IRS Whistleblower Office, China Deflation, and AI in Finance
Tax Policy/News:
July 10: IRS Whistleblower Awards Tick Up
The Internal Revenue Service awarded whistleblowers more money last year than in the previous fiscal year, though the amount still fell short of some previous years' awards.
The Fiscal Year 22 report from the IRS Whistleblower Office said the agency paid whistleblowers 132 awards totaling $37.8 million from proceeds collected of $172.7 million.
The total dollar amount of awards paid increased from FY21, when $36.1 million in awards were paid.
The number of awards paid in FY 2022 dropped from 179 in FY 2021 to 132 in FY 2022.
Whistleblower Program operations continued to be impacted by the COVID pandemic, the report noted.
Awards paid as a percentage of proceeds collected increased from 14.7% in FY 2021 to 21.9% in FY 2022.
The report noted that rules on access to and disclosure of taxpayer information could protect taxpayers more; that clarification is needed on submitting information and claiming awards; and that information-sharing within the government could enhance the ability to use information and pay awards, among other things.
July 7: IRS Tightening Filters To Screen Refundable Tax Credits For Fraud
The Internal Revenue Service has updated its systems to detect invalid claims for the Child and Dependent Care Credit and the Earned Income Tax Credit to guard against errors and scams next tax season.
The changes made the CDCC one of the largest refundable tax credits administered by the IRS for tax year 2021.
"Refundable credits present a unique risk to tax administration because taxpayers not only can have their tax reduced to zero; they can also receive a 'refund' of excess credit," said the report.
As of May 5, 2022, there were a total of 7,486 electronically filed tax returns identified by the IRS's pre-refund filters that didn't meet the requirements for the self-only EITC. If the IRS had the appropriate legal authority, the agency could reject these returns without creating any legal risk and prevent more than $2.9 million in improper payments, the report noted, but it has to wait for Congress to give it that authority.
TIGTA identified 61 tax returns that received a total of $203,535 more in refundable CDCC claims than allowed by the law.
TIGTA also recommended that the IRS work with the Treasury Department's Office of Tax Policy to advance legislation to treat a tax return as filed only when it is accepted, allowing the IRS to remove the legal risk of rejecting tax returns.
The vast majority of the claims for the expanded tax credits were handled the right way, the IRS pointed out.
July 5: IRS Issues 'Last Call' For Taxpayers To Claim $1.5B In 2019 Refunds
The IRS has issued a "Last call" for U.S. taxpayers to file for roughly $1.5 billion in unclaimed refunds from the 2019 tax year.
The agency estimates that around 1.5 million people are eligible to claim a combined nearly $1.5 billion in outstanding refunds, with the average median refund estimated at $893. The deadline to submit a tax return for 2019 and claim the refunds is July 17.
"Time is running out for people owed a tax refund in 2019," IRS Commissioner Danny Werfel said in a news release, which stressed that the deadline is "Rapidly approaching."
The IRS chief urged anyone "Who may have overlooked filing" during the early stages of the COVID-19 pandemic "To act quickly before they lose their final chance to claim a potentially substantial refund."
Taxpayers had "More time than usual" to claim refunds for the 2019 tax year because of the pandemic, the agency noted, with the deadline extended a few months past the normal three-year filing window to mid-July of this year.
"The 2019 tax returns came due during the pandemic, and many people may have overlooked or forgotten about these refunds. We want taxpayers to claim these refunds, but time is running out," Werfel said in an earlier update.
Among the states with the highest number of individuals estimated to be due refunds are California, Texas, Florida and New York.
Economic News/Policy:
July 11: Deflation In China Is A Huge Red Flag For The Global Economy
From issues with sputtering growth to declines in industrial production, China’s economy is in a state of growing turmoil. Now, the country can add deflation to its growing list of economic worries.
Data released Monday showed that the cost of the average Chinese shopping basket stayed the same in June, while the Producer Price Index sharply fell.
Deflation "Is a very bad sign macroeconomically," economist Richard Koo said in a recent episode of Bloomberg's "Odd Lots" podcast.
"Individually, [people trying to save money] might be doing the right things, but collectively, they may be killing the economy,” Koo continued.
China's central bank has shown how seriously it's taking the threat of both deflation and a slowdown in growth by cutting several key interest rates - essentially taking the opposite course of action to the US Federal Reserve.
If those policies don't work, there could be pain ahead for the global economy.
China is the second-largest country by Gross Domestic Product, a massive exporter of goods, and a huge source of income for major US companies ranging from Apple to Nike - so any slowdown there is likely to be felt across the world.
July 11: Economists forecast inflation cooling with the latest consumer price index this week
The monthly index is one indicator of inflation, and economists are forecasting a bit of cooling.
It's not the only measure the Fed looks at, but inflation is a big deal right now.
"All the incoming inflation reports are highly important to the Federal Reserve as they determine the future path of interest rates," said Kathy Bostjancic, chief economist at Nationwide.
Some where prices are increasing and others where they're trending down.
That's why many economists and the Fed may be paying closer attention to something called core CPI. That's a read on inflation that excludes food and energy, because those prices tend to fluctuate more.
"Economists like to look at that core CPI measure to try to figure out just how persistent and sticky is that underlying inflation beyond what's just happening with food and energy, which can be quite volatile," said Michael Pugliese, a senior economist with Wells Fargo.
"As we get into the second half of the year, policymakers at the Fed are keenly aware that this is when core inflation should start to slow down some and they want to see that in the data," he said.
Energy and Environmental Policy/News:
July 10: US Urged To Carve Out Wind, Solar Build Zones To Curb Delays
The bipartisan debt deal approved by Congress in recent weeks will limit the duration of environmental impact studies for energy projects but left out important legislation to expand power transmission capacity between regions.
U.S. wind and solar installations must accelerate rapidly to meet President Biden's climate goals but permitting and grid connection delays are holding back growth.
The debt ceiling reforms are a "Good bipartisan first step" but the U.S. needs a "Gigawatt scale solution to permitting" to bring online larger wind farms than in the past, Roger Martella, Vice President of Government Affairs and Sustainability for GE Vernova, the largest U.S. turbine supplier, told Reuters Events.
President Biden aims to decarbonise the power sector by 2035 and the Inflation Reduction Act passed in August 2022 extended tax credits for wind and solar for at least ten years and also allowed stand-alone energy storage projects to qualify for the deduction for the first time.
Concerns over local airspace have also halted projects, such as the 500 MW Crescent Peak Renewables wind project in Nevada and the 300 MW Byers and Bluegrove wind project in Texas.
Advanced bulk permitting of transmission and wind projects "Would enable optimal siting of wind energy in high potential zones, instead of just places where permitting is easier," Sanjay Patnaik, a fellow at the Brookings Institution think tank, told Reuters Events.
Technology:
July 6: AI And Machine Learning Can Help Accounting Move Toward A Zero-Day Close
As critical as the financial close is, accounting professionals know it's also often a time-consuming, cumbersome and error-prone process.
The good news: Advancements in artificial intelligence and machine learning could potentially revolutionize how accounting teams approach the close - automating and streamlining workflows to make data processing faster and more accurate, reducing the time and effort needed to complete the close.
While finance has earned a wait-and-see reputation in many arenas, they're signaling an early and enthusiastic embrace of AI and ML: 55% of finance executives are aiming for a touchless financial close by 2025, according to a recent Gartner survey.
Embedded AI and ML technology can be utilized for various data management purposes, including streamlining system inputs, surfacing anomalies, and automating analysis of large volumes of data.
The earlier errors and anomalies are detected, the faster they can be addressed by accounting professionals, ensuring small issues don't balloon into larger problems while also preventing reconciliation headaches during the close.
These technologies could impact almost every corner of accounting, including the financial close.
Still, it's important to remember that technology is just one piece of the puzzle when it comes to making progress toward a zero-day close.
July 3: Tax Pros Worried About Impact Of BEPS And ChatGPT
Global tax professionals are concerned about the impact of the Organization for Economic Cooperation and Development's latest base erosion and profit shifting plan, as well as artificial intelligence technology, according to a recent survey.
The survey, released last month by Ernst & Young, polled 1,600 CFOs, heads of tax and finance professionals across 32 jurisdictions, and found BEPS 2.0 readiness is a major concern, with 90% of the respondents expecting to experience a "Significant" or "Moderate" impact from the regulation, which aims to curb tax avoidance by multinational companies.
The impact on U.S. companies remains unclear as many in Congress object to the OECD rules and are resisting the deal on a global tax framework negotiated by the Treasury Department.
"It is interesting that 90% of them expect a moderate to significant impact on tax planning strategies and business operations," said Dave Helmer, EY global tax and finance operations leader.
The survey also asked tax professionals about the impact of generative AI technology like ChatGPT, and found that 85% do not believe ChatGPT, or similar tools, will be a game-changer for their tax function within the next three years.
63% of the respondents indicated their employees will need to augment their tax technical skills with new data, processes and technology abilities in the next three years, and 29% said they don't have enough highly skilled professionals capable of monitoring, evaluating and implementing tax legislative and regulatory change around the world.
72% said they have some gaps between their enterprise reporting planning and source systems to capture relevant tax information, and just one in five said their tax and finance functions' data management capabilities are most mature.
ICYMI:
"Make no mistake, the devastation and flooding we're experiencing across Vermont is historic and catastrophic," Vermont Gov. Phil Scott told reporters Tuesday.
A 'perfect storm' of ingredients are combining to create deadly flooding and record heat. Asked if he considered this flooding event "Tropical Storm Irene 2.0," Scott said, "It might be more like 4.0." "Irene had about a 12-hour duration of rain, and then it was over" the governor said.
The flooding forced evacuations and more than 100 rescues in the state, Vermont's Urban Search and Rescue manager Mike Cannon told CNN. One of the search and rescue teams has been stuck in a heavily flooded area in the north branch of the Winooski River since Monday, Cannon said, adding that five National Guard helicopters were coming in to assist.
New Hampshire will send swift boat rescue crews and Black Hawk helicopters to assist with the response to the flooding in Vermont, Gov. Chris Sununu said.
"Unfortunately, there are very few evacuation options remaining. People in at-risk areas may wish to go to upper floors in their houses," Montpellier City Manager William Fraser said in a post on Facebook.
The Winooski River at Montpelier rose nearly 14 feet Monday and passed the major flood stage as the water continued to climb, threatening further flooding.
Warning of "severe flooding," the agency urged residents in threatened low-lying areas of nearby Vermont and New Hampshire communities to evacuate.
For Fun:
July 10: Scientists Find Planet With Metal Clouds 'Like A Mirror'
Scientists on Monday announced the discovery of a scorching world with temperatures of up to 2,000 degrees Celsius, where glass-like silicate and metals boil into clouds.
The brightest planet to be discovered outside our solar system to date, LTT9779b has been described by researchers as "a planet that shouldn't exist."
The planet, roughly the size of Neptune, lies close to its star, orbiting it every 19 hours. It's the star-facing side of the planet that has a temperature of about 2,000 degrees Celsius.
The planet was a conundrum from the very beginning because of its high reflectiveness, or albedo, which allows the planet to reflect “like a mirror,” according to researchers.
This led researchers to theorize that LTT9779b seemed too hot for cloud formation. However, because the planet’s atmosphere is so saturated with metals and silicate vapors, raindrops composed of titanium are able to form.
Another curiosity was the planet’s proximity to its sun; planets as close to their star as LTT9779b shouldn’t have an atmosphere - normally the outer layer would simply burn away.
"It's a planet that shouldn't exist," said Vivien Parmentier, co-author of a study in the journal Astronomy and Astrophysics. "We expect planets like this to have their atmosphere blown away by their star, leaving behind bare rock,” Parmentier commented.
"The clouds reflect light and stop the planet from getting too hot and evaporating," said paper co-author Sergio Hoyer. "Meanwhile, being highly metallic makes the planet and its atmosphere heavy and harder to blow away," Hoyer continued.
Only with the precision of the Cheops telescope - focused on discovering new exoplanet systems - was it possible to measure the data the team needed this time around.