Ep. 138 | The Future of The Tax Prep Industry - Teaching Tax Flow: The Podcast

Episode Transcript
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John Tripolsky (00:04):
Hey everybody, and welcome back to the Teaching
Tax Flow podcast. Today, episode138, we are looking at the
future of the tax preparationindustry. Yes. We are looking at
the industry as a whole, bustingout of the closet, dusting it
off our crystal ball. We arelooking into the future the best
we can into the industry.

(00:26):
But before we do it, as always,and dive into some of these
details, let's take a briefmoment and thank our episode
sponsor.

Ad Read (00:37):
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Hey, everybody. We are back here again on the
teaching tax full podcast. It'stime to talk about, not you
specifically, but we're gonnatalk about the industry. So,
obviously, as you see in theshow notes, the title, you've
probably heard us talking aboutthis for a little while now in
some way, shape, or form. We aregonna look at the tax
preparation industry.
So what that means for you, thetaxpayer, is that there is

(01:58):
likely somebody that preparesyour taxes. Yes. You may do your
own. You may have a cousin. Youmay have an uncle.
You may have a sister, brother,child, any of these people, but
the industry specifically ismade up of ton of professionals
like this handsome gentlemanhere, I would say to my right,
but actually to my left here onmy screen, Chris Pacquero. How's

(02:19):
it going, man? How are you?

Chris Picciurro, CPA (02:20):
It's going well. How are you doing?

Doing good. Doing good. So, yeah, today,
we're gonna talk a little bitabout you and and your people, I
guess we can say. Right? Soyou've been in this a while.
You've been in the industry, youknow, about, what, a hundred and
twenty five years? Hundred andhundred and twenty

five dog years.

Yeah. Just get it. But it's No. It's back a lot
of changes. Right?
So so twenty twenty plus years,but it's like, I mean, things
have changed so much for youguys as tax pros. Right? Like,
just I mean, even just the wecould say the stereotype of what
a tax and accountingprofessional is has drastically
changed. Right? Like, you'vegone from pocket protectors to

(03:00):
jeans and a T shirt in somecases.
It's just just everything.Right? So tell us a little bit
about even your experience,maybe. Like, how'd you when you
got into this, we won't get intothe the background story of that
because we've done already. But,like, where where do you see
this?
Like, where we stand today andand just kinda run with it here.
Let us know what you think.

Chris Picciurro, CPA: Absolutely. I mean, the things (03:18):
undefined
have changed significantly inthe last twenty, twenty five
years. You know? Just the onsetof efiling alone has changed a
ton of things. If you canimagine, many listeners, you
know, twenty five years ago, taxreturns were mailed in.
In simp in in especially on the,tax preparation side, they were

(03:42):
printed out, put in these fancylittle packages or, folders, and
then they were given a a copywas mailed in to every taxing
authority. W twos were staple tothese returns and processed by
hand. It would be a long, longtime before refunds were
provided. They were mailed topeople, not even direct deposit.

(04:03):
And, there's a lot of, I mean, alot of data security concerns
just that alone going into theyou know, mailing these things
in.
And, actually, when I firststarted, you would if you filed
a tax extension, you'd only get,you'd get four months, and then
you would have to do a secondaryextension for another two months
mailed in. So it's it's justpretty crazy. There there's just

(04:27):
a lot and and the other issuewould be, let's say you were a
tax professional and you printedout all of these returns, and
then if someone came in andsaid, oh, by the way, I forgot
to tell you. I donated all thismoney to this church, and I
didn't give you thatinformation. Well, now it's just
a couple clicks, and we cancorrect the return and reput it
in a a portal, reprocess it.

(04:49):
Before, it was quite aexperience in a time commitment.

I can imagine. And, you know, you you again,
kind of not a not a historylesson on the tax professional
industry, but I would say thatyour desk back in the day
probably had numerous things onit. Right? You probably had a
ton of pens. You probably hadthe the giant stapler, like the
ones that have the big arms onit, binder clips you probably
had in there.

(05:15):
You probably had white out allover the place and, you know,
whether it was the ones youtwist the cap on and spill all
over the place. There was theribbon one. So little things
like that. Right? And I and I'dsay that about whiteout is one
thing.
When was the last time you evenseen that? I haven't seen a
whiteout whole Gosh. Ten years.

It's been a long time. Absolutely. There
was no such thing as importingdata. There just it was just a
very manual process. And Right.
And any changes to the process,any changes to the return were
were a big deal. You know? Theyare significant. So you even
just the paperwork. I mean, whenwe started, we would take all

(05:55):
the clients' source documents,which could be stacks of
paperwork.
And we would the, you know,before the Internet and or
before e filing, we wouldactually make a photocopy of
them. So it's funny. My when Ifirst started, the copier lease
was almost as expensive as myoffice lease because your
photocopier and what let alonebe becoming a scanner or a fax

(06:18):
machine was a huge burden. Andthe ribbon, there was a so you
would you would go through somuch paper, and and then you
would save all those searchdocuments internally, and then
you'd have to house those searchdocuments.

Right. So Which is a whole another thing. Right?

It is.

So so would you would it be safe to say,
obviously, things have changed?What I I'm and I'm thinking of a
word here, and I I know we'vetalked about this. I've seen
this. Would you really considerkind of the current situation,
landscape, whatever we call itwith the tax pro industry, is
really being a crossroad or,like, a pivot point or something

(06:57):
like that? Like, what what doyou

think? Like, it's it's really it's just
an evolution. We talk about inour peer to peer coaching and
mastermind group for other taxprofessionals. So if you are a
tax professional, check outMRRInstitute.com and and maybe
join us. But we talk about youevolve or you erode, and you
could and so the the industry isevolving.

(07:18):
So as someone that in myposition that I want our CPA
private CPA practice to continueon well well beyond my working
years and my living years, gothrough generations of
leadership, we are evolving. Sothat's we're constantly
evolving, and and we have toevolve with with the some of the

(07:40):
changes that we're gonna talkabout today because the tax
preparation industry is gonnacontinue to evolve. There are
significant challenges for thetax for tax professionals and,
as a result, taxpayers. So youneed to be aware of them. You
know, I I mean, one of the rolesI have in our in our private
firm is just to have a quickchat with any potential new

(08:03):
clients before we start that theprocess of of potentially
working together.
And I tell them, this is youknow, what we're gonna talk
about is seventy five percent ofCPAs are expected to retire in
the next fifteen years. So ifyou have a good CPA firm or tax
professional or an enrolledagent, hold on to them. No one's

(08:25):
perfect. It's like a spouse.Like, you you know, with the big
no.
You're not gonna find thatperfect firm. You might not like
their client portal. You mightnot like something about how
they operate. But if they'redoing a good job getting the
best result possible and youfeel like it's a partnership,
then don't be so quick to justjump around and change.

Send them a Christmas card. Don't wait for
the one from them to you.

Exactly. Keep

them happy.

They're telling you about that too.
People just even though they'rekinda looking around and talking
to me about working with ourfirm, a lot of times I tell them
to, hey. You got it pretty goodtoo. I mean, if it's not broken,
don't fix it. That being said,one of the other things we're
gonna talk about is is taxpreparation firms absolutely
need to evolve themselves, andthey need to move into tax

(09:12):
planning and strategy tocomplement their tax preparation
work or tax compliance work.
So so, yeah, let's look at thelandscape of where we're at.

And, really, when when you say involve
involve, obviously, you'reinvolved. Evolving in in the
landscape, the current landscapeof it. Right? I I would say that
it's a % safe to say that eventhough it's evolved and it
people may think like, oh, it'sgotten so much easier with all
these tools and not having tomanage this. I'd almost say it
probably has in some sense.
Right? But it's probably almostgotten more complex than others.

(09:43):
Right? So it's not like it's aneasier gig, we should say.

It's definitely gotten more complex
yet more streamlined. So therethere was technology that we can
we can we can shorten theprocess up, but part of there
there are several challengeswith that process. You you've
heard me for almost two decades,but specifically over the last
five years talk constantly thatthe biggest challenge in tax

(10:11):
compliance or tax preparationand when I say compliance work,
that means bookkeeping, payrollprocessing, and tax preparation
is getting good information frompeople. Once you have the
information, you're in goodshape. You could be an amazing
chef, and then you're trying butif you don't have half the
ingredients you need to make themeal you're trying to make, it's

(10:33):
gonna get compromised.
It's not gonna taste as good, oryou just can't make it.

That's a great way. That's so So tax prep kinda
starts with the taxpayer, weshould say. Oh, absolutely.
Absolutely. Your role or pullingyour weight as the taxpayer
giving you all your information.
You can only do as good as whatyou're giving.

I bet the best one of the better examples
is going to the dentist. Right?You go to the dentist to get
your teeth cleaned. You youshould twice a year. Sometimes
you they run into something thatthat they need to address, and
it's ultimately up to you if youwanna address it.
So, hey. Yeah. You know, you gotthis cavity forming. You might
if you it may be nothing. Itmight become a root canal,

(11:12):
whatever.
It might get have to go getextracted at one point. But when
you go to the dentist to getcleaning, you still brush your
teeth before you go. Right? Imean, you you don't pound a
coffee and three donuts and goin there. Oh, at least I hope
you do.
But the cleaning is so you'vegotta do your part. You've gotta
show up. You've got and you andthe dent the hygienist and the

(11:36):
dentist can can do wonders, butthey need your participation.
Right? They can't if you'resquirming around or you're
missing late for yourappointment or you're you know,
don't you never floss and neverbrush and then get upset that
you have four cavities.
Ultimately, it's your it's up toyou. It's your decision. And,
John, you know, I'd fulldisclosure, like, my two biggest

(11:59):
fears are going to the dentistand geese, but that's another
episode.

I was wondering if you were gonna bring up
geese. You did.

Well, my wife and I were on a walk, and
then I went for a run. Werecently went to the Smoky
Mountains with our family. And,yeah, I crossed the street
because there's mostly becausethere are two geese, adult
geese, with about eightgoslings. And and you don't mess
with the if you see them withtheir little with their with

(12:27):
their babies, get out of the waybecause they're I'll I'll first
of all, they're very mean meancreatures. Dirty creatures.
They like to

Wonder we'll dive into your your real
feelings on the geese, and thenmaybe I'll tell my swan stories
with me in a jet ski.

Oh, swan could be swan could be nastier
than geese, but at least theyonly attack you when you are on
the water.

Oh, yeah. Let's put it this way. We if if I ever
tell my swan story, hope nobodyfrom the DNR is listening to
that because they will be on mydoorstep.

I'm sure the statues statute of
limitations has expired.

Yes. And I'm sure that Swan's long gone.
Plus, he can't testify if wewent to court.

But anyways So I so I walked as I
went across the street to avoidthe geese. And and then on the
way back, we're kinda walkingback. They were they're kinda in
the middle of the road because,of course, they think their poop
doesn't stink even though itends up on your windshield.
Right? And, luckily, there was abarrage of vehicles driving on
the street to set a pick foranyone who's played basketball.

(13:30):
You know what a pick is. Right?You set a pick for someone. Set
a pick for my wife and I to goaround go around the geese
without having to deviate ourpath. It has nothing to do with
tax preparation, but so let'sdive into our landscape here.

Has to do with planning, though. Okay. Good.

Yes. Yeah. You could yeah. But that's a
good way. Your your taxprofessional sometimes could
protect you from the IRS or thegeese.

I I love how these conversations randomly go
in the craziest directions, butyet somehow, someway, they
always circle back in. So let's,yeah, let's talk about the
landscape as we said, like, now.What is the what is the industry
look like? Why why are peopleare they are they? Are they not?
Are they not planning to? Arethey looking to get into the

(14:15):
industry? You know, do theywanna go I don't know. Avoid
being a geese or a goose, Ishould say. Avoid being a goose.

Right. Okay. So the first thing is

What does it look like?

Let's talk about the the the future of the
tax tax professional industry.Number one issue is we have a
shortage of CPAs and taxprofessionals. Not all CPAs are
tax professionals. There's otherthings that we can do, and not
all tax professionals need to beCPAs. We have tons of friends
that are enrolled agents, andyou've had the opportunity to

(14:46):
really meet a lot of thosepeople.
They are super talented people.Many of them have been on
podcasts on this guest. Many ofthem I collaborate with
regularly. But but, you know, wehave a lot more data on the c on
CPAs. So just as an indicator ofwhere we're in this under
industries at, we have like Isaid, seventy five percent of

(15:06):
CPAs are expected to retirewithin the next fifteen years.
And since 2016 from 2016 to2023, we've had a thirty seven
percent drop in CPA examcandidates. So if we have less
than a you know, we have a adangerous mix of thirty seven
percent drop in people evensitting for the CPA exam,
seventy five percent of peopleleaving the profession, that's

(15:29):
not that's not good. We alsohave about a 17% decrease in
accounting degree completionsbetween in the 2012 and 2022. So
we see those indicators. Like,it's just like you know, John,
it's a good a good way to say itis we're our industry is driving
around with our engine light, onand blinking at us super

(15:51):
brightly.
Not any you know, it's acombination of all these
factors. Why? Why is thishappening at least on the CPA
side? Because there's such athere's a hundred and fifty hour
requirement of college, which isbasically a master's degree. We
have outdated education paths,and, and we just you know, it's
just there's too many barriersof entry to be a CPA.

(16:13):
I know that sounds ridiculousbecause as one, you you think,
oh, I got this designation. Letme try to make it hard for
everyone else. We will it therethere's a lot there's a big
push, a lot of state societiesare advocating for there to be
we could still stick with thetraditional path, but we want
some alternative paths that ifyou could pass a CPA exam and

(16:34):
you show a level of competencyto serve the public and you
decide to go into the taxpreparation and planning world,
then you should be able to belicensed. So that's it. Now,
what are we doing as CPA firms,tax firms?
A lot of them are hiringoffshores. A lot of them in The
Philippines and in India and inSouth America, to meet demand

(16:55):
because we we don't have thetalent coming into the industry.
And a lot of it too is theculture of CPA firms,
specifically our tax firms. Itused to be this red badge of
honor, like, yeah. I workedninety hours last week.
I worked eight hundred hours aday. That that mentality is
outdated. And, you know, weagain, you know a ton of tax

(17:17):
professionals. There's a few ofthem out there that absolutely
love to say, look. I'm willingto work ninety to a hundred
hours a week for about threemonths.
My life's gonna be miserable.And the and I think I can make
enough money to live comfortablythe rest of the year. Maybe do
some other projects, do somework, and I'm good with it.
There are some tax professionalsthat that works for. That being

(17:38):
said, we're not the it's veryrare that someone that is either
married in a serious committedrelationship or has children can
operate like that.
They're usually more of a HanSolo, basically.

Right. It's just like a drain. And and you're
right. I mean, it's it it isinteresting. You know, me not
being a tax pro at all.
You know? As I always mentioned,I'm, like, the dumbest person in
the room, but we go to aconference, which I enjoy.
Unless somebody starts talkingmarketing, and then everyone's
real smart. But, yes, somepeople just really enjoy, you
know, that crunch time. So ifsomebody you know, to everybody
that's listening or watchingthis, you might have one of

(18:13):
those, and it's not a bad thing.
It's not terrible. I mean, sure,there might be things that they
don't do or you call or emailthem in July and you don't hear
back until August. I mean,that's a problem. But if if that
works for them, basically, whatI'm hearing here, right, is
there's there's such a shortagenow, but it doesn't look very

(18:35):
positive looking forward.

It doesn't. It's it's at the
moment.

Because, yeah, like you mentioned, it's there's
so much data around it. There'sdata and facts of the current
situation, but then there's alsoa lot of data and what are going
to be deeper, more truthfulfacts in foresight. And there's
not because it's not like Icould wake up tomorrow and say,
you know what? I think I'm gonnabe a tax pro. And in six months,
I'm one.

(19:00):
Like, it doesn't happen. That'scurrently.

No. You can you mean, you can enter the
tax. You can work at a tax firm,but it's gonna take you a long
time to get licensed. You know?So we for so we have the the
what we call the retirementcliff and pipeline issue.
That's that's one. Number two,we have a more compressed time

(19:24):
for with deadlines. Now as youknow, in our private CPA firm,
about 75% of our clients,probably two thirds of 75%, we
intentionally prepare taxextensions. Many people and, you
know, I'm a firm believer in taxextensions if it allows you with
possible. However, many peoplestill feel like I need to I want
my tax return done by April 15.

(19:45):
Well, there is a compression oftime. Even if you had every
document available to you onJanuary 1 to have your tax
return prepared, it would stillbe challenging to get all the
returns prepared, let alone manyof the forms are being delayed
to get to you. So for instance,one oh, let's just focus on one.

(20:10):
A very, very common form is aten ninety nine b. That is a
comes from a brokerage.
So anyone that has a brokerageaccount that owns stocks, mutual
funds, EFTs, etcetera, etcetera,It could be with E Trade. It
could be with Fidelity. It couldbe working with a great
financial adviser like we havein the teaching tax law
community. Okay? Those aretypically due to their to the

(20:31):
taxpayer by by February 18, Butmany, many times they get
delayed, so they'll get apreliminary one.
And many, many times they don'tactually receive the $10.99 b
until March. It's not even dueto the IRS if you e file it from
the brokerage till March 31. Andthis includes remember, we had

(20:53):
tie gains on recently, amazingcrypto digital asset enrolled
agent expert. So that includesdigital assets also. So now all
of these forms are coming outsometime between the February
all the way to the March increating a ton of compression

(21:15):
just because we're having delaysin getting documents.
Some documents, John, is you Imean, you're a taxpayer. You
know, you get some of yourdocuments emailed to you
January, you know, no big deal.But a lot of times these
documents are coming out later,including k one forms if you're
involved in different types ofinvestments. So the the second
issue in in our industry, whichis compounding the work

(21:38):
compression, which is a dominoeffect of why a lot of people
don't wanna enter this industrybecause of the work compression
during certain times of the yearor that we're getting delayed in
tax return or documents comingto us in a delayed fashion.

And looking at, you know, and now back to back
to the one I think youmentioned, before about a
restaurant. Right? So,basically, what's happening per
the what you were just talkingabout is it's almost like you go
into a restaurant with theexpectation of it being a, you
know, a Michelin star, excellentmeal, excellent preparation.
It's great. Everything's kindacustomized for you.

(22:16):
And you get there, and you'relike, oh, well, you close in ten
minutes. Can I put in my orderright now? And they're like,
yeah. We could have it in tenminutes, but it's not gonna be
good. Like, it'll get there, butit's not gonna happen.
So but and everybody, you know,everybody's tax prep needs. You
know, whether I would probablysay literally every single
person, is customized. I mean,down to, like even if you have

(22:40):
the same exact income assomebody else, your social
number's different. Your there'ssomething different in there
that you just can't press onebutton, copy, paste. It's done.
It's done. It's done. It it'snot gonna happen. Not

gonna happen. I'm gonna I'm gonna die
on the hill of saying there isno such thing as an easy tax
return. I I get peopledisagreeing with me. I even have
some tax professionals disagree.There's no thing no such thing
as an easy tax return becausethere's everyone is unique.

And I've seen people say I haven't seen them
argue with you about that, butI've seen them say, like, oh,
yeah. Yeah. There is. And youknow what? My response to that
would be is, like, the peanutgallery.
I would say that you are a %right. There's no easy tax
returns. There's easier taxreturns.

Right. There there could be more
straightforward, but let's thinkabout let's think about well,
I'm gonna I'm gonna throw youout there, John.

Yeah. Chuck me in there.

Nothing nothing personal. Alright? But
let's think about a situationwhere you let's say you didn't
have your own marketing agency.You weren't involved in teaching
tax law. You you received a wtwo from a chamber of commerce.
Your wife receives a W two. Youbought a home in in Michigan,
right? Seems like a pretty quoteunquote easy tax return. Then,

(23:56):
you think, sometimes we forgetactually. You know, we, oh,
wait.
I used to have a property inSouth Carolina. We rented it
out. We're about to sell it.Now, you have a rental property.
Oh, we had a child.
Yeah. Yeah. She goes to daycare.Oh, yeah. No.
Now, have the child tax credit.Oh, now, do you even qualify?
Now you might have the child anddependent care credit. Oh, wow.

(24:17):
Oh, yeah.
We bought this house. We'rerehabbing it. Gosh. I forgot we
did all those windows. Do wehave an do we have energy
efficient oh, maybe.
Oh, you know what? The more Ithink about it, yeah, I I did
put some money away in there tomy daughter's five twenty nine
plan, and I live in Michigan.There's a deduction there. Oh,
yeah. That's right.
So all of a

sudden snowballs.

Looks like, hey. Two w twos. Yeah. We
own a house. And you're like,that's a lot of stuff.

Like, you know, I think we did an episode. I
don't know if we went into a lotof detail on it. It's like,
really, like, getting to knowyour tax professional. I don't
know if this was on this show oranother one, but, like, that's
really where it comes in. Right?
Like, you're you're basicallynot married to your tax pro, but
you got I mean, you have totrust them. They have to feel
comfortable, right, to ask youtough questions. Because if

(25:05):
they're not gonna ask you somequestions or, you know, you
can't expect them to knoweverything about you, but their
relationship has to be there.Because, again, like, you can as
we mentioned, you can only do asgood as the information you're
given. It's like giving somebodydirections and not telling them
how to get to your house, butyou tell them how to get to two
streets away.
They don't know how to, youknow, how to go the extra
hundred yards if you don't giveme your address. They don't know

(25:26):
what it is.

Oh, absolutely. It's like so you you
just don't know, and thatdoesn't include other things.
You know? Anyway, this thiscould be a lot of stuff. Right?
There could be, oh, my well, mywife changed jobs, and she
rolled over her four zero one k.Okay. It might not be taxable,
but there's we need to reportthat ten ninety nine r because

(25:47):
what you know, we need to makesure the IRS knows even if coded
properly, that was rolled overto another another account. So
there are there's no such thingas an easy tax return. Now there
might be people that are easy todeal with, and those are the
kind of people I like to dealwith.
Right.

They're Easy people, difficult returns.
Difficult people, difficultreturns. You get rid of them.

I'll take easy person, complex return all
day if I'm a tax professional.Alright. So we've got we've got
that delay. Now we're so thiskinda ties into the rising
complexity of tax returns isanother factor. Right?
We to 20 look at, like, twentytwenty four returns. We now have
tons of digital asset reporting.We have, short term rental

(26:30):
properties. We've got restrictedstock options. I'm thinking
about just yesterday.
Just yesterday, the dev fromrecording this, I had a bunch of
meetings. I talked about RSUrestricted stock options. I
talked to a a couple that'sstarting a wellness center. I'm
start I talked to someone thathas a short term rental
property. I talked to someonethat that her her spouse passed

(26:52):
away.
I've talked to someone who hasdigital asset reporting. I'm
just thinking off the top of myhead, like, there are tons of
different complexities now thatweren't there before and get
more forms. So and it's gonnaget more complex in 2025 with
the new digital ad ten ninetynine DA stands for digital

(27:15):
assets. And we had a couplepodcast episodes before, the ten
ninety nine k with all of theseVenmo transactions and that sort
of stuff. So there's gonna bemore there'll be more forms to
tangle with.
Oh, by the way, we have the TaxCuts and Jobs Act that's going
to set to expire. We havepending legislation right now on

(27:37):
the federal level that could hitand change a ton of stuff. And
then you have to think about, dothis does the state comply?
John, you've kinda dipped yourtoes. Not really you know,
you've you've you've been in alot of meetings where we're
talking about tax planning andstrategy.
So there are several taxmitigation strategies that are
built for a federal tax returnthat we have to actually look

(27:59):
into every state one by one anddetermine if the state complies
with that deduction or thatcredit, etcetera, etcetera. So
rising complexity of thereturns, shorter amount of time
to do it, less people that cando it, are a bad cocktail for
the future of the taxpreparation industry.

Oh, yeah.

Now And I'm sure that

actually leads us up. I don't know if we're
gonna talk about it next orlater on, just about technology.
Right? Like, all these tools,AI, all these things that are
out there. Is it good?
Is it bad? You know, what whatdoes that look like?

I think we have to so, yeah, so how's AI
going to help how's it gonnaplay a role with tax
preparation? How's it gonna playa role with for taxpayers? And
how's it gonna play a role forthe government? Right? Let's
talk about that.

Very true.

AI and automation. Now we have another
podcast just for taxprofessionals called the mister
r show. We have a nationallyrecognized speaker join us, guy
named John Higgins, specificallytalk about AI in our profession
for an hour because the show'san hour. We have because it has
to con you know, be compliantfor continuing it. And he put it

(29:08):
best.
CPA firms, tax firms, that AI isnot gonna replace your firm, but
firms that use AI are gonnareplace firms that don't use AI.
So if you're if you're workingwith a tax professional that is
not refuses to learn use AI inany capacity, that might be a
little shortsighted, and I'd bevery concerned about them as a

(29:32):
going concern. They're eithergonna close-up shop or it's not
a sellable asset. It's notgonna, you know, it's not gonna
be something that that it's aconcern. Let's just put it that
way.

And it ties right back to what you mentioned
earlier. Right? The evolvaryroad comparison. Like, that this
is a huge part of it. Theadaptability, we should say, of
technology.
Adaptability.

So according to our recent survey
by Thomson Reuters, who's aleading software company and
research company in ourindustry, 84% of accounting
professionals view AI as apositive force. So the sentiment
with us is good. Out there,like, you're like, well, AI is
going replace you guys. Trustme. We're not worried.

(30:14):
We're using it as a lightsaber,we're the Jedi, right? It's not
a bad guy. It's not astormtrooper. Twenty one percent
of firms use AI at theenterprise level, which doesn't
seem like a lot right now, butit was 8% a year ago. That's two
and a half times growth, and,obviously, our firm uses it

(30:34):
already.
We've been we're we're anadapter of that. We're typically
gonna be an early adapter.

I love when you quote anything from Thompson
Reuters because I I wanna hearit from your mouth because you
know where they're I think theirmain office only office is.

Yeah. They're Ann Arbor based.

There you go.

The dark side. That's why I wanted to
write that real quickstormtrooper in there.

For anybody that doesn't know, Chris is a giant
University of Michigan fan.Huge. Huge.

Yes. But just we'll cut that out. Anyway,
but AI you know, what where's AIwell, how's AI helping
professionals? In documentintake, in tax projections, in
classifying source documents, inresearch, in fraud detection.
And let's and let's be clear.

(31:22):
The IRS is already testing AIfor audits and scanning of
forms. The IRS is using AI rightnow because most of their
notices are matching notices.We've talked about the CP 2,000
many times, and and right now,the IRS software will will grab
your transcript, and then it'llit'll grab, you know, what what
was reported to them. It's stillclunky. Once AI starts coming

(31:46):
in, tax notices are gonna be onthe rise.
So IRS might be higher have beon a hiring freeze. It might
have as not as many people, butthey're gonna lean into this
because it's a slam dunk forthem to find unreported income
and put the burden back on thetaxpayer.

So Makes sense.

So what are we gonna do here? Right?
This sounds pretty grim. Soundsbad. So if you're a tax
professional, what do what whatshould you do?
Right? I think that thesecompliance only firms, and we
talk about this all the time inour consulting work, are gonna

(32:25):
go away. They're gonna becomeobsolete. Maybe they're not
gonna go away, but they're gonnabe obsolete, similar to a VCR.
You know, you might be able tofind someone somewhere that'll
that could fix your VCR, but nottoo many people can anymore.
Right? There used to be a vkinda like you had cell phone
repair shops in every in everytown. You used to have VCR

(32:47):
repair shops in every everytown. There might be a few out
there, but not too many. Sothey're gonna become obsolete.
In fact, I feel like they arealready obsolete. I think that
tax professionals are focusingon value based billing and
subscription models. Hey. That'sinteresting because that's what
our firm has done for over adecade, but we're seeing it out
there. And I think that as thetaxpayer, you should embrace

(33:10):
that.
You know, if if someone is is,solving a $10,000 problem for
you and you're getting charged$2,000, that's that's still
pretty good. That's really good.Firms, I think, should really,
as as you know, John, focus onadvisory. You want your tax

(33:32):
professional to be working intax advisory and be be around
all year round to answer yourquestions, but they do need that
revenue to do that. Helpingpeople with business structure
and tax planning, and deductionplanning, and being, you know,
being very, very transparentwith costs.
John, I had a note callyesterday, and then I had a call

(33:57):
two days ago with with meetingswith potential clients. In both
situations, they said, I don'tcare what it costs. We just need
you come so highly recommend.Not me. Art, my team.
My team comes so highlyrecommended. We just want you to
help us. We okay. I said, well,I haven't done your quote yet,
so I don't know why you'retelling me it doesn't matter

(34:17):
what it's called. But the thingis they trust that we're I'm
gonna be very fair.
Right? My role is kinda workingdown the quoting. So even though
and I told those both parties,two separate parties, even
though I realized that yourprice is not your number one
driver and you're not superprice sensitive, I'm gonna be
extremely transparent with anyof the costs. That is essential.

(34:38):
That establishes trust betweenyour tax professional and the
tax payer.
As a taxpayer tax professionals,if you're listening to this, be
transparent. How would you go toa restaurant that you know, we
get it. Sometimes there'ssomething on the menu that says
market value. No. I'm I'm toothrifty to order that, and we
can appreciate that.
But what if you went to arestaurant, opened the menu, and

(34:59):
everything nothing on there hada price? You'd be a little
squirrelly, wouldn't you?

Right. And you wouldn't just say, oh, I'm
hungry. I don't care what itcosts. No. You're always gonna
look at options a little bit.

You would go to another yeah. You just go
to a different restaurant. Soso, yeah, be transparent with
the costs. As a taxpayer,understand that tax
professionals, we're gonnaprobably see more mergers and
acquisitions. We're gonnaprobably see more outsourcing
overseas.
And and if and if you'recomfortable with the data
security of of the firm you'reworking with, I wouldn't be

(35:33):
super concerned about it. Youknow, John, you you you probably
order you're you'd like to fixcrap. Right? So let's say you
ordered a I don't What would youorder? Like a saw some fancy saw
or something?
I don't know. Well

Yeah. We could say that.

Yeah. And let's say something went wrong
and you have to call the 800number. That that's you're
probably gonna be talking tosomeone overseas at some point.
Mhmm. You know, is did when youwent to buy the saw, did you
even think, oh gosh.
If they might have overseashelp? So don't in other words,
it's not that big of a stigmaanymore. If you work with a firm

(36:09):
and and they use outsource someof the the compliance work, the
data entry work overseas, Iwouldn't treat that as a deal
breaker. That's just my ownpersonal opinion.

Right. Because it seems like to a lot of people
that are outsourcing excuse me.Outsourcing with some help like
that. Right? It's filling thattalent gap, at least in the
short term.
You know? Do do the firm ownersdoes your tax professional look
at that as an ideal situation?No. But it's a good solution, a
great solution, actually, for aproblem they have. But then
also, right, I I imagine I Iknow I see with you guys, and

(36:42):
I've heard about it and seenwith other practices, but a lot
of them are they're carryingtheir process that's tried and
true to their firm, and they'rejust bringing in that individual
to help.
But it's not like it's just a acrapshoot and stuff's just
flying all over the place. It'sstill operating in a very
efficient manner Right. If theyoutsource.

We all have to adapt. We all have to
move forward together. And, youknow, in in for some people,
you've got you know, fortaxpayers, you have options.
Right? You've got selfpreparation.
Again, for some people, thatcould work. You've got hybrid
models where you might have selfpreparation with professional
assistance.

Right.

You you and and ultimately, you want
legally and ethically to pay theleast amount of tax possible. In
the vast majority of the time,that requires the assistance of
of a very highly trained taxprofessional. And and for them
to give you that attention youdeserve, they're going they're

(37:43):
you are we already know theconstraints that both the
taxpayer and tax professionalhave. They're gonna have to make
some changes. They're gonna haveto evolve and get more
streamlined using technology,AI, and potentially outsourced
labor overseas.

Well, this was a great conversation because I
know even me and you, you know,on the the sake of transparency,
I know we talk about we'vetalked about this probably at
least every other day in someway, shape, or form, but only
for thirty seconds, twenty like,really quick stuff. So this was
awesome actually getting to sitdown, you know, virtually, and
talk through this with you,kinda hear and see, you know,

(38:19):
your opinion, but then also aswe, we can say, enlighten the
the general audience orlistener, our community, just
what it looks like for thetaxpayers. So I and, you know,
we we looked at this, and Ithink we started off too as,
like, waving the waving theflags around like, oh, crap. We
got a problem. And, yes, thereis a a challenge.
There is a problem. It's not thegreatest thing in the world, but

(38:42):
also too, I think with with itbeing such a dire situation, I I
believe, I'm hopeful, I shouldsay, that it'll probably start
to get more of the attentionfrom people that can make it
easier, more streamlined forpeople to get into it. It's not
gonna be tomorrow. It's probablygonna be five years from now
minimum. But then also, like,what a heck of an opportunity

Mhmm.

For somebody younger or older that may wanna
really get into the industry.Right? Right now, I think more
than ever, you're taking wetalked about earlier the stigmas
of, like, pocket protectors andhighlighters and white out and
having to sit at a desk all daydrinking more Diet Cokes than,
you know, the local party storehas. It's now you can come in as

(39:25):
a business owner. Like, theentrepreneurial mindset comes in
and plays such a huge part in atrue tax professional.
They're not separate anymore.

And and to wrap it up, yeah, for the for
the taxpayer. For the taxpayer,you've got a challenge. Right?
And I always say if I walkedinto a room of a hundred
dentists, I wouldn't know who'sa good dentist and who's a bad.
But here's the cool thing as ataxpayer.
You you might walk in a room ofa hundred tax professionals, and
you can't tell me who's good andbad just by looking at them. But

(39:57):
now we have the Internet. So gocheck out their content. Look
what look at their website. Seeif they have reviews.
See if they've got any type ofvideos, YouTube channel. Do they
have anything out there? Havethey written articles? Have they
collaborated with people? Havethey done projects?

(40:18):
Have they appeared even done apresentation at the local
library? You get a feel of theirhow they operate, and you could
pretty much figure out ifthey're gonna be a good fit by
by just checking things out. Andand you might find go to
somewhere and say, hell, thisperson's in my local town. They
have a website that says comingsoon. They don't have any social

(40:43):
media presence.
And and okay. If if butunderstand that they're probably
not they might have somecapacity capacity issues.
They're probably not gonnaevolve to the point where you
might want them to, or thatmight be a good fit for you.
Maybe you're the kind of personthat likes to bring your box of
stuff in, have a coffee, andtalk through things with the

(41:04):
with the tax professional, andthen that person might be a good
fit for you.

It's like dating. There's a right person
for everybody out there. Justgotta find them. But awesome,
Chris. Well, I appreciate it,man.
Definitely a longer discussionwe had here, but, again, I I
appreciate it. I'm sure our ourlisteners will as well too. And,
yeah, I mean, I can almostguarantee we're gonna be
touching base on this onemultiple times as things change.
And then we have a much longerconversation coming up with, the

(41:31):
CEO, and I think he's executivedirector CEO of the MICPA, so
the Michigan Association ofCPAs. So we look forward to that
on the other show, on the Mr.
O Show. But for now, if anybodyhas any questions on this,
please just drop us a line. I'dsay it's if you really wanna be
modern, right, don't even emailus. Get on Facebook. Send us a
Facebook message, LinkedInmessage.

(41:52):
Check. Get on our TikTok andwatch some videos, some reels on
there. Shoot us something onthere. Join defeating taxes.
Defeatingtaxes.com is ourprivate Facebook group.
Join that. Tons of tax pros inthere. Heck, even get in there
and maybe razz some of these taxpros if you want to. If you
wanna have a little fun with it,we'll let you get in there. But
enjoy it.
Again, the grass is not greenernecessarily on the other side,

(42:15):
but it's also not dead. So let'slet's think about it that way.
Everybody's gonna be fine. It'sgonna be good here. Still, still
in a great spot.
So as always, as we love, love,love to close out this podcast
with, we'll see everybody backhere again next week, roughly
different time, completelydifferent topic on the teaching
text flow podcast. Have a greatweek, everybody.

Disclaimer (42:41):
The content provided is for educational purposes
only. We encourage you to seekpersonalized investment advice
from your financialprofessional. For all tax and
legal advice, please consultyour CPA or attorney. Investment
advisory services are offeredthrough Cabin Advisors, a
registered investment advisor.Securities are offered through
Cabin Securities, a registeredbroker The content of this
podcast does not constitute anoffer of securities.

(43:03):
Offerings can only be madethrough an offering memorandum,
and you should carefully examinethe risk factors and other
information contained in thememorandum.

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Ep. 138 | The Future of The Tax Prep Industry

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Ep. 138 | The Future of The Tax Prep Industry