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Your go-to for up-to-the-minute updates, we curate essential news, insights, and trends to keep you well-informed. Explore our regularly updated content, covering industry developments, regulatory changes, expert articles, upcoming events, and exclusive CalCPA updates.

Discover the latest in the CPA world

CalCPA President & CEO Denise LeDuc Froemming joined the CBA’s Accounting for California podcast with Executive Officer Dominic Franzella to dive into new CBA-backed proposals on CPA licensure and mobility and how these changes align with recent NASBA & AICPA Exposure Drafts.

California Moves to Modernize CPA Requirements Amid Talent Shortage

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What's better than morning coffee and curated news?  On weekday mornings, get significant headlines and essential information to keep you ahead in the business world, available exclusively for CalCPA members.

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Education is among the most dynamic sectors, continuously adapting to the evolving needs of students and society. As different organizations pursue their respective niches, their combined efforts give the learning community a transformative push. In this Newsweek article, read how CalCPA is redefining what being an accountant will mean in the future.

Pushing education on all fronts

Welcome to our annual at-a-glance compilation of federal and state tax information. User-friendly tax rate schedules, facts, figures and assorted data make this time-saving section a handy companion.

Fast Tax Facts

Our annual, easy-to-use guide of federal and state tax information is packed with updated tax rate schedules, essential facts, figures and key data. Designed to help you breeze through tax season, keep this time-saving resource by your side during the busy tax season.

CAMICO has been developing risk management solutions for CPAs for more than 37 years, and we recognize and understand the challenges facing CPA firms navigating each tax season’s nuances. For example, the pandemic years’ economic and tax relief programs had complex, wide-ranging impacts on CPAs, tax practitioners and their clients.

Although most agree that the current tax season has signs of returning to normalcy after the pandemic-induced chaos of recent years, CPA firms continue to face unique challenges and risks they should not ignore. For example, in addition to trying to keep up with the increasing complexities of evolving tax law and regulations (e.g., state pass-through entity taxes, K-2s/K-3s), and ongoing challenges working with the IRS and other taxing authorities, many firms are experiencing significant capacity challenges as they struggle to find and retain qualified talent to support and meet their clients’ service needs.

It can be difficult to stay current on risk management and loss prevention practices when dealing with these significant challenges. With more than 60 percent of CAMICO’s claims originating from tax-related matters, addressing and managing the risk stress points associated with problematic clients can significantly improve a firm’s risk profile.

Now, more than ever, CPA firms need to be proactive. To mitigate these risks, firms need to prioritize performing the “right services” for the “right clients.”

Considering the following questions may help you identify client scenarios that may pose higher risk to your firm.

Proactively evaluate your client list. From a timing perspective, there is no better time than now to review your client list. Do so before the final phase of tax season to decide whether clients remain a good fit for your firm. Disengaging from clients that do not meet that threshold—ideally after they have paid their bills—will better position you going forward.

CAMICO’s experience indicates the following are red flags of potential problem clients which, if not managed appropriately, will present elevated risks to firms:

Pay particular attention to difficult or manipulative clients who are slow in accommodating your requests, do not return your calls or are otherwise non-responsive. When a client seems unwilling to provide you with the information needed to complete an engagement, assess the underlying cause—is the problem merely sloppy recordkeeping, or is the client deliberately delaying or withholding information?

Be cautious in situations where it appears that documents are deliberately withheld, or you are urged by a client to proceed without appropriate or sufficient documentation.

Abrupt changes in a client’s behavior may be indicative of a failing business, financial problems or other personal problems. Trying to uncover the source of the problem could be beneficial, but whatever you do, don’t ignore the warning signs of a deteriorating relationship. And always be on the lookout for potential conflicts of interest.

It is extremely important to examine potential or actual conflicts of interest from each party’s point of view, considering the client’s perspective as well as those of other owners, investors, partners, beneficiaries, spouses, etc.

Conflicts of interest have long been a major factor in professional liability claims against CPAs. Part of the problem is that if CPAs are not proactive and sensitive to their existence, potential conflicts of interest are not perceived before the incidents that trigger these claims. If potential conflicts are identified, you must assess whether you can objectively represent the parties involved and if you determine you can, assess whether there are reasonable safeguards to eliminate or reduce the threat to an acceptable level. If unsure, contact CAMICO. We will work with you to address your potential conflict of interest dilemmas.

Is the engagement a good fit for the firm’s expertise?

In CAMICO’s experience, firms who dabble have a much higher risk of having a claim. Learning the art of saying “no” to clients is an important, but often overlooked, risk mitigation tool.

If clients seek your help with transactions and/or activities outside your comfort zone or skillset [… did someone mention Employee Retention Credit (“ERC”) or virtual investment opportunities such as non-fungible tokens (“NFTs”) …?], you will be better served suggesting they seek the advice and counsel of professionals with expertise in those areas.

It is important to recognize, embrace and maintain your competencies. As such, it is critical that CPAs never feel compelled to dabble in practice areas outside of their expertise. Frankly, this rule is fundamental to our profession as the preeminent standard of the Code of Professional Conduct’s General Standards requires CPAs to only undertake professional services they can reasonably expect to complete with professional competence.

Advising clients regarding ERC and their digital asset transactions are opportunities for some firms, but unfortunately these opportunities also pose considerable liability exposure for firms who lack the requisite skills and dabble—tread carefully, arm yourself with knowledge, know your limitations and be willing and able to say “no.”

Are you taking the right steps to manage (and document) client expectations?

Effective communication is a key factor in any CPA-client relationship, and when you work to stay informed and in control of managing client expectations, you help to safeguard your firm. To that end, good documentation is critical to successfully managing client expectations. Jurors (members of the public) generally consider CPAs to be experts in documentation, and falling short of that expectation may be viewed as negligent and perceived as falling below the standard of care.

Here are some helpful documentation tips to get you through the remainder of tax season:

. While engagement letters won’t immunize you from lawsuits, they can be your first line of defense if a client makes a claim against you. Although you likely already have executed engagement letters in place with your tax clients, for those engagements that have had some engagement creep, memorialize the additional services by updating your engagement letter or obtaining a signed addendum clarifying the revised scope and limits.

Numerous CAMICO engagement letter templates are available on the Members-Only Site’s Engagement Letter Resource Center.

Always document significant meetings, communications and follow-up

. Follow up with written communications in circumstances including, but not limited to:

‘Advise’ clients of opportunities and ‘warn’ clients about risks.

 Consider obtaining a tax representation letter or stand-alone certification letter to mitigate high-risk scenarios such as the following:

In addition to the above examples, there is a new area of potential risk associated with the Corporate Transparency Act, which introduces a new and expansive reporting regime for entities deemed to be Reporting Companies to report “beneficial owner” information to the Financial Crimes Enforcement Network (FinCEN).

CAMICO strongly recommends that CPA firms inform and advise their clients of the beneficial ownership reporting requirements under CTA. (Refer to CAMICO’s article titled, “Corporate Transparency Act/Beneficial Ownership Information Reporting—

Risk Management Considerations for CPA Firms”).

Written documentation should be factual, professional and without personal commentary or unsubstantiated opinions

. Unprofessional and/or inappropriate comments can damage the integrity of documentation. Ask yourself whether your documentation would be helpful or harmful if presented at trial.

: The challenging economy has brought fee issues to the forefront as clients experiencing financial difficulties struggle to meet their financial commitments, including bills owed their CPAs. Good communication with non-paying clients is important and may spur payment. At the very least, contemporaneously memorialized communications create a defensive documentation trail demonstrating that the client, by not responding to your communications, did not have a valid basis to claim your fees were not owed. When dissatisfied with work, clients normally respond to such communications by detailing their dissatisfaction.

Fees, billings and collection issues can and should be managed proactively. For additional information and resources on this topic, including sample collection letters, access CAMICO’s Engagement Letter Resource Center on the Members-Only Site.

: Disengagement is an art form. Skillfully handled transitions can be mutually beneficial to firms and clients.

However, care is needed when disengaging from engagements after they have begun. Disengaging too late and without sufficient cause may increase the likelihood a firm could face allegations of damages if the successor is unable to meet the deadline.

Whether you decide to disengage a specific client, type of business or area of practice, it’s important to terminate relationships professionally, formally and in writing. At a minimum, your disengagement letter should contain clear statements, a description of your work and a list of any due dates or filings. Effective disengagements are a good risk management tool for your firm and doing it skillfully and professionally will help you grow your practice and avoid potential liability exposure.

An article detailing disengaging best practices, “

,” and illustrative CAMICO disengagement letters are available on the Members-Only Site within the Engagement Letter Resource Center.

Early reporting of potential claim situations

: Promptly report potential claims, including potential errors or omissions, to CAMICO to protect your firm’s full policy limits and possibly benefit from CAMICO’s tax penalty abatement services, which provide expertise on abatement requests.

reducing the deductible by 50 percent, up to $50,000

, for any potential claim that is reported before a claim is made. Further, if CAMICO determines that it is appropriate to retain counsel to assist with a potential claim, the related expenses preceding a claim will be absorbed by CAMICO and not impact policy limits or charged to the deductible.

Subpoena and consultation services are included in these potential claim benefits

. Early reporting helps our claims specialists achieve effective resolutions and mitigate the impact of errors and omissions.

Risk Management

CPA firms face numerous challenges as they navigate each tax season’s nuances. Now, more than ever, CPA firms need to be proactive to mitigate risks and prioritize performing the “right services” for the “right clients.”

Loan-out corporations in California are a common way of doing business, especially in the entertainment industry. However, these types of corporations have recently come under scrutiny, and some are afraid that California lawmakers might take additional steps to limit or even ban loan-out corporations.

A loan-out corporation is a business usually structured around one person. The corporation essentially loans out the services of the individual as an independent contractor. When businesses pay for these services, they pay the loan-out corporation rather than the independent contractor directly. 

For example, an actor, singer or other performer might book a gig doing a commercial or a spot on TV and be paid through their loan-our corporation. This is a popular way of doing business among people in California’s vast entertainment industry. Then, the individual who runs the loan-out corporation pays their own salary from the corporation.

Essentially, a loan-out corporation allows people to provide their services to others without having to become someone else’s employee.

Earlier this year the payroll agency Cast & Crew, which works primarily with the entertainment industry, conducted an audit based on information that the California Employment Development Department (EDD) would no longer be accepting loan-out corporations.

A notice from Cast & Crew stated that the EDD would start requiring employers to pay for services directly to contracted employers, not to the loan-out corporations. This would have significant tax implications for independent contractors working for loan-out corporations.

This information appears to be the result of a still unknown miscommunication. The EDD has recently stated that loan-out corporations 

 be prohibited in California and the EDD 

 take any action against them. The EDD maintains its commitment is only to ensure taxes are collected per state law.

At this point, it is still unknown where the notion of a ban on loan-out corporations came from or what it means for the future of these businesses and people working in entertainment. 

On May 28, the EDD issued the following statement regarding loan-out corporations:

“We understand the great importance of California’s film and television industry and are proud of our work to support California’s employers and industries. We have received various inquiries highlighting questions about loan-out corporations’ ability to operate in California. As we have previously stated, EDD is not taking action to ban these companies in California.

“We are one of the nation’s largest tax collection agencies and work closely with businesses to collect payroll taxes that fund vital Unemployment Insurance and State Disability Insurance benefits for workers. Our commitment is to ensure these taxes are collected according to state law.

“We will continue our communication with industry representatives to ensure their concerns are heard and understood. We are optimistic that this dialog will help bring further clarity and information for the benefit of everyone who works in one of California’s most iconic industries.

“We understand taxes can be complex, and we are here for those who have questions. We are committed to providing excellent service to California employers, communicating with industries, and supporting a fair payroll tax system for the benefit of all Californians. Our Office of the Taxpayer Rights Advocate is responsible for protecting the rights of taxpayers during all phases of a tax administration process.”

If the EDD, in its normal audit selection process, does select a loan-out corporation for audit it will also look at how the corporation is run and whether they are following the requirements such that it is doing things correctly for a loan-out corporation. If something is not being done correctly, then the EDD will make assessments as required under the law.

Many people working with loan-out corporations enjoy certain tax breaks and benefits. Whether these tax benefits are in jeopardy remains to be seen. However, these tax implications can be a bit confusing, and it is not unusual for people to make errors when doing their taxes.

Having a loan-out corporation can help workers by providing certain tax breaks. For example, an actor who works for a loan-out corporation they established may deduct certain work and business expenses, reducing their tax liability. If an actor must travel because they are filming on location, they can deduct travel costs as business expenses. Thus, the worker will have more control over what business expenses are paid by the corporation vs. what another employer might pay for business expenses. The worker will have more options on what type of retirement plan the loan-out corporation may set up than what they may be entitled to, if any, as an employee of many different business entities.

After these costs are paid there are less funds available to pay the worker a salary, thus less paid for various taxes, such as Social Security, Medicare and California Disability Insurance.

If the worker was a direct employee of entity needing their services, then some of these “business expenses” would either be limited on their individual tax returns or entirely not allowed.

Loan-out corporations also provide a certain degree of liability protection. If something goes wrong with a client and they want to file a lawsuit, the corporation might be liable, but the worker is not.

Loan-out corporations come with certain downsides that should be considered before deciding to set one up.

First, they can be expensive to establish and maintain. Simply creating a corporation requires legal work and various annual fees. The corporation should also have its own assets, like business accounts for accepting payment and distributing salaries.

To ensure the loan-out corporation is being managed and run correctly the corporation may need regular services of legal and financial advisers. While the individual behind a 

loan-out corporation may enjoy certain tax breaks and benefits, there are other tax implications for the corporation itself. For example, the corporation might be liable for corporate income taxes, Social Security and Medicare taxes.

Because gross compensation paid to the worker will be lower than when working directly with the hiring business, the potential Social Security benefits will be lower at the time of retirement.

In September, California Gov. Gavin Newsom signed into law SB 422 that stated loan-out corps are declared the employer of IC. The also bill states this “is declaratory of, and not a change in, existing law.” To read the text of the bill, visit 

CA Tax: California Loan-out Corporations Update

While loan-out corporations are a common way of doing business in California, these types of corporations have recently come under scrutiny.

As the holiday season kicks into gear, we’re all thinking about gathering with family and friends, festive feasts—and giving back. Whether it’s sharing gifts, donating time or offering financial support to organizations you’re passionate about, this is the season when generosity takes center stage. 

And CPAs are at the heart of this movement, whether they’re giving themselves or providing the financial know-how to help others make an impact.

Did you know CalCPA members contribute hundreds of thousands of dollars each year to fund scholarships for California college students pursuing CPA careers? And donations to our CPA-PAC are crucial in supporting legislative and statewide candidates—across all party lines—who advocate for California CPAs and businesses. Plus, contributions to the CalCPA Institute fuel pathway support, financial literacy, student outreach, professional guidance and belonging—vital programs for a brighter tomorrow for the accounting profession. In 2023-24, we awarded 155 scholarships totaling: $240,000.

To learn more or get involved with the many programs under our Fund the Future with CalCPA initiative, visit 

. Your participation helps shape the future of the profession!

But giving goes beyond the financial. Our members are out there donating time and expertise, whether it’s leading financial literacy presentations, serving on nonprofit boards, teaching classes or serving in leadership roles within CalCPA, and making an impact in their communities. 

There’s no question: CalCPA members truly live out the “Public” in Certified Public Accountant.

As we approach National Philanthropy Day (Nov. 15) and Giving Tuesday (Dec. 3), CPAs are preparing to help their clients and organizations with end-of-year donations. Questions like “What should I donate?,” “How should I give?” and “Which organizations qualify for tax-deductible donations?” are where CPAs shine.

National Philanthropy Day and Giving Tuesday remind us of the power of coming together for the greater good, and it’s inspiring to see our CalCPA community doing just that. Interested in helping a student follow their CPA dreams? Then check out our Community College to CPA program, where you can provide students career tips, expert guidance and deep insights into the journey to a successful career as a CPA. You can find contact info at 

Thinking about teaching for the CalCPA Education Foundation? Find out how at 

calcpa.org/education/instructors-speakers

. Want to share your insights and wisdom with your peers? Then check out our CAL Talks peer-to-peer knowledge exchange program at 

Thank you for all you do to highlight the importance of our CalCPA community and profession—you’re making a difference!

It’s Material: Living Out the ‘Public’ in CPA 

As the giving season kicks into gear, CPAs are at the heart of this movement, whether they’re giving themselves or providing the financial know-how to help others make an impact. 

November 2024: Keep on Giving

lot of movement lately on the “P” word related to the future of accounting—pipeline. Along with the 

 releasing final recommendations to tackle the accounting talent shortage, the California Board of Accountancy also has 

put forward alternative paths to licensure

 to make the journey toward licensure more accessible and affordable. 

With the backdrop, CalCPA President & CEO Denise LeDuc Froemming recently sat down with CBA Executive Officer Dominic Franzella in an episode of the CBA’s 

 to discuss the legislative proposals approved by the CBA aimed at enhancing CPA licensure requirements and modernizing mobility within California, and how they fit in with the Exposure Drafts released by NASBA & AICPA.

The accounting profession faces a critical talent shortage, both nationally and in California. Froemming points to two primary factors driving this trend: retirement among seasoned CPAs and a declining number of accounting graduates.

"Seventy-five percent of current CPAs are expected to retire within the next 15 years," she noted. Compounding the problem, between 2016 and 2022, the number of new accounting graduates fell by 133 percent, and the number of candidates taking the CPA exam dropped by 37 percent. This decline in new talent creates a pressing need to adjust licensure pathways and requirements to make the CPA profession more accessible while upholding standards for public protection. 

To address these challenges, the CBA’s recently proposed updates focus on enhancing flexibility in CPA licensure through its 

, an initiative aimed at creating a streamlined and adaptable framework. Traditionally, the CPA pathway has required a stringent 150 semester units and extensive experience requirements, which may not align with evolving educational and career trends. In response, the CBA’s new proposal redefines educational requirements, prioritizing a bachelor's or master’s degree in accounting rather than focusing strictly on semester units.

Franzella explained that the proposal aims to create two distinct educational pathways: one allowing for a master’s degree in accounting, and the other a focused bachelor’s degree in the field. The proposal also adjusts experience requirements. For example, candidates with a bachelor’s degree in accounting would need to complete two years of relevant experience, whereas master’s degree holders could substitute a year and meet the experience requirement within one year.

This approach, he noted, “emphasizes competency and practical knowledge over traditional academic benchmarks,” a shift that aligns with national discussions on alternative licensure pathways.

Another focal point of the discussion was the importance of mobility for CPAs. As businesses increasingly operate across state lines, California aims to adapt its CPA licensing to support professionals who move frequently or work in multiple states.

Franzella explained that these updates will help align California’s licensure requirements with national mobility standards while maintaining robust consumer protection measures. “This approach allows us to be more dynamic, responsive, and relevant to the changing business environment,” he stated.

Supporting Public Protection and Professional Standards

Both Franzella and Froemming emphasized that public protection remains a priority, even as the state modernizes CPA requirements. To that end, the CPA Exam will continue to serve as a rigorous standard that all candidates must meet, regardless of the new pathways.

According to Froemming, maintaining high standards is crucial for public trust and for the profession’s integrity, especially as technology transforms how CPAs provide services. “We need that professional skepticism and high-level training in the marketplace,” she said, adding that CalCPA fully supports CBA’s efforts to create a balanced framework that meets both industry and public expectations.

This initiative has involved extensive collaboration and feedback from a range of stakeholders, including the National Association of State Boards of Accountancy (NASBA), AICPA, CalCPA and other state boards of accountancy. Town halls and outreach efforts provided insight from current professionals and helped guide CBA toward reforms that balance educational rigor with market demands.

Franzella underscored that adaptability is key, noting, “Our goal is to build a foundation that allows us to be responsive to industry changes without compromising consumer protection.” For instance, the legislative proposal includes provisions for potential future adjustments, which will allow CBA to make necessary modifications without requiring continual legislative approval. “This flexibility will enable us to keep pace with a rapidly evolving profession,” he said.

CBA’s proposed changes reflect a forward-thinking approach to a profession facing significant transformation. As new educational and licensure pathways become available, the CBA and CalCPA aim to address the profession’s talent shortage and make the CPA profession more accessible to a wider range of candidates. While these changes signal a shift, they also underscore the continued importance of public protection and adherence to rigorous standards.

In the coming months, CBA will work closely with legislative bodies, academic institutions, CalCPA and other stakeholders to finalize and implement these reforms. For aspiring CPAs and the firms that employ them, this modernization represents a crucial step toward a more adaptable, inclusive, and resilient accounting workforce.

To learn more about these developments and listen to the full conversation, tune in to the 