The job of a certified public accountant, or CPA, has both rewards and pitfalls. In addition to the challenge of crunching numbers, it’s critical that CPA professionals stay current with ever changing, and complex tax laws. The industry is also facing a technology frontier with the introduction of artificial intelligence which raises questions about what role it will play in the future of business. Paired with an ill-equipped and sometimes nonresponsive IRS, repercussions from COVID and the upcoming election that has professionals, clients and the business community at large anxious, the CPA industry is navigating difficult waters. Recently, a group of CPA professionals met at a roundtable sponsored by City National Bank and held in Las Vegas to discuss challenges the industry is facing.
Connie Brennan, publisher and CEO of Nevada Business Magazine, served as moderator for the event. These monthly roundtables bring together different industries to discuss issues and solutions.
Is It Still a Challenge to Hire Quality CPAs?
Jacqueline Matthew: Hiring is no longer an issue, which is fantastic. But what is a challenge is the expectations of individuals who are relatively new to the profession. [They expect to be] a senior after a year or want to be a manager after six months. [We have to encourage them to] just take it in and learn.
Chris Wilcox: We are in the process of interviewing right now and must have gotten 70 applications [compared to] a year ago when we got four.
Kyle Bybee: We see so many more resumes coming in, which has been nice for our team because we can now be more picky on some of these candidates.
Wilcox: The big national firms stopped hiring as aggressively and laid some people off. Between those two things, it has created quite a bit of capacity in the marketplace.
Zachary Tompkins: One of the biggest challenges I see across the board is getting new CPAs up to speed and managing expectations.
Bybee: We are seeing more great talent on the market. But, finding the right people that can come in and really lead the charge is difficult.
Daniel Gerety: Our biggest challenge has been getting the right people. We got some good people in the last year, but finding high-level tax people that can manage clients [is still difficult].
Bybee: Many firms are looking at pulling in teams offshore and leveraging good talent outside of our markets. We can now draw on good talent outside of Las Vegas. [There are] people in southern California that we have been able to pull in and help us shoulder the load. By trying to [address the need to hire talent] in a few different ways, we were able to get through the talent shortage and we are seeing that there is good talent out there.
Amber Baker: We do not offshore at all as a firm. We cross-utilize between offices and have about 120 offices across the US. We do have that benefit to pull from, especially during times when it was hard to find people in multiple markets. That really helped us. We still provide flexibility to work remotely. It is just communicated, if [an employee] is going to be in the office three days a week, we have that as their schedule. We remain flexible.
Gerety: We also stay flexible. We have a couple of people [that are fully] remote, but they all worked in our office first and know everybody. But we will not offshore. Our clients are our clients, they do not want their information offshore. We have avoided that and tried to keep people in the office and keep that [professional] atmosphere.
Baker: We will not be 100 percent remote. In our market here in Las Vegas we have a lot of clients that just come in [to a branch]. This is a town with a very small business community, and people still want to interact and have face-to-face [communication]. We stagger our schedules to make sure we have people available and ready to meet the clients. But we also provide the benefit of working remotely. We will not go to a mandate or be 100 percent remote at this time. We are seeing a lot of news on that, but right now, we are going to remain flexible and be in the office more than not.
Tompkins: We keep it 100 percent in-house. We do have some remote employees that are fully remote and have never worked in the office. But technology plays a big role in keeping us all connected. It does force us to think outside the box. We are doing a lot more online. Even if half of us are in the office, we will still do [meetings] through Zoom or Teams.
Is AI Being Used in This Industry?
Gerety: In our practice [AI] is helping our people write letters, as long as we are not inputting client information, it helps draft the language of letters. On the audit side we are not [utilizing that technology].
Matthew: In my personal experience I can pick out AI [work immediately]. There were a few [of our staff members that] were being overzealous in the case of [using] AI. [They] all sound like it came out of a can. There has to be a personal touch. [AI] still has a ways to go. There are practical applications for it, but at least, in our firm, it is more fun to play with than [using it] intentionally and meaningfully.
Gerety: You [still] have to review and edit [AI]. And even if you are going to do research with it, you have to go back and do your own research and double-check everything.
Matthew: That is where we end up, too. You might as well just do it [yourself] or train someone to do it, as opposed to vetting everything [AI] is giving you.
Tompkins: If you ask [AI] a question and ask it to reference the IRS code that it is using to come up with that answer, it will point you in the right direction. There was an instance where an attorney wrote up a reference in case law that did not actually exist. [AI] just made it up and [the attorney] got debarred for that. Understanding that can happen and finding the fine line between pointing you in the right direction and getting you from zero to five more quickly while making sure that information is correct and doing your own research is still important. That is what professionals are required to do.
Wilcox: We view AI as a tool. During all of our careers, we have watched new tools come along that have enhanced our productivity and our efficiency. We are very active with an AI platform, but it is a self-contained platform. We do not allow the general AI population to access our information. It is a closed pipe but is a great tool and a tool that we have to embrace. If we do not, we are going to get left behind. It is not a tool that is going to give you the final answer, but it is a tool that will certainly make you more efficient in getting that final answer.
Baker: It is important to remember that this is just AI today. Everyone in this room remembers what the internet was like when it first came out. Compare that to where the internet is today and how powerful it is. Today we are not sure [about what AI produces]. We want to make sure we are checking it and we can’t promise that it is right all the time. But, we have to stay on top of it because it will transform our industry.
What Challenges Does This Industry Experience With the IRS?
Gerety: The IRS is way behind. Even with simple things. [For example], my neighbor sold her house and moved to Las Vegas and did not report the sale because she never got a 1099. The house was less than $500,000 and was completely excluded from tax. Her husband died and they sent her a $100,000 tax notice. It took a year and a half for the IRS to finally respond to an amended return that we filed electronically. They are sending levy notices a year and a half after we told the IRS it was an excludable gain. That is happening with a lot of our clients. They [say] they need more time to look at your notice, but in the meantime, they are sending levy notices to our clients.
Tompkins: There is really only one phone number that we can [use] to get a hold of IRS agents. Someone will be assigned to it, but when you talk to them, [they] need another 30 days. I have one running right now that has [been with the IRS for] 600 and some days on an identity theft issue that they are not able to resolve. [They tell us to] call back in mid-December. This has gone on for two years and when we call them, we get no answers. Our clients are still getting notices that are kicked out by the computer and there is no progress we can make on their behalf. It is really frustrating.
Wilcox: They are working with one hand tied behind their back. During COVID, they had semi-truck loads of mail that was never delivered or opened, that they had to fight through, then they were all furloughed just like we were, and they were short staffed to start with it. They are still short staffed.
Matthew: Their problems are not any different than what we have experienced in terms of quality personnel and experience of personnel.
Gerety: Their pay scale is less than what we are paying. I was at a conference last November and one of the lead estate and gift auditors was asking us to be patient and help train the new agents they are hiring.
Wilcox: [The IRS] is understaffed, and they do not have a lot of experience. They get training, but the tax law in and of itself is complicated. Learning all of it is not something that you do in a year.
Baker: The agents I have interacted with in the last year or two have been inundated. They are just trying to get through their case load. They want to get in and get out and are overwhelmed.
Bybee: I have dealt with a lot of good agents, and I feel bad for them because I know how busy they are. But right now, they have other distractions. The ERC (employee retention credit) is another big focus area for them. They have another voluntary disclosure program that they opened up. I think the IRS is just getting so much pressure from Congress and they are under-resourced. Their hands are tied when they are trying to do their job, and they do not have enough people.
Wilcox: The law passed [providing] $80 billion [in additional funding to the IRS] to hire [personnel] and then they defunded it.
Gerety: The press did not do a good job in bringing out [the news that the IRS was going to hire additional agents]. They brought it out as a scare tactic [causing people to believe that all the funding was] going to be [for] enforcement officers. There was [also] a lot of infrastructure [that was going to be funded for]. Believe it or not, [the IRS] still have some computers that are using floppy drives. They have been underfunded by Congress and been [continually] slashed on their budget. They do not have the people, the infrastructure or the software that they need.
Tompkins: It is the overarching governing of the organization that is causing the issues. It is not so much the IRS. They are taking the orders and doing the work.
Is This Industry Still Dealing with Repercussions From COVID?
Bybee: The ERC was one of the biggest programs that came out of the COVID relief [programs]. Companies could apply for ERC credits, but [the government] gave out way more money than they ever planned on, and [now] there is so much fraud. The IRS is ramping up enforcement and trying to find out who the bad players are.
Matthew: We work in the federal government client space pretty heavily and the COVID money sent some of these nonprofits for a spin. They were given so much money that they unfortunately did not have the infrastructure to handle or understand what to do with it. That has definitely been challenging from an audit perspective.
Bybee: A lot of companies sprang up [during COVID] and earned huge fees by helping people get ERCs. I have many clients that went with some of these third-party companies, and it is going to be an area that the IRS is going to look at for a while. That is potentially going to be some of the legislation [coming up and] allowing for greater statutes and longer periods for them to go back and look at the ERC. They are trying to see how they can claw back some of the money because a lot of it went to bad players. The problem is a lot of the companies that helped expedite those [ERC’s] are going to be gone. They collected their fees, shut their doors, and are gone. [Many] good and innocent taxpayers are going to be left with bad claims facing the IRS. The people that helped them get those claims are not going to be there to defend them, and they are going to find themselves in some trouble. That is another big area for the IRS right now on top of everything else they are doing.
Matthew: We are seeing that with several of our nonprofit clients. They used certain third parties and were promised the sun, moon, and stars. They booked huge receivables and are now learning that they potentially can’t be realized. They were hard core solicited.
Baker: It is taking the IRS time to process the ones that were actually good claims. We have a lot of great clients that are waiting for huge refund checks and are very antsy. I get emails weekly because we helped process ERC claims for people and we are just now seeing them start to be processed again. Some of [these claims have been sitting with the IRS for] a year and a half or longer. [Clients] are waiting for their checks and these are companies that struggled through COVID and have survived, but still need this capital.
Are Clients Concerned About the Upcoming Presidential Election?
Baker: [Clients] are uneasy because of the election and where things have been in the economy. Many businesses have softened depending on their industry. It creates a perfect storm. [There are also things going on] overseas. People are just on edge.
Gerety: [We are advising clients] to wait and see [before making decisions based on the outcome of the election]. You can do all this planning, but none of it comes to fruition because first, Congress has to pass [the legislation] and it may not matter who wins as long as there is a split in Congress. I tell my clients not to get too excited about doing a lot of planning for something that may not happen. Once we see who is elected, then we can [address what to do].
Baker: Clients are savvy enough to know that any time administration changes, things happen. It does not matter which way. Laws change and things come down. We are very careful not to advise on any side, but to give [our clients] the information we have today and tell them we are going to know a lot more after early November.
Wilcox: What worries me is if we get a Democratic President, a Democratic House and a Democratic Senate. Right now, we have until the end of 2025 for [the estate tax exemption to sunset]. But in theory, they could pass a law that would ratchet it back. Everybody who wants to wait until the election is over and do their planning in 2025 could get caught short because it has happened. Clinton got a law passed sometime in May and made it retroactive effective to January 1. If something like that happens, that is going to be devastating and it is not an unrealistic concern if [there is a] Democratic President, House, and Senate.
Bybee: There is more [uncertainty around this election] than there has been traditionally because we are not seeing Congress be responsive to the business community. And depending on what happens with the election in US control, [the impact on the business community] could go a number of different ways. No one likes that uncertainty.
