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Forbes
3 days ago
- Business
- Forbes
Why The Accounting Profession Is Better Off Without A 150-Hour Rule
A former accountant turned cofounder and CEO, Mike Whitmire is the leader of pre-IPO fintech company FloQast. Some people still believe that the 150-hour rule has elevated the accounting profession. I'm not one of them, and frankly, I'm thrilled that the rule may soon become a thing of the past. For those not intimately familiar with the ins and outs of accounting, this rule forces aspiring CPAs to complete what amounts to a fifth year of schooling—30 extra credit hours of college credit beyond a bachelor's degree—before they can even sit for the CPA exam. In theory, adding 30 extra hours of schooling seems like a sound idea. After all, more education should lead to better-trained and better-skilled accountants. Well, based on my experience in the profession and personal opinion, an extra year of schooling doesn't benefit anyone. It just leads to higher tuition payments without offering much real, practical value. If you ask me, the rule has only served to make the talent crisis in our industry worse. Accounting firms can't fill positions fast enough, experienced CPAs are retiring in droves, and fewer students are choosing accounting as a career path. Meanwhile, the 150-hour rule simply places unnecessary financial and time burdens on aspiring accountants. The numbers don't lie. The accounting profession has a serious people problem. U.S. accountants and auditors are leaving their jobs in high numbers. Even worse, about 75% of today's CPAs are set to retire over the next 15 years. Sure, the 150-hour rule isn't the only reason why our industry is in crisis. But it certainly isn't helping. For many promising students, the prospect of taking on an extra year of tuition—often accumulating more student debt—simply doesn't make financial sense, especially when other high-paying careers in tech, finance or consulting don't impose similar hurdles. Nothing beats experience. Proponents of the 150-hour rule argue that additional education leads to better-prepared professionals. But ask any seasoned accountant, and they'll tell you: The most valuable learning happens on the job. Auditing, for example, is as much an art as it is a science. Textbooks can only take you so far. And they certainly can't fully prepare someone for the judgment calls, client interactions and real-world problem-solving that define the profession. CPAs truly learn their craft through hands-on experience, not through extra semesters of coursework that often have little relevance to their day-to-day responsibilities. This is why I'm so gratified to see the recent shift in state-level licensing rules. Fourteen states have passed legislation allowing alternative pathways to CPA licensure, typically by substituting the extra 30 credit hours with an additional year of work experience. And now, after years of defending and promoting the 150-hour rule, the American Institute of CPAs (AICPA) and the National Association of State Boards of Accountancy (NASBA) are finally changing their tune. Most notably, they've agreed to amend the Uniform Accountancy Act (UAA) to allow for alternative pathways to licensure, specifically, permitting candidates to qualify with a bachelor's degree along with two years of experience, rather than the traditional 150-hour requirement. This is a significant step forward, but it's also an admission that the 150-hour rule has failed in its original purpose. If the AICPA and NASBA—once the rule's strongest advocates—are now willing to reconsider it, that should signal to the rest of the profession that change is not just necessary, but long overdue. Let's rethink the entire model. Reducing the 150-hour rule to 120 hours is definitely a step in the right direction. But why stop there? We should be asking an even bigger question: Why are we fixated on credit hours at all? The truth is, the current system is built on an outdated assumption that more classroom time equals better-prepared professionals. But in a field like accounting—where technology, regulations and business practices evolve rapidly—rigid educational mandates can actually hinder adaptability. What if, instead of requiring a fixed number of credit hours, we focused on competency-based assessments? What if we allowed apprenticeships, on-the-job training or specialized certifications to further supplement traditional education requirements? The future of the profession depends on attracting smart, capable professionals in a way that removes artificial barriers and recognizes diverse pathways to expertise. AI will transform accounting. This shift becomes even more urgent when we consider how technology is reshaping the skills accountants need. There's no question that artificial intelligence (AI) will have a profound impact on the accounting profession. AI-powered tools, like those we develop at my company, are already helping to automate repetitive tasks, reduce errors and allow accountants to focus on higher-value work. According to Gartner, finance leaders are increasingly optimistic about AI's potential, with many planning to allocate more resources to AI deployment in the coming years. But AI won't replace accountants—it will augment them. The profession will always need skilled professionals who can interpret data, exercise judgment and provide strategic insights. The question is: Will we have enough of them? Here's the bottom line. The accounting profession is clearly in crisis. Between the talent shortage, increasing regulatory complexity and the rapid pace of technological change, the status quo is no longer sustainable. Eliminating the 150-hour rule won't solve every problem, but it's a critical first step. At the end of the day, the goal should be simple: Ensure that the profession attracts the best and brightest. Because if we don't act now, the talent crisis will only deepen—and the profession will suffer for it. The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation. Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
USA Today
07-07-2025
- Business
- USA Today
How the Child and Dependent Care Credit can cut summer camp costs in 2025
Return-to-office mandates often trigger a return to big bills for summer day camps. So, it doesn't hurt to take a refresher course now on how one decent tax break can help save families a few bucks. Many parents might not realize it, but you can get a bit of relief from the high cost of day care bills and summer day camps paid in 2025 when you file your tax return next year. What is the Child and Dependent Care Credit? The Child and Dependent Care Credit applies to children who are younger than 13 when the day care is provided. You'd complete Form 2441 to calculate the credit and file the form along with your 1040 federal income tax return. Taxpayers also can review IRS Publication 503 for rules. "Summer day camp expense can be claimed only if the care was necessary for the taxpayer to do work or to look for work," said Brandon Nishnick, manager for tax practice and ethics for the American Institute of CPAs. "The primary purpose must be for child care and the camp must be a daytime-only program," he said. Expenses associated with sending children to an overnight camp would not qualify. Typically, you're able to recoup only a small portion of your costs. Yet, no one should leave money on the table and ignore the credit if they qualify to claim it. "In general, to qualify, parents must work or be full-time students and use a day care, summer camp, or another program while they work and the provider must have a Social Security Number or Federal Identification Number that will be needed to apply for the tax credit," said Mark Steber, chief tax officer for Jackson Hewitt Tax Services. How do you calculate the tax credit for summer camps? The Child and Dependent Care Credit is calculated as a percentage of your qualifying expenses, which ranges from 20% to 35%, depending on your adjusted gross income, according to Nishnick. If a taxpayer has a qualifying child under the age of 13, typically they can claim up to $3,000 in eligible care expenses or $6,000 for two or more children. 2026 tax planning: Don't expect a speedy tax refund in 2026 from an understaffed IRS The maximum credit ends up being up to $1,050 for some taxpayers with one child or dependent. And it can be as high as $2,100 for some taxpayers with two or more children or dependents. Or it can be much less than that. How much you'd save in taxes would vary based on your income and your expenses. The value of the credit declines as your income goes up. Consider this example: Take someone who has two children under 13. Say they spend $8,000 in the year for care expenses. Only $6,000 is eligible in this case to be taken into account as an expense for the credit. If your adjusted gross income is $45,000, you would receive a credit of $1,200, which is 20% of the $6,000 in eligible expenses, Nishnick said. Again, expenses must be associated with what you'd pay for care during the time you went to work or were looking for work. We're not talking about what you'd pay a sitter on the weekend to go out to a concert. In order to go to the office or work site, many parents must arrange for care, and paying for the child to attend a day camp program is one such option. Make sure to keep detailed records now "As a credit, it is a dollar-for-dollar reduction in tax owed," said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting in Riverwoods, Illinois. The credit is a nonrefundable tax credit on 2025 returns that can reduce the amount of income tax you owe. But Luscombe noted there is no credit to the extent that no tax is owed. It won't generate an additional refund if your tax liability for the year is less than the credit amount. What you want to do now is keep good, detailed records of your child care expenses, including the camp expenses and provider information if related to a summer camp. The biggest mistake that parents make, some experts said, is failing to keep records of child care during the year, including amounts paid and the address and Taxpayer Identification Number of the summer camp or child care provider. Nishnick said parents should take time now to ensure that their care provider is eligible if they plan to claim the credit. "They cannot be your spouse, the child's parent, a dependent, or a relative under the age of 19. The care provider must be properly documented with a name, address and taxpayer ID," Nishnick said. And don't expect to get any credit for an overnight camp. "For example, if the parent works a third shift or overnight such as in a hospital, these costs for an overnight camp would still not qualify," Nishnick said. Your child's age at the time the care is provided remains a key factor. "The care must be for a child who is under the age of 13 at the time the care is provided," Nishnick stressed. "For example, if the child turns 14 the second day of summer camp, then the remainder of those expenses would not qualify." Unfortunately, Steber said, parents often overlook or forget to claim the Child and Dependent Care Credit. Or some try to claim ineligible expenses toward the credit. Some parents, of course, have been able to work remotely in previous summers since the COVID-19 pandemic hit in 2020. Yet, we're continuing to hear about more return-to-office initiatives. Ford Motor, for example, announced in June that the automaker is calling the majority of its salaried workforce back to the office four days a week, effective Sept. 1. More families could be juggling more child care expenses and might want to brush up on available tax breaks. The Child and Dependent Card Tax Credit can work whether you itemize deductions or claim the standard deduction. Make no mistake, the rules as they are right now are complicated. "The credit is calculated based on your income and a percentage of expenses that you incur for the care of qualifying persons to enable you to go to work, look for work, or attend school," according to the Internal Revenue Service. Currently, Luscombe noted the credit phases down from 35% of expenses for taxpayers with an adjusted gross income of $15,000 or less to 20% of expenses with up to $43,000 in AGI. It never falls below 20%. The total expenses that you may use to calculate the credit may not be more than $3,000 for one qualifying individual or $6,000 for two or more qualifying individuals. If you use a flexible spending account at work, though, you're not going to be able to claim what you spent out of that account. If you saved $1,000 in a flexible spending account and used that money toward day care or summer day camp expenses, for example, you could calculate the dependent care credit based on up to $2,000 in expenses for one child. The IRS has an online tool that can help you run some numbers to see whether you qualify to claim the Child and Dependent Care Credit. Who qualifies? It's not just expenses for children. "A qualifying person generally is a dependent under the age of 13, a spouse or dependent of any age who is incapable of self-care and who lives with you for more than half of the year," the IRS states online. Some tax rule changes could be ahead Going forward, some changes in the child and dependent care credit could be ahead for 2026 expenses. On July 1, the U.S. Senate narrowly approved tax-and-spending legislation that President Donald Trump calls "One, big, beautiful bill." The package went to the U.S. House, where it passed July 3. It was being sent to Trump to be signed into law. The Senate reconciliation bill includes a proposal to increase the maximum rate to 50% from 35% of qualifying expenses for lower-income families. Luscombe noted that this change is proposed to be effective starting in 2026. Garrett Watson, director of policy analysis at the nonpartisan Tax Foundation, said a broader range of households would see a higher credit value for eligible dependent care expenses on their tax return under the Senate version. The 50% credit rate would phase down for taxpayers with adjusted gross income over $15,000. For example, the percentage used to calculate the credit could be reduced from the new 50% mark by 1 percentage point, but not below 35%, for each $2,000 that the taxpayer's AGI exceeds $15,000. The percentage would then be further reduced, but not below 20%, by 1 percentage point for each $2,000 ($4,000 for joint returns) that their AGI exceeds $75,000 ($150,000 for joint returns). Watson noted that the Senate proposal was scored by the Joint Committee on Taxation, a nonpartisan government agency, as costing about $9.3 billion over 10 years. Contact personal finance columnist Susan Tompor: stompor@ Follow her on X @tompor.
Mint
09-06-2025
- Business
- Mint
A health crisis cost you a bundle. How to claw it back.
The medical tax deduction comes into play after a health crisis like a car accident or a cancer diagnosis, allowing you to write off some unreimbursed costs. Taxes aren't a priority when you are facing a health crisis. But once you recover, don't miss a valuable tax break called the medical tax deduction that could alleviate the emergency's financial toll—an oversight that happens all too often. Taxpayers 50 and over missed out on almost 40% in savings from this deduction, a recent analysis found. Nearly one in five failed to deduct $4,714 on average. Americans undergoing a major medical event or relying on assisted care at home or in a facility should put the deduction on their radar, tax experts say. Keeping detailed records through the year is key. 'Make sure you've got proof of payment for any out-of-pocket cost, everything to support that deduction," said Henry Grzes, lead manager for tax practice and ethics with the American Institute of CPAs. Taxpayers are allowed to deduct unreimbursed medical expenses for themselves, their spouse or their dependents if the costs total more than 7.5% of their adjusted gross income, or AGI. Only medical costs above that 7.5% threshold are deductible. For instance, if your AGI is $100,000, then 7.5% of that is $7,500. If your out-of-pocket medical costs total $7,000, nothing is deductible. But if those expenses added up to $12,000, then $4,500 of that can be written off. You must itemize to receive the benefit. 'If you choose the standard deduction, you don't get anything," Grzes said. Older households deduct about a quarter of their medical spending, the study last year found. That is just half of the medical costs eligible for the deduction. The analysis was based on data before the standard deduction was doubled in 2018, which could make the medical expense deduction less attractive. But out-of-pocket spending has jumped since the end of the pandemic and aging boomers are entering their costliest health years, potentially making the deduction beneficial for more taxpayers. One reason why people fail to take the deduction is because its benefit doesn't seem large enough to justify the work that goes into claiming it. 'It's more for people where it seems there's a higher return to claiming it, say, because you live in a high tax state," said Gopi Shah Goda, author of the study and a senior fellow at Brookings Institution. 'So for every dollar you deduct, you get a higher share of that dollar back in tax savings." Other folks aren't aware of the deduction or how to use it. Generally, taxpayers are often on 'autopilot," said Andy Phillips, vice president at the Tax Institute at H&R Block. There are various times when you should consider the deduction. The most obvious is after a catastrophic health event, such as a car accident or a cancer diagnosis. You can write off unreimbursed costs related to your hospital stay, follow-up doctor or treatment visits, and rehab or physical therapy. If you need to modify your home to accommodate a wheelchair, whatever isn't reimbursed can also be deducted. 'Same thing with transportation. You get a rate per mile," Grzes said. 'Say you're in a small rural community and you have to go to the Cleveland Clinic for some special treatment, that would be deductible." Another time to consider the deduction is if you or your spouse rely on assisted care, whether in home or at a facility. If a full-care facility is required for health reasons, its full cost, including meals and transportation, would be eligible for the deduction. If health isn't the primary reason you are living in an assisted-care home, then only the medical component of those costs are deductible. The facility itself typically provides a breakdown of what charges are attributed to medical care, Grze said. A taxpayer who teeters between itemizing and taking the standard deduction from year to year may want to check out the medical expense deduction. Adding in eligible medical costs to other deductions—like charitable donations or mortgage interest—may make itemizing the better option. Married couples who typically file jointly might find the deduction worthwhile if one spouse earns a lot less than the other, Phillips said. If the lower-earning spouse has large unreimbursed medical expenses during the year, filing separately as a married couple may be beneficial. 'This one is tricky, it's not one to do in a vacuum," he said. 'The challenge is you've got to run the math both ways." The biggest hassle to taking the deduction is to make sure you have the documentation to back it up. This can become complicated because your insurance may pick up some of those medical bills. Only the uncovered portion is deductible. Typically insurers send an explanation of benefits showing how much was charged by the medical provider, how much the insurer paid, and the amount you must pay. Keep that along with a receipt, bank or credit-card statement showing you paid that out-of-pocket amount. If you have a regular accountant, contact him or her after the medical event. Your accountant can help plan for the next tax season and advise what documents to send. If you do your taxes yourself you may want to seek out an accountant for a midyear consultation on how your medical expenses may affect your taxes. Phillips said: 'Don't leave it to chance." Write to editors@
Yahoo
02-06-2025
- Business
- Yahoo
How sports betting taxes work and what you might owe
Sports betting only became legal in the United States in 2018 after the U.S. Supreme Court struck down a 1992 federal ban and ruled that states could individually determine what forms of gambling were legal within their boundaries. This opened the floodgates for various state legislatures to decide whether to allow sports betting. Currently, 40 states and the District of Columbia authorize the practice, and 34 permit online sports betting, according to the American Gaming Association. This has tax implications for millions of gamblers — who are also taxpayers. There is no ambiguity here, according to tax experts. 'Broadly, winnings from sports betting are taxable income,' said April Walker, senior manager for Tax Practice and Ethics with the American Institute of CPAs. Sports betting winnings are taxed under the Internal Revenue Service's designation for gambling income and losses. If your winnings total $600 or more and are at least 300 times the amount wagered, then a payer, such as a casino, is required to issue you a Form W-2G. While supplying the form is the responsibility of the payer, Walker noted, you are still liable for reporting and ensuring taxes are paid on those sports betting winnings, whether or not you receive the form. If you're dealing with a mobile sports gambling provider, like DraftKings or FanDuel, the reporting standards are a little different, according to New England-based accounting firm Baker Newman Noyes. If you reach net earnings above $600 or 300 times your original wager, you can also receive a Form 1099-MISC from an online sports wagering organization that will report your net earnings from the previous tax year. Net earnings would be calculated as your cash winnings minus any cash entry fees and adding any cash bonuses received from the platform. Individual tax filers must report total gambling income as 'Other income: gambling' on line 8b of Schedule 1, 1040. The only exception is if you are filing as a professional gambler, meaning someone 'engaged in sports betting primarily for profit rather than only as a hobby,' per the Journal of Financial Planning. In this case, the filer would use Form 1040, Schedule C to report profit or loss from a business, and they would note winnings as revenue and be able to deduct their losses directly. Self-employed filers — in this case, professional gamblers — must pay self-employment tax, which is 15.3 percent, half of which is subject to deduction, for Social Security and Medicare. This embedded content is not available in your region. To answer the tax rate question, we must work backward. Taxpayers whose winnings exceed $5,000 and 300 times the amount wagered will automatically have 24% of their total payout withheld by the payer, according to Walker. This rate could be higher in states that have additional income tax, in which case the 24% federal rate would be withheld on top of the state's personal income tax rate. Still, when it comes time to file your income taxes, this withholding doesn't ensure you've paid the required amount of tax. Rates range from 10% to 37%, depending on your total income, so based on what tax bracket you end up in at the end of the tax year, you'll either get a refund or have to pay out a higher amount from your winnings. Read more: How tax withholding works Perhaps the most pivotal — and confusing — part of understanding how to report gambling income on your federal income tax return is factoring in your losses. The correct method, according to Walker, comes down to what the IRS refers to as 'sessions.' This philosophy comes from a 2015 IRS notice on slot machine play, indicating that total wins and losses need to be calculated by the day they were made. Each day counts as an individual session, so rather than net your total losses against your total winnings, you will need to calculate the end amount of each session, or day, and determine which days were a loss and which days ended with winnings. Still, the only way that losses can be offset against gambling winnings is if you itemize your deductions rather than take the standard deduction, which is $15,000 for single tax filers on 2025 taxes. Using the session method, you could add your total losses on Schedule A, line 16 as gambling losses. Whether you can itemize your deductions to offset your winnings when it comes to state income tax depends on which state you're filing in. Nine states, including North Carolina, Connecticut, and Rhode Island, do not allow itemized deductions for gambling losses, per an article in the Journal of Financial Planning. Even professional gamblers can only offset their total winnings with their losses and get to zero. There is no tax refund for losses that exceed the total amount of winnings, Walker said. To minimize sports betting taxes, the key is having a demonstrable record of all of your wagers, where and when they occurred, proof that they occurred (like receipts and tickets), and evidence of your total amount of winnings and losses. This will be particularly useful if you find yourself audited by a tax authority. 'Gambling has been around for quite a while, and so the rules on that have not changed,' Walker said. 'The difference is that there might be more people who are doing it on a regular, daily basis, and I would encourage them to understand how important it is to do their bookkeeping so they are not having to scramble after the fact and if they are able to itemize, and take advantage of all of their losses.'
Yahoo
30-05-2025
- Business
- Yahoo
AICPA opposes limitations on tax deductions
The American Institute of CPAs (AICPA) has reiterated its stance against the proposed limitations on state and local tax (SALT) deductions for specified service trades or businesses (SSTBs) in the One Big Beautiful Bill Act. The body sent a second letter to the Senate Finance and House Ways & Means Committees highlighting the need for modifications to the 'troubling' tax proposals. In the letter, the AICPA said: 'We are sensitive to the challenges in drafting a budget reconciliation bill that permanently extends tax provisions, enhances tax administrability, and balances the interests of individual and business taxpayers. 'While we support portions of the legislation, we do have significant concerns regarding several provisions in the bill, including one which threatens to severely limit the deductibility of SALT by certain businesses. This outcome is contrary to the intentions of the One Big Beautiful Bill Act, which is to strengthen small businesses and enhance small business relief.' The AICPA called for an allowance for business entities, including SSTBs, to deduct SALT paid or accrued in trade or business activities. This move aligns with the Tax Cuts & Jobs Act's original intent and has been sanctioned by the Internal Revenue Service. The current House version of the bill is criticised for unfairly targeting SSTBs by restricting their SALT deduction capabilities. The AICPA also addressed the risks of contingent fee arrangements in tax preparation, suggesting they could lead to abuse. They recommended removing an amendment that could permanently disallow business losses without offsetting business income. The letter warned against laws that financially harm businesses and discourage professional service-based business formation. The AICPA supported provisions in the bill, such as using section 529 plan funds for credential expenses, tax relief for natural disaster-affected individuals and businesses, and making the qualified business income deduction permanent. They also advocated for the preservation of the cash method of accounting and increasing the Form 1099-K reporting threshold. In addition, the AICPA endorsed permanent extensions of international tax rates and provisions that offer greater certainty and clarity. It also shared a list of endorsed legislation, principles of good tax policy, and a compendium of proposals for simplifying and technically amending the Internal Revenue Code. AICPA Tax Policy & Advocacy vice-president Melanie Lauridsen said: 'While we are grateful to Congress for many provisions in this bill, the unfair targeting of certain types of businesses creates inefficiencies in business decision-making and could result in negative, long-lasting impacts on the economy. 'We hope that Congress will consider our recommendations and make the necessary changes that will create parity between all businesses.' Earlier in May 2025, the AICPA submitted comments to the US Department of the Treasury and the Internal Revenue Service on proposed regulations concerning previously taxed earnings and profits and related basis adjustments. "AICPA opposes limitations on tax deductions" was originally created and published by The Accountant, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
