Ep. 138 | The Future of The Tax Prep Industry
Download MP3Hey everybody, and welcome back to the Teaching Tax Flow podcast. Today, episode 138, we are looking at the future of the tax preparation industry. Yes. We are looking at the industry as a whole, busting out of the closet, dusting it off our crystal ball. We are looking into the future the best we can into the industry.
John Tripolsky:But before we do it, as always, and dive into some of these details, let's take a brief moment and thank our episode sponsor.
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John Tripolsky:Hey, everybody. We are back here again on the teaching tax full podcast. It's time to talk about, not you specifically, but we're gonna talk about the industry. So, obviously, as you see in the show notes, the title, you've probably heard us talking about this for a little while now in some way, shape, or form. We are gonna look at the tax preparation industry.
John Tripolsky:So what that means for you, the taxpayer, is that there is likely somebody that prepares your taxes. Yes. You may do your own. You may have a cousin. You may have an uncle.
John Tripolsky:You may have a sister, brother, child, any of these people, but the industry specifically is made up of ton of professionals like this handsome gentleman here, I would say to my right, but actually to my left here on my screen, Chris Pacquero. How's it going, man? How are you?
Chris Picciurro, CPA:It's going well. How are you doing?
John Tripolsky:Doing good. Doing good. So, yeah, today, we're gonna talk a little bit about you and and your people, I guess we can say. Right? So you've been in this a while.
John Tripolsky:You've been in the industry, you know, about, what, a hundred and twenty five years? Hundred and hundred and twenty
Chris Picciurro, CPA:five dog years.
John Tripolsky:Yeah. Just get it. But it's No. It's back a lot of changes. Right?
John Tripolsky:So so twenty twenty plus years, but it's like, I mean, things have changed so much for you guys as tax pros. Right? Like, just I mean, even just the we could say the stereotype of what a tax and accounting professional is has drastically changed. Right? Like, you've gone from pocket protectors to jeans and a T shirt in some cases.
John Tripolsky: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 into the the background story of that because we've done already. But, like, where where do you see this?
John Tripolsky:Like, where we stand today and and just kinda run with it here. Let us know what you think.
Chris Picciurro, CPA:Absolutely. I mean, the things have changed significantly in the last twenty, twenty five years. You know? Just the onset of efiling alone has changed a ton of things. If you can imagine, many listeners, you know, twenty five years ago, tax returns were mailed in.
Chris Picciurro, CPA:In simp in in especially on the, tax preparation side, they were printed out, put in these fancy little packages or, folders, and then they were given a a copy was mailed in to every taxing authority. W twos were staple to these returns and processed by hand. It would be a long, long time before refunds were provided. They were mailed to people, not even direct deposit. And, there's a lot of, I mean, a lot of data security concerns just that alone going into the you know, mailing these things in.
Chris Picciurro, CPA:And, actually, when I first started, 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 secondary extension for another two months mailed in. So it's it's just pretty crazy. There there's just a lot and and the other issue would be, let's say you were a tax professional and you printed out all of these returns, and then if someone came in and said, oh, by the way, I forgot to tell you. I donated all this money to this church, and I didn't give you that information. Well, now it's just a couple clicks, and we can correct the return and reput it in a a portal, reprocess it.
Chris Picciurro, CPA:Before, it was quite a experience in a time commitment.
John Tripolsky:I can imagine. And, you know, you you again, kind of not a not a history lesson on the tax professional industry, but I would say that your desk back in the day probably had numerous things on it. Right? You probably had a ton of pens. You probably had the the giant stapler, like the ones that have the big arms on it, binder clips you probably had in there.
John Tripolsky:You probably had white out all over the place and, you know, whether it was the ones you twist the cap on and spill all over the place. There was the ribbon one. So little things like that. Right? And I and I'd say that about whiteout is one thing.
John Tripolsky:When was the last time you even seen that? I haven't seen a whiteout whole Gosh. Ten years.
Chris Picciurro, CPA:It's been a long time. Absolutely. There was no such thing as importing data. There just it was just a very manual process. And Right.
Chris Picciurro, CPA:And any changes to the process, any changes to the return were were a big deal. You know? They are significant. So you even just the paperwork. I mean, when we started, we would take all the clients' source documents, which could be stacks of paperwork.
Chris Picciurro, CPA:And we would the, you know, before the Internet and or before e filing, we would actually make a photocopy of them. So it's funny. My when I first started, the copier lease was almost as expensive as my office lease because your photocopier and what let alone be becoming a scanner or a fax machine was a huge burden. And the ribbon, there was a so you would you would go through so much paper, and and then you would save all those search documents internally, and then you'd have to house those search documents.
John Tripolsky:Right. So Which is a whole another thing. Right?
Chris Picciurro, CPA:It is.
John Tripolsky: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've talked about this. I've seen this. Would you really consider kind of the current situation, landscape, whatever we call it with the tax pro industry, is really being a crossroad or, like, a pivot point or something like that? Like, what what do you
Chris Picciurro, CPA:think? Like, it's it's really it's just an evolution. We talk about in our peer to peer coaching and mastermind group for other tax professionals. So if you are a tax professional, check out MRRInstitute.com and and maybe join us. But we talk about you evolve or you erode, and you could and so the the industry is evolving.
Chris Picciurro, CPA:So as someone that in my position that I want our CPA private CPA practice to continue on well well beyond my working years and my living years, go through generations of leadership, we are evolving. So that's we're constantly evolving, and and we have to evolve with with the some of the changes that we're gonna talk about today because the tax preparation industry is gonna continue to evolve. There are significant challenges for the tax for tax professionals and, as a result, taxpayers. So you need to be aware of them. You know, I I mean, one of the roles I have in our in our private firm is just to have a quick chat with any potential new clients before we start that the process of of potentially working together.
Chris Picciurro, CPA:And I tell them, this is you know, what we're gonna talk about is seventy five percent of CPAs are expected to retire in the next fifteen years. So if you have a good CPA firm or tax professional or an enrolled agent, hold on to them. No one's perfect. It's like a spouse. Like, you you know, with the big no.
Chris Picciurro, CPA:You're not gonna find that perfect firm. You might not like their client portal. You might not like something about how they operate. But if they're doing a good job getting the best result possible and you feel like it's a partnership, then don't be so quick to just jump around and change.
John Tripolsky:Send them a Christmas card. Don't wait for the one from them to you.
Chris Picciurro, CPA:Exactly. Keep
John Tripolsky:them happy.
Chris Picciurro, CPA:They're telling you about that too. People just even though they're kinda looking around and talking to me about working with our firm, a lot of times I tell them to, hey. You got it pretty good too. 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 tax preparation firms absolutely need to evolve themselves, and they need to move into tax planning and strategy to complement their tax preparation work or tax compliance work.
Chris Picciurro, CPA:So so, yeah, let's look at the landscape of where we're at.
John Tripolsky:And, really, when when you say involve involve, obviously, you're involved. Evolving in in the landscape, the current landscape of it. Right? I I would say that it's a % safe to say that even though it's evolved and it people may think like, oh, it's gotten so much easier with all these tools and not having to manage this. I'd almost say it probably has in some sense.
John Tripolsky:Right? But it's probably almost gotten more complex than others. Right? So it's not like it's an easier gig, we should say.
Chris Picciurro, CPA:It's definitely gotten more complex yet more streamlined. So there there was technology that we can we can we can shorten the process up, but part of there there are several challenges with that process. You you've heard me for almost two decades, but specifically over the last five years talk constantly that the biggest challenge in tax compliance or tax preparation and when I say compliance work, that means bookkeeping, payroll processing, and tax preparation is getting good information from people. Once you have the information, you're in good shape. You could be an amazing chef, and then you're trying but if you don't have half the ingredients you need to make the meal you're trying to make, it's gonna get compromised.
Chris Picciurro, CPA:It's not gonna taste as good, or you just can't make it.
John Tripolsky:That's a great way. That's so So tax prep kinda starts with the taxpayer, we should say. Oh, absolutely. Absolutely. Your role or pulling your weight as the taxpayer giving you all your information.
John Tripolsky:You can only do as good as what you're giving.
Chris Picciurro, CPA: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 you should twice a year. Sometimes you they run into something that that they need to address, and it's ultimately up to you if you wanna address it.
Chris Picciurro, CPA:So, hey. Yeah. You know, you got this cavity forming. You might if you it may be nothing. It might become a root canal, whatever.
Chris Picciurro, CPA:It might get have to go get extracted at one point. But when you go to the dentist to get cleaning, you still brush your teeth before you go. Right? I mean, you you don't pound a coffee and three donuts and go in there. Oh, at least I hope you do.
Chris Picciurro, CPA:But the cleaning is so you've gotta do your part. You've gotta show up. You've got and you and the dent the hygienist and the dentist can can do wonders, but they need your participation. Right? They can't if you're squirming around or you're missing late for your appointment or you're you know, don't you never floss and never brush and then get upset that you have four cavities.
Chris Picciurro, CPA:Ultimately, it's your it's up to you. It's your decision. And, John, you know, I'd full disclosure, like, my two biggest fears are going to the dentist and geese, but that's another episode.
John Tripolsky:I was wondering if you were gonna bring up geese. You did.
Chris Picciurro, CPA:Well, my wife and I were on a walk, and then I went for a run. We recently went to the Smoky Mountains with our family. And, yeah, I crossed the street because there's mostly because there are two geese, adult geese, with about eight goslings. And and you don't mess with the if you see them with their little with their with their babies, get out of the way because they're I'll I'll first of all, they're very mean mean creatures. Dirty creatures.
Chris Picciurro, CPA:They like to
John Tripolsky:Wonder we'll dive into your your real feelings on the geese, and then maybe I'll tell my swan stories with me in a jet ski.
Chris Picciurro, CPA:Oh, swan could be swan could be nastier than geese, but at least they only attack you when you are on the water.
John Tripolsky:Oh, yeah. Let's put it this way. We if if I ever tell my swan story, hope nobody from the DNR is listening to that because they will be on my doorstep.
Chris Picciurro, CPA:I'm sure the statues statute of limitations has expired.
John Tripolsky:Yes. And I'm sure that Swan's long gone. Plus, he can't testify if we went to court.
Chris Picciurro, CPA:But anyways So I so I walked as I went across the street to avoid the geese. And and then on the way back, we're kinda walking back. They were they're kinda in the middle of the road because, of course, they think their poop doesn't stink even though it ends up on your windshield. Right? And, luckily, there was a barrage of vehicles driving on the street to set a pick for anyone who's played basketball.
Chris Picciurro, CPA:You know what a pick is. Right? You set a pick for someone. Set a pick for my wife and I to go around go around the geese without having to deviate our path. It has nothing to do with tax preparation, but so let's dive into our landscape here.
John Tripolsky:Has to do with planning, though. Okay. Good.
Chris Picciurro, CPA:Yes. Yeah. You could yeah. But that's a good way. Your your tax professional sometimes could protect you from the IRS or the geese.
John Tripolsky:I I love how these conversations randomly go in the craziest directions, but yet 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 people are they are they? Are they not?
John Tripolsky:Are they not planning to? Are they looking to get into the industry? You know, do they wanna go I don't know. Avoid being a geese or a goose, I should say. Avoid being a goose.
Chris Picciurro, CPA:Right. Okay. So the first thing is
John Tripolsky:What does it look like?
Chris Picciurro, CPA: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 tax professionals. Not all CPAs are tax professionals. There's other things that we can do, and not all tax professionals need to be CPAs. We have tons of friends that are enrolled agents, and you've had the opportunity to really meet a lot of those people.
Chris Picciurro, CPA:They are super talented people. Many of them have been on podcasts on this guest. Many of them I collaborate with regularly. But but, you know, we have a lot more data on the c on CPAs. So just as an indicator of where we're in this under industries at, we have like I said, seventy five percent of CPAs are expected to retire within the next fifteen years.
Chris Picciurro, CPA:And since 2016 from 2016 to 2023, we've had a thirty seven percent drop in CPA exam candidates. So if we have less than a you know, we have a a dangerous mix of thirty seven percent drop in people even sitting for the CPA exam, seventy five percent of people leaving the profession, that's not that's not good. We also have about a 17% decrease in accounting degree completions between 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 it is we're our industry is driving around with our engine light, on and blinking at us super brightly.
Chris Picciurro, CPA:Not any you know, it's a combination of all these factors. Why? Why is this happening at least on the CPA side? Because there's such a there's a hundred and fifty hour requirement of college, which is basically a master's degree. We have outdated education paths, and, and we just you know, it's just there's too many barriers of entry to be a CPA.
Chris Picciurro, CPA:I know that sounds ridiculous because as one, you you think, oh, I got this designation. Let me try to make it hard for everyone else. We will it there there's a lot there's a big push, a lot of state societies are advocating for there to be we could still stick with the traditional path, but we want some alternative paths that if you could pass a CPA exam and you show a level of competency to serve the public and you decide to go into the tax preparation and planning world, then you should be able to be licensed. So that's it. Now, what are we doing as CPA firms, tax firms?
Chris Picciurro, CPA:A lot of them are hiring offshores. A lot of them in The Philippines and in India and in South America, to meet demand because we we don't have the talent coming into the industry. And a lot of it too is the culture of CPA firms, specifically our tax firms. It used to be this red badge of honor, like, yeah. I worked ninety hours last week.
Chris Picciurro, CPA:I worked eight hundred hours a day. That that mentality is outdated. And, you know, we again, you know a ton of tax professionals. There's a few of them out there that absolutely love to say, look. I'm willing to work ninety to a hundred hours a week for about three months.
Chris Picciurro, CPA:My life's gonna be miserable. And the and I think I can make enough money to live comfortably the rest of the year. Maybe do some other projects, do some work, and I'm good with it. There are some tax professionals that that works for. That being said, we're not the it's very rare that someone that is either married in a serious committed relationship or has children can operate like that.
Chris Picciurro, CPA:They're usually more of a Han Solo, basically.
John Tripolsky:Right. It's just like a drain. And and you're right. I mean, it's it it is interesting. You know, me not being a tax pro at all.
John Tripolsky:You know? As I always mentioned, I'm, like, the dumbest person in the room, but we go to a conference, which I enjoy. Unless somebody starts talking marketing, and then everyone's real smart. But, yes, some people just really enjoy, you know, that crunch time. So if somebody you know, to everybody that's listening or watching this, you might have one of those, and it's not a bad thing.
John Tripolsky:It's not terrible. I mean, sure, there might be things that they don't do or you call or email them in July and you don't hear back until August. I mean, that's a problem. But if if that works for them, basically, what I'm hearing here, right, is there's there's such a shortage now, but it doesn't look very positive looking forward.
Chris Picciurro, CPA:It doesn't. It's it's at the moment.
John Tripolsky:Because, yeah, like you mentioned, it's there's so much data around it. There's data and facts of the current situation, but then there's also a lot of data and what are going to be deeper, more truthful facts in foresight. And there's not because it's not like I could wake up tomorrow and say, you know what? I think I'm gonna be a tax pro. And in six months, I'm one.
John Tripolsky:Like, it doesn't happen. That's currently.
Chris Picciurro, CPA: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 retirement cliff and pipeline issue.
Chris Picciurro, CPA:That's that's one. Number two, we have a more compressed time for with deadlines. Now as you know, in our private CPA firm, about 75% of our clients, probably two thirds of 75%, we intentionally prepare tax extensions. Many people and, you know, I'm a firm believer in tax extensions if it allows you with possible. However, many people still feel like I need to I want my tax return done by April 15.
Chris Picciurro, CPA:Well, there is a compression of time. Even if you had every document available to you on January 1 to have your tax return prepared, it would still be challenging to get all the returns prepared, let alone many of the forms are being delayed to get to you. So for instance, one oh, let's just focus on one. A very, very common form is a ten ninety nine b. That is a comes from a brokerage.
Chris Picciurro, CPA:So anyone that has a brokerage account that owns stocks, mutual funds, EFTs, etcetera, etcetera, It could be with E Trade. It could be with Fidelity. It could be working with a great financial adviser like we have in the teaching tax law community. Okay? Those are typically due to their to the taxpayer by by February 18, But many, many times they get delayed, so they'll get a preliminary one.
Chris Picciurro, CPA:And many, many times they don't actually receive the $10.99 b until March. It's not even due to the IRS if you e file it from the brokerage till March 31. And this includes remember, we had tie gains on recently, amazing crypto digital asset enrolled agent expert. So that includes digital assets also. So now all of these forms are coming out sometime between the February all the way to the March in creating a ton of compression just because we're having delays in getting documents.
Chris Picciurro, CPA:Some documents, John, is you I mean, you're a taxpayer. You know, you get some of your documents 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 of investments. So the the second issue in in our industry, which is compounding the work compression, which is a domino effect of why a lot of people don't wanna enter this industry because of the work compression during certain times of the year or that we're getting delayed in tax return or documents coming to us in a delayed fashion.
John Tripolsky:And looking at, you know, and now back to back to the one I think you mentioned, before about a restaurant. Right? So, basically, what's happening per the what you were just talking about is it's almost like you go into a restaurant with the expectation of it being a, you know, a Michelin star, excellent meal, excellent preparation. It's great. Everything's kinda customized for you.
John Tripolsky:And you get there, and you're like, oh, well, you close in ten minutes. Can I put in my order right now? And they're like, yeah. We could have it in ten minutes, but it's not gonna be good. Like, it'll get there, but it's not gonna happen.
John Tripolsky:So but and everybody, you know, everybody's tax prep needs. You know, whether I would probably say literally every single person, is customized. I mean, down to, like even if you have the same exact income as somebody else, your social number's different. Your there's something different in there that you just can't press one button, copy, paste. It's done.
John Tripolsky:It's done. It's done. It it's not gonna happen. Not
Chris Picciurro, CPA:gonna happen. I'm gonna I'm gonna die on the hill of saying there is no such thing as an easy tax return. I I get people disagreeing with me. I even have some tax professionals disagree. There's no thing no such thing as an easy tax return because there's everyone is unique.
John Tripolsky:And I've seen people say I haven't seen them argue with you about that, but I've seen them say, like, oh, yeah. Yeah. There is. And you know what? My response to that would be is, like, the peanut gallery.
John Tripolsky:I would say that you are a % right. There's no easy tax returns. There's easier tax returns.
Chris Picciurro, CPA:Right. There there could be more straightforward, but let's think about let's think about well, I'm gonna I'm gonna throw you out there, John.
John Tripolsky:Yeah. Chuck me in there.
Chris Picciurro, CPA:Nothing nothing personal. Alright? But let's think about a situation where you let's say you didn't have your own marketing agency. You weren't involved in teaching tax law. You you received a w two from a chamber of commerce.
Chris Picciurro, CPA:Your wife receives a W two. You bought a home in in Michigan, right? Seems like a pretty quote unquote easy tax return. Then, you think, sometimes we forget actually. You know, we, oh, wait.
Chris Picciurro, CPA:I used to have a property in South Carolina. We rented it out. We're about to sell it. Now, you have a rental property. Oh, we had a child.
Chris Picciurro, CPA:Yeah. Yeah. She goes to daycare. Oh, yeah. No.
Chris Picciurro, CPA:Now, have the child tax credit. Oh, now, do you even qualify? Now you might have the child and dependent care credit. Oh, wow. Oh, yeah.
Chris Picciurro, CPA:We bought this house. We're rehabbing it. Gosh. I forgot we did all those windows. Do we have an do we have energy efficient oh, maybe.
Chris Picciurro, CPA:Oh, you know what? The more I think about it, yeah, I I did put some money away in there to my daughter's five twenty nine plan, and I live in Michigan. There's a deduction there. Oh, yeah. That's right.
Chris Picciurro, CPA:So all of a
John Tripolsky:sudden snowballs.
Chris Picciurro, CPA:Looks like, hey. Two w twos. Yeah. We own a house. And you're like, that's a lot of stuff.
John Tripolsky:Like, you know, I think we did an episode. I don't know if we went into a lot of detail on it. It's like, really, like, getting to know your tax professional. I don't know if this was on this show or another one, but, like, that's really where it comes in. Right?
John Tripolsky:Like, you're you're basically not married to your tax pro, but you got I mean, you have to trust them. They have to feel comfortable, right, to ask you tough questions. Because if they're not gonna ask you some questions or, you know, you can't expect them to know everything about you, but their relationship has to be there. Because, again, like, you can as we mentioned, you can only do as good as the information you're given. It's like giving somebody directions and not telling them how to get to your house, but you tell them how to get to two streets away.
John Tripolsky:They don't know how to, you know, how to go the extra hundred yards if you don't give me your address. They don't know what it is.
Chris Picciurro, CPA:Oh, absolutely. It's like so you you just don't know, and that doesn't include other things. You know? Anyway, this this could be a lot of stuff. Right?
Chris Picciurro, CPA:There could be, oh, my well, my wife changed jobs, and she rolled over her four zero one k. Okay. It might not be taxable, but there's we need to report that ten ninety nine r because what you know, we need to make sure the IRS knows even if coded properly, that was rolled over to another another account. So there are there's no such thing as an easy tax return. Now there might be people that are easy to deal with, and those are the kind of people I like to deal with.
Chris Picciurro, CPA:Right.
John Tripolsky:They're Easy people, difficult returns. Difficult people, difficult returns. You get rid of them.
Chris Picciurro, CPA: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 this kinda ties into the rising complexity of tax returns is another factor. Right?
Chris Picciurro, CPA:We to 20 look at, like, twenty twenty four returns. We now have tons of digital asset reporting. We have, short term rental properties. We've got restricted stock options. I'm thinking about just yesterday.
Chris Picciurro, CPA:Just yesterday, the dev from recording this, I had a bunch of meetings. I talked about RSU restricted stock options. I talked to a a couple that's starting a wellness center. I'm start I talked to someone that has a short term rental property. I talked to someone that that her her spouse passed away.
Chris Picciurro, CPA:I've talked to someone who has digital asset reporting. I'm just thinking off the top of my head, like, there are tons of different complexities now that weren't there before and get more forms. So and it's gonna get more complex in 2025 with the new digital ad ten ninety nine DA stands for digital assets. And we had a couple podcast episodes before, the ten ninety nine k with all of these Venmo transactions and that sort of stuff. So there's gonna be more there'll be more forms to tangle with.
Chris Picciurro, CPA:Oh, by the way, we have the Tax Cuts and Jobs Act that's going to set to expire. We have pending legislation right now on the federal level that could hit and change a ton of stuff. And then you have to think about, do this does the state comply? John, you've kinda dipped your toes. Not really you know, you've you've you've been in a lot of meetings where we're talking about tax planning and strategy.
Chris Picciurro, CPA:So there are several tax mitigation strategies that are built for a federal tax return that we have to actually look into every state one by one and determine if the state complies with that deduction or that credit, etcetera, etcetera. So rising complexity of the returns, shorter amount of time to do it, less people that can do it, are a bad cocktail for the future of the tax preparation industry.
John Tripolsky:Oh, yeah.
Chris Picciurro, CPA:Now And I'm sure that
John Tripolsky:actually leads us up. I don't know if we're gonna talk about it next or later on, just about technology. Right? Like, all these tools, AI, all these things that are out there. Is it good?
John Tripolsky:Is it bad? You know, what what does that look like?
Chris Picciurro, CPA:I think we have to so, yeah, so how's AI going to help how's it gonna play a role with tax preparation? How's it gonna play a role with for taxpayers? And how's it gonna play a role for the government? Right? Let's talk about that.
John Tripolsky:Very true.
Chris Picciurro, CPA:AI and automation. Now we have another podcast just for tax professionals called the mister r show. We have a nationally recognized speaker join us, guy named John Higgins, specifically talk about AI in our profession for an hour because the show's an hour. We have because it has to con you know, be compliant for continuing it. And he put it best.
Chris Picciurro, CPA:CPA firms, tax firms, that AI is not gonna replace your firm, but firms that use AI are gonna replace firms that don't use AI. So if you're if you're working with a tax professional that is not refuses to learn use AI in any capacity, that might be a little shortsighted, and I'd be very concerned about them as a going concern. They're either gonna close-up shop or it's not a sellable asset. It's not gonna, you know, it's not gonna be something that that it's a concern. Let's just put it that way.
John Tripolsky:And it ties right back to what you mentioned earlier. Right? The evolvary road comparison. Like, that this is a huge part of it. The adaptability, we should say, of technology.
John Tripolsky:Adaptability.
Chris Picciurro, CPA:So according to our recent survey by Thomson Reuters, who's a leading software company and research company in our industry, 84% of accounting professionals view AI as a positive force. So the sentiment with us is good. Out there, like, you're like, well, AI is going replace you guys. Trust me. We're not worried.
Chris Picciurro, CPA:We're using it as a lightsaber, we're the Jedi, right? It's not a bad guy. It's not a stormtrooper. Twenty one percent of firms use AI at the enterprise level, which doesn't seem like a lot right now, but it was 8% a year ago. That's two and a half times growth, and, obviously, our firm uses it already.
Chris Picciurro, CPA:We've been we're we're an adapter of that. We're typically gonna be an early adapter.
John Tripolsky:I love when you quote anything from Thompson Reuters because I I wanna hear it from your mouth because you know where they're I think their main office only office is.
Chris Picciurro, CPA:Yeah. They're Ann Arbor based.
John Tripolsky:There you go.
Chris Picciurro, CPA:The dark side. That's why I wanted to write that real quick stormtrooper in there.
John Tripolsky:For anybody that doesn't know, Chris is a giant University of Michigan fan. Huge. Huge.
Chris Picciurro, CPA:Yes. But just we'll cut that out. Anyway, but AI you know, what where's AI well, how's AI helping professionals? In document intake, in tax projections, in classifying source documents, in research, in fraud detection. And let's and let's be clear.
Chris Picciurro, CPA:The IRS is already testing AI for audits and scanning of forms. The IRS is using AI right now 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'll it'll grab, you know, what what was reported to them. It's still clunky. Once AI starts coming in, tax notices are gonna be on the rise.
Chris Picciurro, CPA:So IRS might be higher have be on a hiring freeze. It might have as not as many people, but they're gonna lean into this because it's a slam dunk for them to find unreported income and put the burden back on the taxpayer.
John Tripolsky:So Makes sense.
Chris Picciurro, CPA:So what are we gonna do here? Right? This sounds pretty grim. Sounds bad. So if you're a tax professional, what do what what should you do?
Chris Picciurro, CPA:Right? I think that these compliance only firms, and we talk about this all the time in our consulting work, are gonna go away. They're gonna become obsolete. Maybe they're not gonna go away, but they're gonna be obsolete, similar to a VCR. You know, you might be able to find someone somewhere that'll that could fix your VCR, but not too many people can anymore.
Chris Picciurro, CPA:Right? There used to be a v kinda like you had cell phone repair shops in every in every town. You used to have VCR repair shops in every every town. There might be a few out there, but not too many. So they're gonna become obsolete.
Chris Picciurro, CPA:In fact, I feel like they are already obsolete. I think that tax professionals are focusing on value based billing and subscription models. Hey. That's interesting because that's what our firm has done for over a decade, but we're seeing it out there. And I think that as the taxpayer, you should embrace that.
Chris Picciurro, CPA: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 on advisory. You want your tax professional to be working in tax advisory and be be around all year round to answer your questions, but they do need that revenue to do that. Helping people with business structure and tax planning, and deduction planning, and being, you know, being very, very transparent with costs.
Chris Picciurro, CPA:John, I had a note call yesterday, and then I had a call two days ago with with meetings with potential clients. In both situations, they said, I don't care what it costs. We just need you come so highly recommend. Not me. Art, my team.
Chris Picciurro, CPA:My team comes so highly recommended. 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're telling me it doesn't matter what it's called. But the thing is they trust that we're I'm gonna be very fair.
Chris Picciurro, CPA:Right? My role is kinda working down the quoting. So even though and I told those both parties, two separate parties, even though I realized that your price is not your number one driver and you're not super price sensitive, I'm gonna be extremely transparent with any of the costs. That is essential. That establishes trust between your tax professional and the tax payer.
Chris Picciurro, CPA:As a taxpayer tax professionals, if you're listening to this, be transparent. How would you go to a restaurant that you know, we get it. Sometimes there's something on the menu that says market value. No. I'm I'm too thrifty to order that, and we can appreciate that.
Chris Picciurro, CPA:But what if you went to a restaurant, opened the menu, and everything nothing on there had a price? You'd be a little squirrelly, wouldn't you?
John Tripolsky:Right. And you wouldn't just say, oh, I'm hungry. I don't care what it costs. No. You're always gonna look at options a little bit.
Chris Picciurro, CPA:You would go to another yeah. You just go to a different restaurant. So so, yeah, be transparent with the costs. As a taxpayer, understand that tax professionals, we're gonna probably see more mergers and acquisitions. We're gonna probably see more outsourcing overseas.
Chris Picciurro, CPA:And and if and if you're comfortable with the data security of of the firm you're working with, I wouldn't be super concerned about it. You know, John, you you you probably order you're you'd like to fix crap. Right? So let's say you ordered a I don't What would you order? Like a saw some fancy saw or something?
Chris Picciurro, CPA:I don't know. Well
John Tripolsky:Yeah. We could say that.
Chris Picciurro, CPA:Yeah. And let's say something went wrong and you have to call the 800 number. That that's you're probably gonna be talking to someone overseas at some point. Mhmm. You know, is did when you went to buy the saw, did you even think, oh gosh.
Chris Picciurro, CPA:If they might have overseas help? So don't in other words, it's not that big of a stigma anymore. If you work with a firm and and they use outsource some of the the compliance work, the data entry work overseas, I wouldn't treat that as a deal breaker. That's just my own personal opinion.
John Tripolsky: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 that talent gap, at least in the short term.
John Tripolsky:You know? Do do the firm owners does your tax professional look at that as an ideal situation? No. But it's a good solution, a great solution, actually, for a problem they have. But then also, right, I I imagine I I know I see with you guys, and I've heard about it and seen with other practices, but a lot of them are they're carrying their process that's tried and true to their firm, and they're just bringing in that individual to help.
John Tripolsky:But it's not like it's just a a crapshoot and stuff's just flying all over the place. It's still operating in a very efficient manner Right. If they outsource.
Chris Picciurro, CPA:We all have to adapt. We all have to move forward together. And, you know, in in for some people, you've got you know, for taxpayers, you have options. Right? You've got self preparation.
Chris Picciurro, CPA:Again, for some people, that could work. You've got hybrid models where you might have self preparation with professional assistance.
John Tripolsky:Right.
Chris Picciurro, CPA:You you and and ultimately, you want legally and ethically to pay the least amount of tax possible. In the vast majority of the time, that requires the assistance of of a very highly trained tax professional. And and for them to give you that attention you deserve, they're going they're you are we already know the constraints that both the taxpayer and tax professional have. They're gonna have to make some changes. They're gonna have to evolve and get more streamlined using technology, AI, and potentially outsourced labor overseas.
John Tripolsky: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've talked about this probably at least every other day in some way, shape, or form, but only for thirty seconds, twenty like, really quick stuff. So this was awesome actually getting to sit down, you know, virtually, and talk through this with you, kinda hear and see, you know, your opinion, but then also as we, we can say, enlighten the the general audience or listener, our community, just what it looks like for the taxpayers. So I and, you know, we we looked at this, and I think we started off too as, like, waving the waving the flags around like, oh, crap. We got a problem. And, yes, there is a a challenge.
John Tripolsky:There is a problem. It's not the greatest thing in the world, but also too, I think with with it being such a dire situation, I I believe, I'm hopeful, I should say, that it'll probably start to get more of the attention from people that can make it easier, more streamlined for people to get into it. It's not gonna be tomorrow. It's probably gonna be five years from now minimum. But then also, like, what a heck of an opportunity
Chris Picciurro, CPA:Mhmm.
John Tripolsky:For somebody younger or older that may wanna really get into the industry. Right? Right now, I think more than ever, you're taking we talked about earlier the stigmas of, like, pocket protectors and highlighters and white out and having to sit at a desk all day drinking more Diet Cokes than, you know, the local party store has. It's now you can come in as a business owner. Like, the entrepreneurial mindset comes in and plays such a huge part in a true tax professional.
John Tripolsky:They're not separate anymore.
Chris Picciurro, CPA: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 walked into a room of a hundred dentists, I wouldn't know who's a good dentist and who's a bad. But here's the cool thing as a taxpayer.
Chris Picciurro, CPA:You you might walk in a room of a hundred tax professionals, and you can't tell me who's good and bad just by looking at them. But now we have the Internet. So go check out their content. Look what look at their website. See if they have reviews.
Chris Picciurro, CPA:See if they've got any type of videos, YouTube channel. Do they have anything out there? Have they written articles? Have they collaborated with people? Have they done projects?
Chris Picciurro, CPA:Have they appeared even done a presentation at the local library? You get a feel of their how they operate, and you could pretty much figure out if they're gonna be a good fit by by just checking things out. And and you might find go to somewhere and say, hell, this person's in my local town. They have a website that says coming soon. They don't have any social media presence.
Chris Picciurro, CPA:And and okay. If if but understand that they're probably not they might have some capacity capacity issues. They're probably not gonna evolve to the point where you might want them to, or that might be a good fit for you. Maybe you're the kind of person that likes to bring your box of stuff in, have a coffee, and talk through things with the with the tax professional, and then that person might be a good fit for you.
John Tripolsky:It's like dating. There's a right person for everybody out there. Just gotta find them. But awesome, Chris. Well, I appreciate it, man.
John Tripolsky:Definitely a longer discussion we had here, but, again, I I appreciate it. I'm sure our our listeners will as well too. And, yeah, I mean, I can almost guarantee we're gonna be touching base on this one multiple times as things change. And then we have a much longer conversation coming up with, the CEO, and I think he's executive director CEO of the MICPA, so the Michigan Association of CPAs. So we look forward to that on the other show, on the Mr.
John Tripolsky:O Show. But for now, if anybody has any questions on this, please just drop us a line. I'd say it's if you really wanna be modern, right, don't even email us. Get on Facebook. Send us a Facebook message, LinkedIn message.
John Tripolsky:Check. Get on our TikTok and watch some videos, some reels on there. Shoot us something on there. Join defeating taxes. Defeatingtaxes.com is our private Facebook group.
John Tripolsky:Join that. Tons of tax pros in there. Heck, even get in there and maybe razz some of these tax pros if you want to. If you wanna have a little fun with it, we'll let you get in there. But enjoy it.
John Tripolsky:Again, the grass is not greener necessarily on the other side, but it's also not dead. So let's let's think about it that way. Everybody's gonna be fine. It's gonna be good here. Still, still in a great spot.
John Tripolsky:So as always, as we love, love, love to close out this podcast with, we'll see everybody back here again next week, roughly different time, completely different topic on the teaching text flow podcast. Have a great week, everybody.
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