Tax Pro Roundup: August Edition

On the move: MGO names new CIO

Accounting Today

[7/5] MGO, Los Angeles has a new chief information officer in Azunna Anyanwu, CliftonLarsonAllen, Minneapolis has a new chief financial officer in Ray Price Jr. and a new chief data officer in Spencer Lourens, and CohnReznick has a new director in the government and public sector advisory practice in Jessie Handforth Kome. Article features various tax and accounting industry news.

"Brinker Simpson & Co., Media, was named the No. 1 employer in the small company category of the Philadelphia Inquirer's 2024 Top Workplaces list and one of the Best Places to Work in Greater Philadelphia by the Philadelphia Business Journal."

Exclusive: PwC weighs halving of China financial services audit staff, say sources

Reuters

[7/16] PwC may reduce up to half of its financial services auditing staff in China as a regulatory investigation and client departures influence business prospects. PwC’s auditing operation employs at least 2,000 people across mainland China.

"The firm, with 781 partners and nearly 19,000 employees in mainland China as of last September, according to its website, is also mulling laying off about 20% of the staff in other auditing teams and non-auditing business lines, they added."

Job Market For Gen Z College Graduates Actually Isn’t Too Bad

CPA Practice Advisor

[7/23] Gen Z may not have it so bad on the job front, especially when compared to previous generations. Despite some social media posts highlighting struggles to find good jobs, the data tells a different story. The overall labor market is strong, and the current unemployment rate is among the lowest in 50 years.

"Gen Z college graduates can expect higher-than-ever salaries when they enter the job market: The typical recent college graduate with a four-year degree can anticipate a salary of around $62,609, according to an analysis of employer job postings and third-party data sources by ZipRecruiter, a job posting site. That roughly matches the Federal Reserve Bank of New York’s finding of $60,000 as the median annual wage for a recent graduate with a bachelor’s degree."

Amid shortage of new blood, accounting firms recruiting teens

Times Union

[7/21] Accounting graduates and CPA exam candidates have been in steady decline for years, but firms are taking action. The New York State Society of CPA sponsored an event that brought 18 high schools together to drum up interest in the profession. Their hope is to convince students that accounting can be a stable, promising, and fun career choice.

"Van Bladel says the accounting profession is much more dynamic than people expect. And today's students might not know that. She also says that the accounting industry has pulled back from taking on as much client work as possible to the point where CPA firms have become fiscal factories."

Intuit will lay off 1,800 workers and hire new ones to advance its AI ambitions

Quartz

[7/10] Intuit’s corporate restructuring involves laying off 1,800 employees, which is about 10% of its current workforce. Intuit chief Sasan Goodarzi noted that the layoffs are about reallocating capital to its “most critical areas.” As Intuit looks rehire about 1,800 new employees, the company also plans to invest more in data, AI, engineering, and other customer-oriented solutions.

"Despite the cuts, the company plans to grow its overall headcount in the 2025 fiscal year and beyond, Goodarzi said. Intuit owns a number of popular financial and tech products, including MailChimp, QuickBooks, and Credit Karma."

How the Accountant Shortage Is Rippling Through the Startup World

Thomson Reuters

[7/17] The impact of the accountant shortage is being felt by businesses, especially startups looking for extra insights. CPA Ben Richmond says finding accountants to tackle tax returns isn’t a problem, but finding accountants to act as business partners or advisors is a different story.

"For many early-stage and smaller companies, accountants serve as de-facto financial advisors in place of a CFO, and right now, in a tricky environment of higher interest rates, elevated costs, and tighter margins, entrepreneurs could really use some professional guidance. But with depleted ranks, accounting firms are struggling to keep up with demand, and founders say they are struggling to get the answers they need."

Workflow insights from the 2024 Tax Professionals Report

Thomson Reuters

[7/10] Responses from the 2024 Tax Professionals Report showed that firms’ efficiency and staffing continue to be top challenges throughout the industry. Notably, one component that gained popularity in the past year was the notion of value-based pricing as opposed to hourly billing.

"This is likely an indicator of the move away from strictly compliance-based tax preparation and into the profitable (and rewarding) world of advisory services."

Enhancing Lease Accounting Through Strategic Innovations

Entrepreneur

[7/25] Lease accounting is a notoriously meticulous and time-consuming practice, but in the age of automation and digital streamlining, does it have to be? A senior accountant at Wasabi Technologies transformed the companies lease accounting process with cutting-edge innovation.

"'The introduction of ASC 842 presented a challenge but also an opportunity to rethink how we manage lease accounting,' says Choudhary. Through meticulous planning and execution, her team has met these challenges and set a new industry benchmark."

Embracing AI: A How-To Guide for Firm Leaders

Boomer Consulting

[7/11] Artificial intelligence (AI) is a transformative tool that firms need to put to work. But leaders must take deliberate steps to encourage adoption and lead this transformation. Marc T Staut, Boomer Consulting Shareholder and Chief Innovation and Technology Officer, shares some of his own successful strategies for embracing AI.

"First, we need to understand the difference between free AI solutions and paid or private. Free solutions might be tempting but often come with security and reliability trade-offs. Invest time in educating yourself by sitting down with your IT team or service providers to discuss potential solutions. Dedicating a weekend to reading about AI's capabilities and applications can also be enlightening."

What Is the Greatest Flaw of Accounting Firm Leaders?

CPA Practice Advisor

[7/25] Accounting employees look to managers and partners for leadership and inspiration. And sometimes, leaders need inspiration of their own. Allan Koltin, CEO of Koltin Consulting Group, discusses how the show "Ted Lasso" sets a positive example for team leaders in every industry.

"'Having uncomfortable conversations is not a strength of Coach Lasso … Despite his discomfort, he still finds the courage to have the crucial conversations anyway, because he knows it will improve the individual, and serve the culture of the team.'"

How does real-time accounting drive a healthier financial future for businesses*

Accounting Today

[7/17] Imagine how productive your firm could be with automatically updated records, seamless data imports, and real-time dashboard reporting tools. With AI and cloud technology, you don't have to imagine. Real-time accounting solutions can resolve major bottlenecks.

"Accounting is an profession wedded to traditional techniques, so leveraging new technology will require a cultural shift within the organization. Naturally, this comes from the top down, and leaders need to be clear about wanting to interact with real-time data solutions and show their commitment by investing in these tools."

The future of accounting: Exploring the CPA Evolution initiative

Rightworks

[6/25] The tax and accounting profession is drastically changing with technology advancements, the new skills CPAs need, and recent changes to the CPA exam. The CPA Evolution initiative may be a helpful roadmap for an evolving profession that now leverages cloud technology, AI, and automation tools.

"The profession is witnessing accelerated advancements in technology, data analysis and security, along with evolving rules, concepts and standards. That means today’s CPAs are expected—and required—to take on more responsibilities than ever before. And they’re expected to take on these responsibilities much earlier in their careers, if not immediately. This includes newly licensed CPAs who are just entering the profession."

Improve your Technology Budgeting with Quarterly Forecasting

Boomer Consulting

[7/11] Technology budgets shouldn’t have annual, one-time reviews. Quarterly forecasting helps firms become more flexible and capable of adapting to emerging opportunities and challenges. Being more responsive could save budgets and achieve strategic goals.

"Quarterly forecasting also facilitates regular review and reassessment of specific projects. For example, you might revisit ongoing discussions around licensing costs and their impacts on the firm as part of your forecasting process. This approach allows you to balance expenses against revenue, ensuring you maximize opportunities without being constrained by the initial budget you set months earlier."

Rethinking Accounting Firm Structures: The Pentagon Model for a Sustainable Future

INSIDE Public Accounting

[7/9] Like most businesses, accounting firms have traditionally operated in a pyramid-shaped company structure. But is that really the best approach for your practice? The Pentagon model supports a stronger, more durable, and more accountable workflow.

"'I think those at the top are probably working harder than ever – which is kind of surprising because we know firms are more profitable than ever – but they’re getting squeezed from a lot of directions,' [said Jennifer Cryder, CEO of the Pennsylvania Institute of CPAs."

Embracing technology in accounting: Practical steps for firms

Thomson Reuters

[7/9] The tax and accounting industry has been adopting new technology for years. While AI-powered tools are the latest opportunity in a rich history of progress, knowing where to start is still a challenge. Thomson Reuters offers five practical steps to integrate advanced tech.

"The long-term benefits of embracing advanced technologies are significant. Firms that successfully integrate these tools can expect improved operational efficiency, reduced errors, and enhanced data security. These improvements translate into cost savings and the ability to offer more competitive pricing."

E187 - Strategies for Smooth Relationship Transitions

Boomer Consulting

[7/2] This episode of the Boomer Briefing Podcast features Sandra Wiley, Shareholder and President at Boomer Consulting, discussing ways to transition client relationships to someone else within your firm. [Podcast]

"It’s also like a cascade. If we have partners or people that are getting ready to either transition out or they’ve got too much on their plate and they need to be doing other things in the firm, we need to push it to another level."

Beyond tax season: creating revenue stability year-round

Thomson Reuters

[7/1] With another busy season in the books, some tax and accounting firms have already experienced the majority of their business for the year. But this longstanding business model appears to be changing, according to the 2024 State of Tax Professionals Report.

"A majority of respondents in this year’s survey said their accounting firms reported a 24% increase in revenue over the past 12 months, and many were expecting that their revenues would continue to rise at a rate of more than 20% over the next 12 to 24 months. This is exciting news—and proves the increasing importance of creating revenue stability beyond tax season."

IRS Releases Initial Guidance on Carbon Sequestration Tax Credit

CPA Practice Advisor

[7/24] The Internal Revenue Service (IRS) has provided initial guidance on how taxpayers can claim the tax credit for the capture and use of carbon oxide, a credit expanded by the Inflation Reduction Act. Before taxpayers can claim the credit, a lifecycle analysis (LCA) report must be approved by the IRS. The LCA information to include is detailed in Notice 2024-60.

"Substantial improvements to the Section 45Q tax credit include increased credit values to $85 per ton of carbon oxide captured and stored from industrial facilities and power plants and $180 per ton for direct air capture facilities, an extension of the credit to a full 10 years, the ability to claim the credit directly as a cash payment, and expanded eligibility for smaller direct air capture, industrial, and power generation facilities, the Energy Department said."

IRS: People Are Being Misled on Social Media About a Tax Credit That Doesn't Exist

CPA Practice Advisor

[7/15] Financial influencers on TikTok and Instagram have gone viral by promoting a tax credit that compensates gig workers and self-employed individuals. There's just one problem: No such tax credit exists.

"In a consumer alert issued on Monday, the IRS said bad advice circulating on social media about the non-existent “self-employment tax credit” is misleading taxpayers into filing false claims."

I.R.S. Crackdown on Delinquent Millionaires Yields $1 Billion

The New York Times

[7/11] The ongoing $60 billion modernization of the IRS has helped the agency collect $1 billion from delinquent rich taxpayers this year. 1,600 taxpayers with more than $1 million of income and more than $250,000 in tax debt were targeted in the effort.

"Daniel Werfel, the I.R.S. commissioner, said that because of the agency’s larger enforcement staff, it has been able to focus on tracking down and sending letters to wealthy taxpayers who owe money. In many cases, these result in threats of additional penalties until the taxpayers eventually pay their tax bills, he said."

3 Reasons It May Look Like You Love the IRS More Than Your Family

CPA Practice Advisor

[7/3] Knowing legitimate tax reduction strategies is important. You probably don’t want to “gift” your kids a large tax bill down the road. RIA and LUTCF Scott Phillips shares three reasons why it might look like you love paying taxes more than you love your family.

"The 10-year limit does apply to Roth IRAs as well as traditional ones, but since you already paid the taxes on the Roth, your kids won’t be stuck with a large tax bill. Roth IRAs have different rules and contribution limits, of course, but conversion is generally a beneficial way to help you deal with some of the financial fallout from inheritance."

FASB Aims to Improve Derivative Accounting

CPA Practice Advisor

[7/23] The definition of a derivative in accounting has a notoriously broad interpretation, and the Financial Accounting Standards Board (FASB) is now looking to change that. Between now and October 21, industry leaders and stakeholders will provide comments to the FASB to help them clarify rules on derivative accounting.

"'A frequently cited challenge was the broad and evolving interpretation of the derivative definition and the complexity of applying scope exceptions to certain contracts with variables (referred to as ‘underlyings’) based on operations or activities specific to one of the parties to the contract,' the FASB said."

FASB answers Big Four convertible debt ask

CFO Dive

[7/18] Convertible bonds have grown more popular among companies during the recent credit crunch. Deloitte, EY, KPMG, and PwC made a request in November 2022 to the U.S. accounting standard setter’s Emerging Issues Task Force, resulting in a change to the standards. Now, another standards update is being made to address the difference between induced conversion accounting and extinguishment.

"The standards update follows on the heels of a FASB vote to finalize new rules on expense disclosures. They will require public companies to disclose in the notes to their financial statements certain expenses such as purchases of inventory, employee compensation, depreciation and intangible asset amortization. The new requirements are expected to be a relatively heavy lift for companies because compliance will require them to collect significantly more data from a wide range of departments, CFO Dive previously reported. Those new rules will be effective for fiscal years beginning after Dec. 15, 2026, and interim periods within fiscal years beginning after Dec. 15, 2027."

SEC Allows Some Exceptions to Crypto Accounting Compliance

Bloomberg Tax

[6/11] While banks and brokerages were initially instructed to report customer cryptocurrency holdings on balance sheets, a new SEC ruling changes things. New guidance from the SEC allows large banks to make certain arrangements that enable them to bypass crypto reporting.

"Banks have successfully argued during closed-door consultations with SEC staff that wallets and spot Bitcoin exchange traded products should be outside the scope of the crypto guidance, the source said."

AI Can Save Professionals 12 Hours Per Week, According to Thomson Reuters Report

CPA Practice Advisor

[7/9] The Thomson Reuters 2024 Future of Professionals Report surveyed tax, legal, and risk and compliance professionals about technology, workflows, and feelings about their respective industries. One of the main takeaways: Teams are overcoming staff shortages and regulatory challenges through AI assistance.

"63% of those surveyed are already using AI-powered technologies as a starting point for tasks, with research, summarization, and drafting cited as the most common use cases."

Mid-Tier Accounting Firms Tread Slowly in Gen AI Transformation

Bloomberg Tax

[7/8] Adopting technology isn’t like flipping a switch, especially for accounting firms outside of the Big Four. Today, mid-tier firms are exploring the productivity-boosting potential of generative AI. Firm leaders at CliftonLarsonAllen LLP, Grant Thornton Advisors LLC, Forvis Mazars LLP, RSM, BDO USA P.C., and Baker Tilly Advisory Group LP share their insights on the industry’s progress.

"Mid-tier firms have focused on piloting early applications, crafting guardrails for their use and providing training. They continue to roll out productivity tools like Copilot or internal assistants that answer IT or benefits questions."

Why AI will kill accounting generalists*

Accounting Today

[7/12] While humans will always be vital to the accounting profession, the emergence of AI is poised to devalue certain skills and emphasize others. It’s possible to find a niche specialty before generalized accounting tasks become automated.

"Accounting partners that can connect and sell to industry leaders will become all the more valuable for firms — and that connection isn't going to flow from high-level, general business knowledge. Trust comes from repeatedly showing deep and exclusive expertise when a client needs it."

How CFOs can build the most effective tech stack

Raconteur

[7/1] The tech stack is becoming a more valuable tool for CFOs, especially as data collection increases and the finance function’s role evolves. Although a perfect tech stack may not be achievable, considerable optimization can yield impressive results. CFOs Martin Edstrom of Paragon, Andrew Kennard of VCL Vintners, Julien Lafouge of Spendesk, and Vijay Padmanabhan of UST offer their insights.

"For Padmanabhan, usability is always the main consideration when he’s making a decision about upgrading his tech stack. When it comes to automated tools, such as financial planning and analysis (FP&A) software, he highlights the importance of sense-checking the data and balancing it with human judgement and intuition."

Democrats sign on to attempt overturning SEC's crypto accounting rule

Axios

[7/24] There’s a renewed effort to overturn the SEC’s crypto accounting rule SAB 121. Although H.J. Res 109 ended with President Biden’s veto, a different bill, H.R. 5741, has gained the support of five Democrats. Existing accounting rule SAB 121 has been criticized by a variety of finance professionals for creating prohibitive expense when providing custody services for digital assets.

"What we're watching: Vice President Kamala Harris' gaining support as the Democratic party nominee could be the catalyst that thaws the standoff between crypto and the White House, and we're looking for any signs of that."

How Your Accounting Firm’s Business Model Decides AI’s Impact On Your Firm

Forbes

[7/29] The connection between your firm’s business model and AI is worth exploring. The way your firm operates now can help establish what role AI could eventually play to bolster your business. Tangible benefits for your clients, staff, and your bottom line may be on the horizon, according to industry expert Hitendra Patil.

"AI is not some magic. It is not a mystery. There is a science to it. There is a method to it. And there are no better professionals than accountants to understand things in systematic ways. After all, you can almost predict what your software will do in a given situation, right? Because you can figure out the software logic."

Surveying a Shifting Landscape

The CPA Journal

[7/24] Advisory services are on the rise, even surpassing audit in total industry revenue. Big Four accounting firms have nearly quadrupled their advisory revenue since 2000. The rest of the industry is taking notes on this development.

"The faster growth of advisory services as compared to assurance services … has caused tension within large audit firms and regulators worldwide. This tension will eventually lead to some resolution. What form that resolution takes is a question that firms and regulators are struggling to answer."

Top accounting challenges in 2024

Thomson Reuters

[7/18] The accounting industry keeps changing, which keeps its many challenges in focus for firms of all sizes. From navigating staffing limitations to updating billing approaches, a wide array of firm needs is being addressed at the same time. The 2024 State of Tax Professionals Report reveals the top 13 challenges firms are facing.

"According to Thomson Reuters research, the billing model gaining the most traction in 2024 is value-based pricing, in which charges are based on expertise, guidance, and results, rather than time spent. Nearly half (48%) of respondents said their firms already offer value-based pricing on some of their services, and 18% said their firms plan to start offering it by the end of the year."

Accounting Firms Must Do More Than Make One-Time Salary Bumps

Bloomberg Tax

[7/9] One-time salary increases aren’t enough to stay competitive and attract early-career accountants. Bringing students back to the profession will require raising salaries above other fields, improving work-life balance, and adding funding for licensures. Hofstra professor and CPA Jack Castonguay offers recruiting solutions and a real-world assessment of the industry’s current talent pipeline.

"And here lies the ultimate difficulty for firms in 2024. Salaries have been uncompetitive for long enough that this perception is well-established among students entering college. A one-time increase won’t change that. Students often decide their major before arriving at college; others decide their first year or two. Today’s increases will affect students who will be CPA eligible in 2029 or 2030."

Perspectives from the Profession – Ideas for Smaller Firms to Remain Competitive and Address the Concerns of the Next Generation

INSIDE Public Accounting

[7/10] Smaller firms are at a disadvantage when forced to compete against larger firms, especially those with outside private equity and other funding. Due to several other industry-wide challenges, the next generation of leaders may look elsewhere to build their careers. Lynn Ledbetter, Executive Director, Edwards & Associates, shares several ideas for smaller firms to stay competitive in the battle for young talent.

"The challenges facing public accounting are significant, but they are not insurmountable. By adopting thoughtful, employee-focused strategies, firms can create an attractive and supportive workplace. Such environments not only draw talent but make it easier to retain young professionals as they navigate the complexities of public accounting. As we continue to refine our approaches and policies, the goal remains clear: to ensure that public accounting is as rewarding and fulfilling as it is critical to the business landscape."

‘More Listening, Less Talking’ And Other Advice, Challenges, Observations from Top MPs

INSIDE Public Accounting

[7/9] INSIDE Public Accounting took a look back at the managing partners (MPs) they profiled in 2023 and selected some of the best quotes. Industry leaders offered their take on the state of the profession, different advice they cherish, and even reading recommendations.

"I think the very best advice I got was to have fun in this profession – to enjoy it. Working with clients can bring a lot of satisfaction, which is why it’s so important to take care of those relationships. – Seth McDaniel, MP, Frazier & Deeter"

Private Equity and the Ethics of a Profession

The CPA Journal

[7/5] Private equity (PE) investments in CPA firms may lead to unintended consequences. Auditors serve the public’s interests, but outsized PE investments can increase pressure to serve clients’ interests. Richard H. Kravitz, MBA, CPA, provides a historical review to consider.

"Having worked for two private equity firms during my career, I can say that our objective was to restructure the acquired organization, eliminate investments that would not be realized in the short term, cut marketing and new product development spend, reduce technology investment, optically dress up the company, and then sell it to another PE company."

Danny Werfel’s Cat Is the IRS’s New Social Media Darling

CPA Practice Advisor

[7/5] IRS Commissioner Danny Werfel’s cat, Emmett, is now being featured on the agency’s Instagram posts. Emmett is part of an effort to create eye-catching content to educate taxpayers about scams.

"IRS Commissioner Danny Werfel recently dropped by the studios of NBC10 in Boston to talk about tax scams, the agency’s Direct File tax-filing software, and how the IRS is trying to reach a younger audience via social media. That led to a discussion about Werfel’s cat, Emmett."

John Summit on 'Comfort in Chaos,' Social Media and Accounting

Variety

[7/12] John Summit (real name John Schuster) is one of the fastest rising stars in the electronic dance music (EDM) scene, but music wasn't always his day job. Before selling out Madison Square Garden and receiving shoutouts from Barack Obama, Schuster worked as a CPA to fund his artistic ambitions.

"I graduated, got my master’s degree in accounting and got my job in accounting. But I was a terrible accountant, because I didn’t care about it at all. That was just to pay the bills while making music and playing the parties every weekend."

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