographics and affiliations, only time will tell whose interpretation is most accurate (or whether they are all accurate in some way). In the meantime, we at RBT CPAs have taken a detailed look at the plan, as well as thoughts from other sources. Following is our initial take on what is sure to be the topic of many office and dinner discussions in the days ahead.

To start with the basics, the plan defines five key objectives, which will be achieved through 42 key initiatives with over 190 programs and 200 milestones between 2023 and 2031:

  1. Dramatically improve services to help taxpayers meet their obligations and receive the tax incentives for which they are eligible
  2. Quickly resolve taxpayer issues
  3. Expand enforcement on taxpayers with complex tax filings and high dollar noncompliance
  4. Operate more effectively using innovative technology, data, and analytics
  5. Attract, retain, and empower a highly skilled, diverse workforce and culture

Based on these objectives alone, we think it is fair to say the plan is comprehensive and addresses the critical components required to transform the agency and bring it into the 21st century. Upon a closer look at the plan, some additional observations began to emerge:

There is going to be more to the story.

The first page indicates the plan covers 2023 to 2031. Yet, most of the milestones outlined in the plan appear to be accomplished by 2025 and 2026. While we agree it is strategic to reassess and refine plans along the way, we do believe this opens the door for a sequel to the plan in a few years, and there is no telling how the story will play out.

The main goal is hiding in plain sight.

Although there is a lot of emphasis on service, technology upgrades, and building a skilled workforce and the right culture, it is striking how often the plan references and returns to enforcement. When you look purely at the financial investment and timeline, it is clear the biggest priority is to address the “tax gap.” Over half the planned investment targets enforcement. Most of the milestones for enforcement show progress being driven by 2025. Even the mission statement published at the start of the plan seems to make clear what’s the top priority: “Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.”

Even with multiple references to the enforcement focus being on high income and high wealth individuals, partnerships and corporations, we can’t help but notice the four words that follow the discussion on how this will impact those making under $400,000 annually: “All efforts will comply with your directive not to use IRA resources to raise audit rates on small businesses and households making under $400,000 per year, relative to historic levels.” So, while there is no doubt enforcement will primarily target high income earners, the same percentage of lower earners audited today will continue to be audited in the future. The enhanced workforce and technology capabilities, we speculate, may result in audits garnering more income for the IRS than in the past.

We do not know how far back the new-and-improved IRS will reach in terms of enforcement.

As noted on the IRS webpage on audits, “Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually do not go back more than the last six years. The IRS tries to audit tax returns as soon as possible after they are filed. Accordingly, most audits will be of returns filed within the last two years.” We only mention this because it goes hand in hand with our prior point: with more enforcement, not only will there be more audits, but each one may be more fruitful for the IRS than what they are now.

There are three key “ifs” that may impact the plan’s execution.

First, each program in the plan highlights numerous co-dependencies or contingencies – meaning all the stars will have to align for this to be executed as planned.

Second, there are a number of references to the importance of annual IRS funding and increases for inflation. Should this not occur, funding for the plan – and its impact – may erode. (See Commissioner Werfel’s cover memorandum stating: “To cover steady state operations, annual discretionary appropriations must be fully maintained at the FY 2022 level, including growth for inflation and pay raises. Any reduction in annual discretionary funds – including not providing for inflationary increases to maintain current levels – will require IRA funding to be shifted to general operations.”)

And third, the plan relies on a significant uptick in all types of staffing at the same time the talent pool is shrinking and competition to attract and retain highly skilled talent – including accountants and technology specialists – is fierce.

Everyone will be impacted by the plan.

Page 132 of the plan defines stakeholders. It says: “Within this Plan, taxpayers are referred to broadly and include all people and groups whom we serve, including: • Individuals and families • Businesses large and small • Charities and other tax-exempt organizations • International taxpayers • Federal, state, and local governments • Tribal nations • Tax professionals and others who assist and serve taxpayers.” Translation: While there will be a lot of focus on high earning, wealthy individuals and institutions, everyone is going to feel the impact somehow. Exactly how remains to be seen.

One other thought:

While some are still calling for the IRS to reallocate the budget so there’s equal emphasis on service, technology and enforcement, the fact is the IRS does not have the discretion to change how funds are allocated. Still, with groups like the American Institute of Certified Public Accountants calling for a more equitable allocation of funds, you never know…


This story will be continued in the days, months and years ahead. We will be sure to keep you updated and share our thoughts as things unfold. If in the meantime, you have any questions or need accounting, tax, auditing, or advisory services, RBT CPAs is here for you. Just give us a call. NOTE: This alert shares RBT CPAs’ initial interpretations. It should not be construed as legal or financial advice or direction.

More Money Is on the Way to Address New York’s Homeless and Housing Crisis

More Money Is on the Way to Address New York’s Homeless and Housing Crisis

We have to admit that when HUD announced $315 million was awarded to help communities provide housing and support to the homeless and people in unsheltered settings at the start of February, we were a bit confused. Of the total, just over $2 million was awarded to New York. It turns out, we just had to be a little bit patient.

Before the month was out (or February 26 to be exact), HUD announced $5.6 billion in funding will “go to 1,200 communities through more than 2,400 grants to states” and other organizations across the country. “These annual formula grants provide critical funding for a wide range of activities including affordable housing, community development, and homeless assistance.”

Funds will be made available through Community Development Block Grants (CDBG), the HOME Investment Partnership Program (HOME), HOPWA, Emergency Solutions Grants (ESG), and the Recovery Housing Program (RHP). New York will receive $541,252,698 as follows:

  • CDBG: $318,043,716
  • HOME: $140,182,508
  • ESG: $27,743,018
  • HOPWA: $55,283,456

(To see an Excel spreadsheet listing funding by community, click here.)

The good news continued into March. On March 21, HUD announced over $54 million was awarded to 182 fair housing organizations across the country to help end discrimination in housing and to fund second and third year Private Enforcement Initiative grantees under its Fair Housing Initiatives Program (FHIP). Seven New York  organizations received just over $3.2 million.

On March 28, HUD announced $2.8 billion in Continuum of Care (CoC) awards for thousands of U.S. local homeless service and housing programs to help homeless individuals and families move into permanent housing. In New York, 563 projects received $268,337,527 – making it second only to California in terms of total award value. (More details are available here.)

On March 29, it was announced that New York will receive American Rescue Plan funding to the tune of $100 million to connect 100,000 homes and families to affordable, high-speed internet. As reported by Leadingageny.com, “Building owners who are interested in receiving no-cost new or upgraded fiber-to-the-unit broadband equipment installations should complete the Broadband in Your Property survey. According to the State’s ConnectALL website, taking the survey is the first step for property owners to receive infrastructure upgrades.”

On April 4, the Choice Neighborhood Planning Grants application became available on grants.gov. Grants support the development of comprehensive neighborhood revitalization plans for public or assisted housing to transform neighborhoods and drive positive outcomes for families. Eligible applicants include Public Housing Agencies (PHAs), local governments, tribal entities, and nonprofits. An estimated $10 million will be awarded to about 20 recipients. The deadline to apply is June 6.

Through May 5 applications are being accepted via Enterprise Community Partners, working with NYS Homes and Community Renewal (HCR), which have up to $10 million in funding available for the new Making Moves Program. Local governments, nonprofits, and Public Housing Authorities (“PHAs”) are eligible to apply for funds to provide mobility counseling services and assist Section 8 families in moving to well-resourced areas with high performing schools and more economic opportunity. To apply, visit New York State Making Moves Program RFP | Enterprise Community Partners.

As additional opportunities become available, we’ll let you know. In the meantime, to be in the best position to understand Federal and State strategies and programs, and align your plans accordingly, take some time getting to know:

While you’re developing your own plans and possibly seeking funds to drive progress, remember that RBT CPAs is here to help with all of your accounting, tax, audit, and advisory services needs. We’ve been serving businesses, non-profits, municipalities and more in the Hudson Valley and beyond for over 50 years. Give us a call to learn what we can do for you, so you’re freed up to do what really makes an impact on your clients, neighborhoods, and communities.

Are You Ready for GASB 96, 94, 100 and 101?

Are You Ready for GASB 96, 94, 100 and 101?

It’s a big year for new and updated GASB standards, which translates into new and updated reporting requirements for government entities, including public school districts and institutions of higher education.

GASB96 took effect for fiscal years beginning after June 15, 2022, so it will start to be reflected in financial statements with a June 30, 2023 year-end and all reporting periods thereafter. Similar to GASB 87 governing leases, GASB96 sets standards for how government entities – including school districts and higher education institutions – account for and disclose costs and investments for subscription-based information technology arrangements (SBITAs) that are longer than 12 months.

Similar to what is required for leases under GASB87, all SBITAs that may be covered under GASB96 must be identified; required information must be collected and documented, and various costs must be accounted for during the implementation and subscription periods. (For more details, see RBT CPAs’ article, GASB 96 Kicks Off in 2023: What to Know & Do.)

GASB 94 took effect for fiscal years beginning after June 15, 2022, so it will start to be reflected in financial statements with a June 30, 2023 year-end and all reporting periods thereafter. It applies to Public-Private and Public-Public Partnerships (PPP) and Availability Payment Arrangements. GASB94 defines PPP as an arrangement where a government (the transferor) contracts with an operator for public services by giving the right to operate or use a non-financial asset (i.e., infrastructure) for a period in an exchange or exchange-like transaction. The transferor can approve and change which services the operator provides, to whom and related prices. The transferor is also entitled to residual interest in the service utility of the PPP asset at the end of the arrangement.

GASB 100 amends GASB62. It is effective for accounting changes and error corrections made in fiscal years beginning after June 15, 2023. Accounting changes are defined as changes in accounting principles, estimates, and/or changes or within the financial reporting entity. Implementation of corrections/changes must be identified as prospective or retrospective and prior period financial statements must be restated, displaying the aggregate amount of adjustments to and restatements of beginning net position, fund balance, or fund net position. Financial reporting entity changes should be reported by adjusting current period beginning balances. Estimated changes should be recognized in the current period and reported prospectively. Financial statements should note the organization adopted GASB 100 provisions as well as the date of adoption; note disclosures detailing changes, errors, impacts on starting balances; and highlight why new methods are preferable.

GASB 101 (Compensated Absences) replaces GASB16 (Accounting for Compensated Absences) to reflect paid time off practices (including vacation and sick time) in a workplace. Enhancements to compensated absence recognition, measurement, and reporting requirements take effect fiscal years starting December 15, 2023.

That’s a lot of GASB to take in. For more details, see RBT CPAs’ article, What to Know About GASB Changes Taking Effect in 2023. Even better, if you need clarifications or answers to questions, please don’t hesitate to reach out to your RBT CPAs contact.

Succession Plan: What’s Yours?

Succession Plan: What’s Yours?

As counter-intuitive as it may seem, at the same time that you’re developing and executing plans to grow your business, you should also be working on your exit plan, which can impact business decisions today and be a make-or-break factor in achieving your long-term goals.

According to Investopedia.com, “Data from the Bureau of Labor Statistics (BLS) shows that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.”

At the same time that you’re striving to pass these milestones, there are more hurdles ahead. According to Score.org, as family businesses are handed down, 30% survive the transition from first to second generation; 12% survive from second generation to third; and just 13% of family businesses are still in the family after 60 years. That may not be bad news – if transitioning ownership outside the family was your plan all along. The important word here is “plan.”

Succession planning is a critical business owner responsibility that helps ensure your legacy continues the way you want. Even if you are not sure what that legacy is just yet, succession planning can help you figure that out, too. Then, as situations change and evolve, you can adjust succession plans accordingly.

There are two types of succession plans: one focuses on what will happen to your business and the other focuses on the talent you need to lead your business. They are closely inter-related – what you do with one has a big impact on the other, and vice-versa.

Business succession plan options are pretty straight forward: close it; sell it to outsiders or to your employees; or transition it to the next generation of your family. That doesn’t mean it’s easy to decide – each has its pros and cons, and each will enable a different legacy over time.

Talent succession plans can be a bit more complicated. You need one as a contingency should a leader (including you) or hard-to-find talent leaves unexpectedly (or even dies). You also need one for the long-term to ensure the next generation of leaders and talent are ready, willing, and able to take the reins once you are ready to pass them on. (When done correctly, long-term succession plans have the added benefit of driving employee engagement by showing employees someone at work cares about them; someone is encouraging their long-term development; and someone is providing them with opportunities to learn and grow.)

Succession planning may require anywhere from five to seven years lead time to develop and execute, as you may need to recruit, hire and acclimate new talent or ensure existing talent has the runway to learn everything needed before take-off. Once you have plans, make sure they stay relevant to changing business decisions and environment by reviewing them and making changes at least once a quarter. Perhaps most important is to get started on your plans now. Not having one has brought big name brands and family relationships to the brink of extinction, while strong, well-thought-out plans have led to success for generations.

One more thought: at the same time that you commit to develop succession plans, also consider getting your estate planning in order. As reported by Craft Brewing Business, “The federal estate tax, which applies to large estates at a rate of 40%, can have a crippling effect on businesses given to heirs without any kind of protections put in place. (Beals, Michael. “How Retiring Brewery Owners Can Protect Their Legacy.” December 2022. CraftBrewingBusiness.com)

RBT CPAs has resources that can help you on all fronts. Our advisory services professionals can help you think through succession plan options for your business. Our Vision Human Resource Services affiliate can help you with talent succession planning, a succession planning process, and recruiting. Plus, our Trust, Estate & Gift experts can help make sure the legacy you’ve worked so hard to build endures according to your wishes.

As always, our tax, accounting, and audit professionals are here to help free you up to focus on other aspects of your business – like succession plans.  To learn more, give us a call.

Timely Remittance: Being Late Will Cost You

Timely Remittance: Being Late Will Cost You

No doubt, offering a defined contribution retirement plan – like a 401(k) – can have a positive impact on employee attraction, engagement, and retention. Plus, helping employees build a nest egg for the future is simply the right thing to do. Just make sure that when you take on the responsibility of being a plan manager, you’re also aware of the many regulations governing plan administration, such as timely remittance. Failing to comply violates Department of Labor and IRS regulations, and can result in significant penalties, plan disqualification, and more.

So, what is timely remittance? Once you deduct funds from your employees’ wages for contribution to a retirement plan or repayment of a plan loan (if applicable), timely remittance relates to how long it takes you to segregate those monies from general funds and remit them to the plan. Failing to remit contributions in a timely manner can be seen as taking a loan from the plan, which is a prohibited transaction.

To be timely, the process of segregating and remitting funds should occur:

  • As soon as administratively possible for employers with more than 100 eligible plan participants.
  • Within seven days of taking the deduction for employers with 100 or fewer eligible plan participants and no ERISA audit requirement.
  • No later than the 15th business day of the month following the end of the month that the deductions occurred (as per DOL regulation 2510.3-102).

It sounds simple, but there’s more to it. As noted by the American Institute of Certified Public Accountants (AICPA) in its March 2021 Primer Series, the 15 business days “is not a safe harbor for depositing deferrals; rather, these rules set the maximum deadline if that amount of time is the earliest that is reasonably required to be able to separate the plan assets from the employer’s corporate assets.”

If other payroll items, like tax withholdings can be segregated inside of the 15-day period, employee contributions and loan repayments must be segregated on that earlier date as well. What’s more, if the company can segregate employee contributions from general assets within three business days, for example, failing to do so can be considered late remittance. Even if the remittance process is shortened from four days to three days during the year (for example, you change payroll processors and the new one is quicker), you could be responsible for untimely remittance for the months where it took four days.

What’s the big deal? Holding onto the money for too long can result in lost earnings for the plan participants.

To fulfill fiduciary responsibilities, plan management must monitor timely remittances, regardless of whether payroll is processed in-house or by a third party. This can be accomplished with a policy that requires regular reconciliation of plan contributions according to the trust statement to payroll records, as part of ongoing internal control procedures.

If at any time there should be a delay in segregating and remitting the funds, it’s wise to document what happened in detail and hold onto any supporting records. It’s also a good idea to consult an ERISA lawyer to evaluate whether a deposit was late and is considered a prohibited transaction.

As for next steps, refer to the IRS’ 401(k) Plan Fix-It Guide and the DOL’s FAQs about Reporting Delinquent Participant Contributions on Form 5500.

In general, you’ll need to report the prohibited transaction by completing and submitting Form 5500. There are penalties for each day that a remittance was delayed. The plan administrator may also be subject to civil monetary penalties and tax liabilities for failing to report delinquencies on Form 5500 and if an auditor fails to note a missing delinquent contribution schedule.

If you have any questions on this or other accounting, tax, payroll, or audit issues, please don’t hesitate to give RBT CPAs a call. We’re a leader in the Hudson Valley and we care about getting the details right so you can focus on other things like your business. RBT CPAs: We succeed when we help you succeed. Give us a call today.


Please note: The information is this article should not be construed as legal advice. When you need such advice, it’s always best to contact your legal counsel.