The Accounting Podcast

Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Blake Oliver: [00:00:04] The headline is pastor charged with cryptocurrency fraud said God told him to do it in a civil action. Prosecutors in Colorado said that a Denver pastor and his wife created and sold a cryptocurrency that was practically worthless and then pocketed more than $1 million.

David Leary: [00:00:23] Coming to you weekly from the OnPay Recording Studio.

Blake Oliver: [00:00:29] Hello and welcome back to the show. I'm Blake Oliver.

David Leary: [00:00:33] I'm David Leary, and those of you who like to tune in to our live stream. I got a new web camera, so I don't go out of focus anymore. I don't know what happened to my old one, but now I'm coming to you. It's 4k. Now, Blake, do I can you see all my defects of my almost 50 year old face and skin damage from Arizona?

Blake Oliver: [00:00:48] You got to use that auto touch up feature they got now on all of these apps, right? I think it's in the settings.

David Leary: [00:00:54] The AI, the AI. Yeah.

Blake Oliver: [00:00:55] Well, for those of you who are listening on the podcast, you can actually see what we look like if you, uh, follow us on YouTube, subscribe to our YouTube channel. Just search for the accounting podcast. You will find us there and you can get notified when we go live. And I see folks joining us now. Thanks for joining us in the live stream. Feel free to let us know what you think about these stories that we are going to talk about. The first one is that there is a shortage of accountants in the United States. David, here's what to do if you can't find one for tax season. That's the headline on CNBC. Uh, it seems like this accountant shortage is going more and more mainstream, at least every tax season. We hear about it because it's real. You know, on CNBC they always distill every article into three key points. So you can decide if that's all I ever read.

David Leary: [00:01:41] It's simple.

Blake Oliver: [00:01:42] It's great. It's very helpful. I love the executives above the fold.

David Leary: [00:01:44] You never have to scroll. Yeah. It fits in this world we live in. Of tweets.

Blake Oliver: [00:01:48] The first bullet point is if you're looking for an account to help you with your taxes this year, good luck. Okay. Wait, that's not helpful. What are we going to do? As fewer college students graduate with accounting degrees, the number of accountants and certified public accountants has been declining. This we are aware of. Therefore, you might need to get creative if you have not secured a tax preparer yet. So let's find out what Anna Sohla on CNBC says we need to do. First of all, they talk about why there's an accounting shortage. Accounting has a reputation of long work hours, coupled with stressful deadlines, leading college students to opt for other lucrative roles in finance like investment banking, consulting or data analysis. The declining birth rate also plays a role in into the low supply of accountants, according to Henry Grzes, lead manager for tax practice and ethics with the American Institute of CPAs.

David Leary: [00:02:43] He's going to say, before you finish the sentence, I knew exactly where that stat was from.

Blake Oliver: [00:02:46] So of course, this AICPA is out there saying like, oh, it's, you know, out of our control. It's it's declining birth rates, right. Nothing to do with what we've done as a profession with work life balance and all that good stuff. Salaries, starting salaries, none of that. We're not going to talk about that. Uh, and CNBC put together a really nice chart here of new candidates sitting for the US CPA exam. Uh, that I think illustrates very well the issue that we have, which is that in 2010, we had almost 50,000 new candidates sitting for the exam, and in 2022 it was down to like 30,000. So 50,000 to 30,000 drop pretty precipitous there. Then they talk about the new CPA exam, how that's, I guess, gonna make things better. I don't really see, but let's move on. Let's talk about how we actually are going to, you know, find a tax preparer this year.

David Leary: [00:03:39] These are the creative suggestions. Yeah. Okay.

Blake Oliver: [00:03:41] So number one and this should worry the AICPA is broaden your search to enrolled agents. So see, this is what happens when you don't produce enough accountants, enough CPAs. What happens? Alternative certifications start to gain in prominence. If you couldn't hire an accountant or CPA to handle your taxes, enrolled agents may be a safe bet. Enrolled agents are experts who focus solely on taxes and must pass three exams. Some tax preparers only carry a Preparer Tax Identification Number, or Tin. While they can certainly prepare and file your tax returns, they can't represent tax preparers before the IRS in case there's any notices or an audit. So number one, go to an E. I think our enrolled agent listeners will appreciate that. I do think that there needs to be more awareness of enrolled agents among the public. I'm curious to know how many taxpayers actually know what an enrolled agent is or what.

David Leary: [00:04:35] That's a very confusing name, because people think of IRS agents and it's very, very confusing. Even be somebody in the industry. It took a little while to like, reconcile that in your brain. Yeah. When you hear it.

Blake Oliver: [00:04:46] Second option is consider online filing options. So that's what people have been doing for years is heading over to TurboTax, H&R block, TaxSlayer. Those are recommended in the article. And the number three look into local community resources the IRS has. Programs that offer free basic tax return prep. There's a link there to volunteer income tax assistance called Vita and tax counseling for the elderly. And then number four, which is actually the best recommendation if you actually want to work with an accountant or a CPA, is to file your taxes later in the year. So be okay with going on an extension. Uh, make sure you pay. Of course. That's the tricky part. Most people don't know what they're supposed to pay, but if you do, uh, pay enough and then file later, which is the one thing that we keep telling firm owners to do, advising them to do is put all your clients on extensions, spread the work around, uh, you've got the leverage. You've got the power to do that. Right. You don't have to do it all during busy season.

David Leary: [00:05:50] I mean, I don't have a link here, but I think I saw some other articles floating by that were kind of in the same vein of like, expect to pay more to have your taxes done this year, kind of along the same lines. Right. Mhm. It's not. Yeah. You should keep as it was a year ago. Do you want to talk more IRS? Do you want to talk taxes? Do you want to talk TurboTax like where do you want to go next?

Blake Oliver: [00:06:09] We should stick on taxes. Okay, I heard that that contractor who leaked Trump's tax returns and the tax returns of Bezos and a bunch of other billionaires got sentenced.

David Leary: [00:06:23] He got sentenced. Charles Littlejohn, 38. He pled guilty October 12th. But the sentencing just recently took place. So just to rewind, he was like an IRS IT contractor for 15 years or so. And he was very upset that Trump did not release his tax returns. And so he got a hold of Trump's tax returns, leaked those to the New York Times in 2019. Then he stole some more tax returns and leaked those to the New York Times. Then in 2020, he stole 500 more returns for lots of billionaires and handed those over ProPublica. So he did this a bunch of times. His motivation was, you know, he he he felt strongly that he was doing the right thing. But the judge made it pretty clear they sent he got sentenced to five years in prison because this is just not acceptable. We cannot be having people's tax returns be leaked out there. I just so for me, though, I did not know that he kept doing it. I thought it was like a one time breach, but once he got away, it's just like all criminals. You get away with it. Once you try it again, you try it again. You try it again.

Blake Oliver: [00:07:22] Who's doing it for years?

David Leary: [00:07:23] Yeah.

Blake Oliver: [00:07:25] So he got five years in prison.

David Leary: [00:07:27] Five years? Yeah. In prison.

Blake Oliver: [00:07:29] Well, that's, uh, should act as hopefully a stronger deterrent to anyone else over working at the IRS to keep our information secure and to not leak it to the press. Uh, sticking with taxes. Did you see the FTC? The Federal Trade Commission said that Intuit TurboTax can no longer advertise their products as free. And the rationale is that while one third of taxpayers did qualify for the free service, two thirds of taxpayers did not. And the disclaimers that it was not free for all were often, quote, ineffective and often inconspicuous. So I'm thinking about those free free free free free free free free free free. Years ago. Yes. Yeah. They have to if they want to market their products as free. The FTC is saying that they have to be free to everyone, or they have to clearly disclose the exceptions.

David Leary: [00:08:33] Which is hard to do in a commercial. It's very, very hard to do.

Blake Oliver: [00:08:36] It can be. I mean, I don't know, I feel like it could be. Right. You like, here's all the common situations where you would be ineligible for free, right? They could do it.

David Leary: [00:08:45] Like the drug companies just like rattle off all these things at the very end of the commercial.

Blake Oliver: [00:08:49] There you go. Right. Um, yeah. So people who might have been surprised that they weren't going to be able to file for free, it included taxpayers who were claiming mortgage and property deductions, charitable donations, over 300 and unemployment income, investment income, rental property income, certain education expenses. Gig workers who reported income as independent contractors, including many delivery drivers, were also ineligible. Samuel Levine, the director of the FTC's Bureau of Consumer Protection, described into its violations as egregious. This is in the New York Times article I'm reading from. This order also sends a message across industry. Free means free, not free for a few or free for some, Mr. Levine said in a statement. Businesses can expect an FTC enforcement action if they harness the power of free in the dishonest way into it did now. It requires them. If they want to market their products as free into. It has to clearly and conspicuously disclose the percentage of taxpayers or consumers who qualify for the free product or service. Alternatively, TurboTax may disclose the majority of consumers do not qualify, so that that's what they'd have to do. David. They'd have to say at the end of the ad, a majority of people do not qualify for the free product.

David Leary: [00:10:04] So I think I loosely talked about the new TurboTax commercials that were coming out, and I was surprised that there was a free one. And until recently, that's the only one I saw was the free one. But they had 37% of taxpayers. So they were they had that in the ad. Um, so Intuit had an official press release or blog post about this. It's simple. It's like four paragraphs or 2 or 3 paragraphs. One thing is they said they, uh, were unsurprised that the FTC announced this because they ruled in favor of themselves. Right. And they're immediately appealing because they believe once it's in a neutral body, a court, they'll prevail. Um, they clearly said in sentence all on its own, its own paragraph. There is no monetary penalty in the FTC's order, and Intuit expects, no expects, no significant impact to its business. And this is where I've always thought about this, because I if you think about Intuit's last few years of behaviors, when they removed themselves from the Free File Alliance, I think at the end of the day, Intuit doesn't need free file. They don't need anybody free. I think the TurboTax live offering is enough. I think they're very confident in it. I think they just do advertising. They say free just because competitors are out there saying free as well, and they don't want to miss that. They don't want to be part of that conversation, but they can go off of that. I'm like, is this one of those like, there's no bad press. Like millions and millions of mentions of TurboTax are in articles now because of this. And the same thing when they they do that dance, they sue H&R block. H&r block sues them over what they claim in their commercials. They both get press like, is this? This has been going on for 25 years. Every season somebody's complaining about free TurboTax and it gets in the news like it's it's free marketing, I think.

Blake Oliver: [00:11:49] So you mentioned that Intuit and TurboTax or TurboTax in H&R block have been suing each other. Are they still at it?

David Leary: [00:11:57] Yeah. The latest now, um, because, you know, one claimed something in the commercial, the other claims something in the commercial. And when I thought was interesting in there, this year's round of lawsuits is they're arguing about how good the AI is. So Intuit's arguing that H&R block's I. It's more like a little search engine and it's not really a good AI. And so I'm surprised that that's where we're at now in 2024. We're suing each other about who has the better AI in our tax product. Right. Even though it's it's like what for both of them. It's wet paint. Right. Like it barely exists and they're already suing each other. Whose is better for the cost. Right. Kind of that. But this is this has gone on forever. H&r Block and Intuitive always sued each other every tax season in January. As long as I can remember.

Blake Oliver: [00:12:44] So you mentioned that H&R block has AI now in the product, so does Intuit. I'm curious what these exactly are. Uh, they appear to be just conversational AI chat bots that have been added in in H&R block calls, there is AI tax assist, and it's integrated into the paid versions of their DIY tax software. It answers tax related queries and directs users to human tax experts for more personalized advice. The company is also working on an AI powered, personalized advice chat bot, so I guess it's just a more enhanced version of these chat bots you've probably used, which try to find articles for you and point you to help articles. I mean, this has existed in these products for a long time. This AI tax assist was developed using models from OpenAI and Microsoft, and trained solely on H&R block's library of tax laws with the assistance of its accountants, lawyers and tax professionals, so it's limited to H&R block's content. So this could be really powerful for these do it yourself users. I mean like for me, right? I love doing my own taxes. Um, maybe this will inspire me to try it again this year.

David Leary: [00:14:00] Did you find any videos or any demos of it? Because I went on this rabbit hole a little bit and you get to the H&R Block website and on the pricing page it says, get help from our live experts and our new AI Tax Assist. You click on that link. And it just has a small pop up that just says put the power AI to work basically. So like I can't really see it or feel it anywhere. I don't know if at least with Intuit, you know, they had their big AI launch and announcements and demo videos. You could kind of see it, but I don't know. Did you come across anything?

Blake Oliver: [00:14:31] I haven't seen it in action, but I'm just just based on that description, I feel like I know what it's going to do. It's just going to be a more enhanced version of like a chat support bot.

David Leary: [00:14:41] Yeah, which is right. A lot of them are searches.

Blake Oliver: [00:14:44] The documentation gives me the answer without having me to go read the article. Which is which could be very helpful. Um, and that's kind of how the TurboTax AI seems to work. Turbotax customers this year have access to Intuit Assist, which is that AI model that we saw demoed in QuickBooks. And it's also trained on Intuit's proprietary tax knowledge and the tax code it's designed to provide personalized answers, offer insights for specific situations, and deliver recommendations for future actions. It can interact with users in natural language, and interestingly, it is available in both English and Spanish. And we know that's a growing market for TurboTax is the Spanish language market. So. Here. Now we have AI with these assisted products encroaching onto territory of tax preparers. More and more, I think it's going to make the assisted products easier and easier to use. Because when you have a question now you have multiple options. You can ask the AI, you can go schedule time with a human because they've got TurboTax live. This is why it's important for tax preparers to pay attention. To what Intuit is doing, what H&R block are doing because they're creating what could be really appealing customer experiences. And we're going to try it. We're going to try it again this year. And I was just thinking, this should we.

David Leary: [00:16:04] Should we like this year when we do our taxes, really try to as much as possible interact with the AI bots?

Blake Oliver: [00:16:10] I think we should yeah.

David Leary: [00:16:11] We don't know how to do anything.

Blake Oliver: [00:16:13] We're going to we're going to use the, the assisted, uh, because it's going to be available in Arizona this year. The business assisted for our one of our LLCs. So I want to let's use the chatbot. Let's see if it gets the right answer. Right. And not that you and I would know I guess maybe we'll have to recruit some listeners. What else is new in the world of apps? Brex is cutting 20% of their staff amid reports of stalled growth and high burn. That's according to TechCrunch. And this is following a round of layoffs back in 2022, when they let go of 11% of their staff. 11% 2022, uh, and then 20% right at the beginning of this year. They're also changing company leadership. There's going to be. A new Co coming in. They're shifting their operating model with a focus on long terme thinking over short terme gains. I don't know what that means that.

David Leary: [00:17:13] That is a weird phrasing.

Blake Oliver: [00:17:16] Like before we were just going for short terme gains, but now, now we're really going to go for long terme success here. Isn't that what every business is supposed to do? Especially a startup. Their goal. Go ahead. David.

David Leary: [00:17:31] Oh, so it's just because they I know they made changes in the past. Remember? They stopped supporting small businesses. They said we don't want small businesses anymore. They drop that. They dropped a.

Blake Oliver: [00:17:39] Ton of small businesses.

David Leary: [00:17:40] Dropped a ton. But then when the Silicon Valley bank thing, they were like one of the number one recipients of new customers, right? Yeah. I think when that went on. So it's it's they do feel very roller coaster y. Right. It's a lot like maybe you're right. Longer, longer, smoother planning might be better for Brex.

Blake Oliver: [00:17:57] So their goal is to be cash flow positive with a runway of around four years. They had annualized net revenue of 290 $279 million in the fourth quarter, a 32% increase. Although most of this growth occurred in the first quarter of the year. Like you said, when Silicon Valley Bank went under and all those deposits fled and Brex got a bunch of those deposits. So imagine if Silicon Valley Bank hadn't collapsed, where would Brex be?

David Leary: [00:18:24] Yeah. And I think I saw a tweet or sensationalized article about how they're burning $17 billion a month right now. I'm sorry, 17 million, not billion, $17 million a month right now. But that's like with any any company, as soon as you have employees, you know, for your tech company, every ten employees is $1 million, right? So if you have 500 employees, you're going to burn 15 to $20 million in a month.

Blake Oliver: [00:18:48] Did you see Microsoft Mesh, David. We use Google Apps at earmark, so we aren't exposed to all the team's releases. But I had to point this one out because I know most of our listeners, the vast majority are on the Microsoft stack. And there's a new feature in Microsoft Teams called Microsoft Mesh, and it feels almost like we've gone back in time to last year because Microsoft Mesh is basically, uh, virtual reality meetings inside of teams. So now you can put on your Oculus, you, you can put on oh, no, it's not Oculus. Well, Meta Quest, that's what they call it now right. I think they rebranded. So it's available on PC and Meta Quest VR devices. So you and I, if we had teams, we could put on our VR headsets and we could meet in virtual reality. David and I.

David Leary: [00:19:38] Third, the way it works too, is if I heard about this on a podcast is if there's ten of us in a room, if you and I walk over to a slightly different area, I can only hear you.

Blake Oliver: [00:19:47] Right? Like proximity based based, virtual proximity based, uh, audio. Which that could be interesting, right? I suppose. I feel like we need to. We need to. I mean, I have a quest headset. Maybe you need to invest in one, too.

David Leary: [00:20:04] In this house for the podcast.

Blake Oliver: [00:20:06] And, uh, we could try having one of our dangerous.

David Leary: [00:20:08] I fell down in it. I was, like, on the ground. It's like a little, little goofed up.

Blake Oliver: [00:20:13] I just don't understand. Like, how would I take notes, right? How would we how would we actually do anything other than meat? I guess you can do it on your computer. You don't have to be in the headset mode. You can just wander around a virtual room. But companies have tried this before. I, I ran across a couple of startups that were using this like top down 2D, almost RPG style, uh, video game kind of style office simulator. And it did the same thing where your mic was always on, and if you wanted to talk to somebody, you could just like walk over to them and then it would engage the conversation, turn on your mic and you could talk to them. Or if somebody wanted to walk to you, they'd walk into your virtual office and it's all top down like an old school, you know, like Final Fantasy RPG. I always wanted to try that.

David Leary: [00:21:00] I think there was a conference during Covid. I think you went to and then you told me about it. So I registered and went to two and it felt like you were outside. Inside. Outside. It felt like, uh, Minecraft or Roblox. For those of you who have children that play those games and you can walk around. But when I was in there, the only other one other person, it was like a ghost town. But I think the concept is kind of there, right? Like you'd only here you'd you'd walk to a virtual room and you'd hear that presentation only like I get the concept of all this stuff, but like, you just click zoom and we see each other face to face and yeah, 4K video, I don't know, just. And I have arms and legs. I'm like in virtual.

Blake Oliver: [00:21:37] I think it was Boomer consulting that did the VR conference during Covid and we the one we did it and it was not it was not a great application though. I feel like it was the the app they used was like so ancient that it made for a not a great experience. Like standing at a booth in real life is already hard enough standing at a conference booth in virtual reality. Makes you question the meaning of existence.

David Leary: [00:22:06] Did you see that wave? So I know we haven't talked about wave in a very long time. H&r block bought wave years ago, and wave has always been a free accounting software, right? Yeah. And they either did it through some Google ads in the margins or they would, uh, make money on payments and payroll and some add on services. Well, they announced they are now going to start charging approximately $20 Canadian per month for what they're calling is their paid pro plan. So they're they're moving away from their 100% free tier. So they always offer something for free.

Blake Oliver: [00:22:38] What do you get with the paid plan.

David Leary: [00:22:39] So. It's just a subscription, you know, like they're going to have it. It's not really clear. And they say starting today. But then when I went to their website, I don't see this new plan on their website.

Blake Oliver: [00:22:53] What about pricing? If you click on pricing what do you see. Yeah. So I'm.

David Leary: [00:22:56] In pricing. So I think this is still the old pricing because I'm not seeing like some $20 pro plan here.

Blake Oliver: [00:23:02] Okay let me hit refresh.

David Leary: [00:23:03] Let's just see just in case real time I still don't have a pro Pro plan yet.

Blake Oliver: [00:23:08] But I'm gonna start charging for something. But we don't know what.

David Leary: [00:23:10] Yeah, I didn't know that they were charging for, like, mobile receipt scanning. They're charging for payroll. They actually offer bookkeeping and accounting services, right? I didn't know they offered all this other stuff. I always thought they were just bouncing around in the run. Google ads on. Okay. Accounting software.

Blake Oliver: [00:23:27] Didn't. H&r block by wave?

David Leary: [00:23:29] Yeah, they bought them a while ago. Yeah. But then it's just been very quiet. Like, I don't know what they've been doing with it. Um, I'm surprised they didn't even co-brand it. It seems like it seems like the H&R block name is so big. You would you would co-brand this even. But that's just it is what it is. So wave is now going to be a paid software package. I don't know any accountants who have clients on it. I don't know if if you do, but, um, they're still around.

Blake Oliver: [00:23:54] Amazing. Uh, did you see that Microsoft's stock market value has overtaken Apple? This happened last time in. When was it? Looks like 2021. So they go back and forth. But Apple has been ahead of Microsoft for a while. Back in 2021, Microsoft briefly overtook Apple and now they are ahead again. Why do I bring this up? Well, Microsoft made that enormous $1,011 billion. I don't know how many billions it is now investment into OpenAI ChatGPT. Obviously the market thinks this was the right move. And it looks like they're going to stay ahead for quite a while. The institutional investors believe that their value will stay ahead of Apple for the next five years, and Microsoft shares have surged 7% so far in 2024. They are above $3 trillion in market cap. As the world. And they're the world's most valuable company now.

David Leary: [00:24:57] But a lot of these. Google had the bump as these companies have announced AI and they're charging for AI. Yeah, they all have their little stock bumps. But I'm starting to you know, obviously Apple is going to put AI into Siri. There's no way Apple can move forward without rolling out some sort of AI. And imagine Siri being useful, right? And so.

Blake Oliver: [00:25:16] Yeah.

David Leary: [00:25:16] Do they have elbow room to charge people? Hey, for an extra 20 bucks a month, you get the really good Siri for 20 bucks a month, or you get crappy Siri for free. Do they have room to? Because if that's the case, they're going to be the most valuable company if they can charge for that. I think I saw an article, um, that there's internal arguments happening in Amazon, whether or not their AI version of Alexa should be a monthly charge service versus free Alexa. So obviously. Oh, yeah.

Blake Oliver: [00:25:43] That would be a terrible idea.

David Leary: [00:25:46] For Amazon, because they have these other ways to make lots of money off of you, right? Yeah.

Blake Oliver: [00:25:51] I mean, they, they they should just make Alexa actually like more useful than as a kitchen timer and as a media player. I mean, that's basically the two things that we use them for in our house. Well, and home automation. Right. So it's put the blinds up and down, turn the lights on and off, set a kitchen timer, listen to music. I have a I have trouble thinking of anything else that we use it for. Oh, definitions of words for my son's vocabulary. Homework. Yeah.

David Leary: [00:26:17] I don't use mine. Never played din. Never used it. Yeah.

Blake Oliver: [00:26:20] So the reason I'm bullish on Microsoft as well is because when your entire company, especially your email. Is all in Microsoft. And let's say your files are saved in SharePoint or whatever. That is a humongous database of information that's incredibly valuable, that has totally been unused in the past because there was no way to sort through it all, but I can ingest all of that into an LLM and give you some really interesting insights about your business and help you respond to customers autogenerate emails. If they do this right, and they integrate the AI generative AI into outlook. Correctly so that it can just write emails for you and it sounds like you. And it has the right answer to questions, and it knows the context in the history. Uh, the productivity gain will just be. Unbelievable.

David Leary: [00:27:13] In the footprint like it's in windows, like I used it today to prepare for the show. Um, for one of my stories, um, I was researching. I'm going to get the name correctly here before I mess it up, because it's three names together. It's Archer Daniels Midland and I used the built in AI tool. So instead of opening a browser tab, navigating out to Claude or to ChatGPT, I just did it right inside of windows, which is super convenient. And that's an advantage Microsoft has. Like, if I don't ever have to go somewhere else to use AI, it's just right there in windows. It's a monster advantage that they have. Um, but we can get into that story if you want. Um, this was.

Blake Oliver: [00:27:53] Before you do. I just want to say welcome, Edgar, to our show. Edgar said, one less accountant for this tax season. I just left tax and am going to ERP consulting. Well, Edgar, sorry to lose you in the tax world, but I think ERP consulting is a fantastic place to be. So I hope you find it fulfilling and exciting and enjoyable. Alina says Alexa keeps my kids occupied. That's a very valuable, uh, trait. And with AI, maybe it can be like a tutor. Uh, Amazon really has an opportunity there. They originally the idea with Alexa was we're going to sell a bunch of stuff on Amazon. People will just buy with their voice. But it turns out that people don't really want to shop with just audio. You want to actually look at the products and see the reviews. And I've occasionally reordered things, but very rarely. All right, David, sorry to cut you off. Go ahead. No, sorry.

David Leary: [00:28:49] So this was this came through about 300 times in the last 24 hours of my feed. Um, ADM so Archer Daniels Midland, they, uh, had a huge stock drop because of an accounting investigation. So if you kind of rewind a little bit, if you're. Are you familiar with who this is?

Blake Oliver: [00:29:06] No. Tell me. I mean, they're Archer Midland it sounds like. Are they a food.

David Leary: [00:29:12] Big food. Big food. Corn on one end. Chemicals and cash coming out of the other end. Right. Okay. That way. Um, uh, they produce chemical additives. They sell corn to, uh, corn to feed livestock. They sell additives to food. Right. And before we get into them being in the news before, uh, it took a little while to, like, poke around and figure out, like, what really was going on here. Like, what's the crime and what it looks like. This is a game of cost accounting to some extent. So what set this off is they have this nutrition unit that's probably less than 10% of their complete revenue. Right. And we'll just say, uh, ADM for short to make it easy on us. And but what happened was it had an outsized outside influence on the recent executive bonuses. So the executives collected more than $70 million in bonuses for this teeny little division of the company. And the background on this was in 2020, Adm's board changed the goals of growth, and they wanted to see the profitability of this nutrition unit go up and move from 10% profitable at the time to 20% profitable. Okay. Well of course, what? Because if they if they got to 20%, they got twice as many shares. So of course, this business unit moved from 10% to like 21% profit. So they got these huge bonuses. Now there's nothing that fully says what the what what they did here.

David Leary: [00:30:41] But they've had people resign. They're investigating. They've had people step down. Right. But it sounds like it's the oh, we'll put some of those costs to this other business unit and some of these costs of this business unit. So now we have we hit our profit goal on this business unit, which is like a minute part of the bigger company. But during this research and I this is when I use the copilot that was built into windows, I was trying to find what the crime was. So I literally was searching for archer-daniels-midland like, what did they do? What was their crime? Right? What happened? Turns out this is not the first time they've been questionable. So back in 1996, they were accused of price fixing. So there was two chemicals that they were price fixing. Lysine. Lysine, apparently that's a chemical they put on corn to make chicken fatter so chickens will get fatter, you know, before they, uh, we all eat them and then citric acid. So they in 1986, they agreed to pay $100 million, which at the time was the largest criminal antitrust file in history that they paid to the US Treasury. And in 1998, three executives were found guilty of guilty of the global conspiracy to fix prices. Um, and this is a big story that obviously, before we had the podcast, they even made a movie about it. So there's a 2009 movie starring Matt Damon called The Informant.

Blake Oliver: [00:32:01] Oh, yeah, I saw that. That's what that was about.

David Leary: [00:32:05] That's what that's about. Yes. Is this this? That's a.

Blake Oliver: [00:32:08] Good movie.

David Leary: [00:32:08] So they haven't they have history of doing questionable behaviors. But there's nothing clear of what the exact thing they did wrong, other than it's one of those Smokey's fire. Hey, if they're playing these games, what's the real state of the company? And that's probably why the stock's being punished. But it's a it's a counting games.

Blake Oliver: [00:32:25] So we don't know exactly what the improper accounting practices were. So that they used to inflate the nutrition segment.

David Leary: [00:32:32] Yes there's a lot of no comment other than they're they're people are resigning. So the story will probably eventually come out.

Blake Oliver: [00:32:40] Interesting. We'll have to stay on that, David. Speaking of fraud. We've got a crypto fraud, a new crypto fraud, and it has a twist. I saw this in the New York Times. The headline is pastor charged with cryptocurrency fraud said God told him to do it. In a civil action, prosecutors in Colorado said that a Denver pastor and his wife created and sold a cryptocurrency that was practically worthless and then pocketed more than $1 million. So our live stream viewers can see, uh. Eligio Regalado, who is the pastor accused of selling a worthless cryptocurrency in Denver. He said he was guided by the voice of God when he took the money, and then he spent it. What's interesting is that. They acknowledge. That they had no experience in cryptocurrency exchanges. They created this coin called index coin. They sold it to Christians in Denver. They raised nearly $3.2 million for more than 300 people who bought it between 2022 and 2023, and then they used the money for themselves. This is according to the Colorado Division of Securities. And in a video addressing the complaint, Mr. Regalado said that he did not want investors to be mad at the prosecutors. They have to do this, he said. I mean, if you think about this, we sold a cryptocurrency with no clear exit. We did. We took God at his word and sold a cryptocurrency with no clear exit. And of course, because of problems with the cryptocurrency exchange, investors can't take their money out. Mr. Regalado said in the video that he went into the cryptocurrency business because the Lord told him to. He said that God had once come to him in a dream and asked him to do so, and he accepted that he and his wife spent the funds in a home remodel that the Lord told us to do. He said he still hoped the investors could get their money back, and he said that he believed God is going to work a miracle in the financial sector.

David Leary: [00:34:51] This is great, Blake, because I know how they can get their money back.

Blake Oliver: [00:34:54] How's that?

David Leary: [00:34:55] F.t.x. Is showing this model. So I don't know if there was another piece of anything from this article before we jump over to FTX, but I have the solution.

Blake Oliver: [00:35:03] No, I just, you know. Mr. Regalado, I just I just want to emphasize he still has faith that God will rescue him and his followers from this cryptocurrency. With that has become worthless. All he has.

David Leary: [00:35:17] To do is sell more crypto to pay back the other investors. So Ft apparently now has amassed $4.4 billion in a stockpile of cash because they're selling. Crypto assets again. So they're selling crypto access assets.

Blake Oliver: [00:35:38] Which assets does it say which coins they're selling. Are they selling?

David Leary: [00:35:40] Say and they're stockpiling this cash with the intention of paying back the customers who they stole from buying crypto to begin with. Like, how is this they're going to take this customer's money and pay these customers? I don't get it. Like it's crazy. Um, and they also FTX still says they don't expect all customers to be fully repaid. And then their bankruptcy team says it would be impractical, impractical to determine the exact value of each customer's portfolio. There are just too many claims. So, like, this is craziness that they're selling more crypto, piling all this cash up, and they're gonna maybe pay some people with some people's other money. I don't know how this is even legal. Like, where's the oversight? I thought this was all being bundled up under a judge now, keeping track of this bankruptcy. Like it's shocking that. But this could be your pastor's solution. He could just sell more coins. Just sell more crypto.

Blake Oliver: [00:36:35] So sticking with fraud, I talked about the failed Deloitte audit of Tingo. Tingo mobile. Remember that, right? Was that last episode?

David Leary: [00:36:45] I think so, yeah.

Blake Oliver: [00:36:46] So this is a African company, and I believe that I said at the time that Tingo was balance sheet, said that they had 400 something million dollars on the balance sheet. And I reported that the actual bank records show a balance of less than $50 million. But I read the report wrong. It was actually $50. Yes. So I, I saw it said it said the news article. When I was reading it, it said $461 million, when in actuality they had, you know, dollar sign 50. And I took that to mean 50 million.

David Leary: [00:37:31] Because in your brain, you would never expect it to be that drastic of.

Blake Oliver: [00:37:34] A drastically different. Well, it turns out that Tingo Mobile's Nigerian bank accounts only had a balance of less than $50 $50 for the period. So Tingo just picture this. You're the auditor, right? You signed off on financial statements. The 2022 form 10-K reported $461.7 million in Tingo Mobile's Nigerian bank accounts. The actual bank records show just 50 less than $50 for the same period. The fabricated cash balance was supported, and this is according to the SEC allegation. The fabricated cash balance was supported by fake bank statements manufactured by Tingo mobile to deceive auditors. The fake statements show billions in cash credits and debits that do not exist in Tingo mobile's actual bank records. The fake 2021 bank statement shows over 800 million in credits and debits, while the real statement for the same account shows less than 1 million in transactions. They provided fake bank statements, contracts, invoices, etc. to substantiate these non-existent cash balances and related party transactions during the audit process. Uh, and apparently the fake documents were incorporated into the company's books and records and reported in their SEC filings without detection by the external auditors. I think this is going to end up being bigger than Wirecard in terms of like, I mean, it's the same thing, right? The auditors took the bank statements provided by the client and didn't independently verify any of this stuff, which is just like the worst failure, the worst audit failure.

David Leary: [00:39:11] I mean, the other problem with Wirecard was I think there was a lot of politicians that all were on the take, and there's a lot of turning a blind eye to it, which made it even worse. It was an audit failure at the same time it was. Pretty shady on all fronts. Who knows about this, right? Or is there going to be politicians or going to be people that turn a blind eye to this, or is it just flat out poor auditing?

Blake Oliver: [00:39:34] So the thing about Tingo that's really kind of shocking is I dig in a little more to this. Is that the company, like, never, uh, like really existed. So the defendant. Fabricated financial statements starting in 2019 that falsely portrayed Tingo mobile as a highly profitable business with hundreds of millions in annual revenue. More. Bussey, who is the defendant, used the statements to induce two public companies to acquire Tingo mobile through reverse mergers at inflated valuations exceeding 1 billion. So there never was a super profitable business in the first place. He'd deceived the companies that acquired his mobile business, the public companies. And then these public companies incorporated Tango Mobile's fictitious financial results into their books, records and SEC filings.

David Leary: [00:40:32] I'm just shocked at how this happens. Like there's there's zero due diligence. It's just like when, you know, uh, I think it was Chase. They bought that student loan company and turns out they didn't have any customers. They're all, it's a big made up email list, right? Like, how does this like, nobody pauses before you did it say how much they acquired it for? It's got to be hundreds of millions, if not billions of dollars.

Blake Oliver: [00:40:53] Well, the valuations exceeded $1 billion.

David Leary: [00:40:58] Am I shocked by these stories? Like $1 billion and nobody pauses to do any due diligence before you make the acquisition? I and that could be because, you know, executives that the new company there are bonuses are based on growth. So you make the acquisition look how much we grew. And now I get my bonuses. Like, maybe we need to get rid of all bonuses, like, and put everybody at a level playing field of just doing your job right without bonuses.

Blake Oliver: [00:41:25] So let's, uh, let's detour from fraud and let's talk a little bit about. The 150 hour rule. And I promise I will be brief. Don't turn that dial. I just want two minutes, two minutes, two minutes. Okay, so I posted the Arizona CPA society survey showing that 80% of respondents to that survey believe we should have an alternative to 150 hours. So whatever that is, we want to change. And only 10% say we should keep it the same. And a lovely person from the Iowa Society of CPAs sent me their study. Apparently they did a survey as well and found very much the same thing, um, they found in a survey done last year that. They asked the question, should there be alternative pathways? And 79% said yes, only 5% said no. The rest either didn't respond or were unsure. So just like in Arizona, 80% or so believe that we need to have an alternative pathway and less than 10% believe that we should keep things the way it is. And among preference, uh, where, you know, what should we do? What should we replace it with? It seems like most agree that we should have 120 hours of education, which is four years of college plus two years of experience. Uh, but there's actually reasonable support for 120 plus one year of experience even. I don't think the years of experience really matters all that much, but if you do want to keep things equivalent in terms of time, then swapping a year of education for a year of experience seems to make a lot of sense.

David Leary: [00:43:13] Now. Does Iowa. Now where's Iowa's stance on this? I mean, there's very clearly some states are putting their stance on this. Very clearly versus just reporting what their members are saying. But it feels like in general now the members or the the populace believes that there needs to be modifications, but and then it state the governing bodies are still not all on board. State to state. So did Iowa take a stand yet?

Blake Oliver: [00:43:41] Um. Yeah. I mean, they're taking this and making a recommendation to the EOS society of CPAs board of directors that says we support alternative pathways to CPA licensure that preserve a path to mobility. We support a trigger strategy to propose legislation we do not believe Iowa needs to be first. Reciprocity for other states must be simultaneous with Iowa's implementation of alternative pathways to protect Iowa stakeholders. Is CPA will be an advocate working to support other states in their alternative pathways. The task force will be maintained to continue evaluating these details, and is CPA needs to continue its work to remove other barriers to entry into the profession. Good. So this is great, right? We've now got multiple state societies, at least a handful actively working to create alternative pathways that don't require a burdensome amount of education. That's unnecessary. South Carolina Minnesota seems like Arizona is on that path. Iowa. Um, maybe there's more.

David Leary: [00:44:46] Think there's more. It's just it's. Those are.

Blake Oliver: [00:44:49] The ones I can think of off the top of my head that publicly.

David Leary: [00:44:52] Issued guidance on it, I guess.

Blake Oliver: [00:44:55] Elena in the chat says, what do you guys think about mobility? And, um. I, you know, this is the thing. This is the this is the reason why we can't change according to the folks that don't want to change anything, we'll break mobility. I honestly don't think it's actually that big a deal. If there were. A coordinated national effort to change the laws in the states that need legal changes. I think it could be done just because it took 20 years to put the 150 hour rule into place, doesn't mean it would take that long to undo it. And we have seen plenty of examples in other professions where changes have been made during Covid. Uh, the nursing associations managed to create reciprocity across all the states, like within months to allow nurses to travel so they didn't have to get licensed in individual states. So we could just do that. We could as a profession, we could say all the states are going to recognize CPA licenses from every other state, and we're going to make that the default. And then if there's issues, we can address those. And, you know, states can argue about those small differences. But right now the problem is that the default is there's very little reciprocity. And mobility is actually kind of a mess. So my feeling is let's just open it up. I really don't think it's going to result in like massive problems. Like I don't think there I think I think all this legislation actually creates more of a problem than it solves. It doesn't protect the public. That's my feeling about it.

David Leary: [00:46:31] And South Carolina called this out, that it's already broken. Yeah. All these states have these differing rules. And like this, you're not going to break it. It's already kind of broken.

Blake Oliver: [00:46:39] So I'm a CPA in Arizona right. So in terms of mobility I really don't care because like I can serve clients all over the country and those states are never going to know about it. How are they ever going to regulate me sitting here in the Phenix Metro? Uh, theoretically they could complain to my state board, but by the time any of that actually works through the system, I probably don't even have the client anymore. So it's irrelevant, right? There's, like, no practical impact, I guess. Maybe the large firms, it impacts them somehow in terms of their staffing. I think that's what they're worried about is like, if I do audits right across state lines, then, you know, I got to have staff that are licensed in the States where I'm doing the audits. If there's not mobility, and then that becomes a big hassle. But like for most CPAs, it really doesn't matter. And most of us are actually serving clients locally anyway. Still. So Edgar says, when I got my CPA license in Arizona in 2011, I remember that California had 120 hour and one year of experience requirement. Didn't California CPAs still get reciprocity in other states? Yeah, well, there was everybody got grandfathered in. Isn't that funny? That was part of the whole initiative, right, is that people had to get grandfathered in. So most CPAs today actually don't have 150 hours of education. All right, moving on, David, you gave me way more than two minutes, I know.

David Leary: [00:48:05] Well, you got distracted by a question, so it's okay. Um, there's two, uh, pieces of IRS news in regards to documents. If you want to talk about some of that. Okay, I'm going to share this screen.

Blake Oliver: [00:48:17] Did we talk about how the IRS launched their free file program or they're going to do it in March? We also talk about that their own program, not the one that Intuit was doing. Yeah I'll let you go.

David Leary: [00:48:30] This is sharing. Yeah. Hopefully this is sharing okay. But the IRS is starting to, um, change their notifications. The mail that goes out, the physical mail. So you get those, you know, 12 page notifications for the IRS and it looks like it's from a computer from the 70s, and you don't even know what to do with it, right? It just sits on your desk. It's a little intimidating. But now there are new forms. If I have up on the screen, they look a little bit more. It reminds me of my electric bill, my gas bill. Right when you now get statements for services, you get and you can kind of read the bill and these new notifications, you even have next steps and they're numbered. Step one do this. Step two do this. And it's part of a bigger initiative. So they've redesigned 31 notices over the past year. Next tax season they're going to review and redesign 200 notices that are about 90% of all the tax notices that go out to individuals. So that's about 150 million notices a year. Then in 2026 tax season, they're going to fix all or improve the notices that are sent out to business taxpayers. So everybody should be getting a better IRS experience based on these documents, which is good.

Blake Oliver: [00:49:38] So the IRS is also modernizing. They are offering their own direct free file system. This of course, follows that whole free file debacle over the last few years where Intuit pulled out of doing free file because they were they were they it was hard to find the free file site and people were going into TurboTax regular and, uh, the powers that be thought that was misleading. So IRS is using part of its $80 billion it got from Congress.

David Leary: [00:50:14] But they're launching they're launching a a tax service. So I can do my taxes on the IRS website today. Yes.

Blake Oliver: [00:50:19] It's called it's called Direct File. And it's not today. It's going to launch in March. The IRS is expecting several hundred thousand taxpayers to use it. Um, they aren't putting a limit on the number of people who can use it. And. It will work in 12 states where it's being rolled out. It will be available in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming. Anyone who meets the program's eligibility requirements and lives in one of the 12 pilot states will be able to use the direct. The free direct file system to file their 2024 taxes should be 2023 taxes write tax year 2023. It's limited to people with form W-2 income. Unemployment compensation, social security benefits, and interest of $1,500 or less. Other types of income, such as returns on stock or other investments, won't be supported by the program. So if you're a simple W-2 filer. You could file your taxes for free if you're in one of those 12 states. Gig economy workers if you have 1099 income, you can't use the system.

David Leary: [00:51:33] Sounds like TurboTax.

Blake Oliver: [00:51:34] Free. It can't do itemized deductions. Yep. You have to do the standard deduction. Only the child Tax credit, the earned income Tax credit, and the credit for other dependents are selectable in the system. So if you have any other tax credits, you can't do it.

David Leary: [00:51:50] So it's interesting so that what TurboTax and H&R block are offering for free is essentially parity to what the IRS is going to offer for free. So until they offer more, that's kind of where that's always going to be. Yeah.

Blake Oliver: [00:52:02] And I would expect like the IRS system to gradually. Eventually offer more tax credits. More la la la, all that stuff. Right? But like, it has a long way to go before it can be sophisticated tax filing software. So tax pros don't need to worry about any of that stuff for a long, long time, most likely.

David Leary: [00:52:24] So two U.S. senators introduced what I would call as a pretty stupid bill. Yeah, for the IRS, they're going to require. So the bill is called barcode automation for Revenue Collection to Organize disbursement and Enhance Efficiency. Act barcode is the name of the bill. Okay. That um, so essentially more or less what it is is any time there's an electronically prepared document, so you're going to electronically prepare a tax form, but then when you print it out it has to put a barcode on it. So the IRS could scan it and instantly get the data off that form. But I think they missed the bigger point of this. If you've already electronically prepared the document. Why aren't you e-filing the doc? That should be the act. They should require more e-filing. Or require the IRS not to turn off the file servers. Because if you're late, you know they turn them off and then you have like, I had to do that at a print and mail, did a paper turns that I created electronically like they're missing the whole point of this, like the wait.

Blake Oliver: [00:53:27] So the idea is that a printed form would have a QR code on it.

David Leary: [00:53:32] Yeah. So you do use TurboTax. It's too late to e file. You print it out or your taxpayer uses a pro taxpayer file. They print it out because you have to physically mail in the tax form now, right. Another reason there's going to be it has to have a barcode that has all the data that's basically on the rest of the form. Right. Or if it's a manually filled out form, it has to be OCR and it just feels like they're missing the whole point of the efficiency problem. The efficiency problem is they turn off the file servers. Like that should be the that should be the law. Don't turn those off. It's stupid. It's like when you go to the airport and they have the Self-check-in kiosk and seven of them are turned off, like turn them all on like it doesn't matter. It doesn't make any sense. It's the same thing. Like you don't need to have a barcode on a printed return if you let people file the returns. I just a stupid bill. Stupid name. I think senators just do this to get a press release, I don't know.

Blake Oliver: [00:54:26] Well, I don't know. Like you said, they're kind of out of touch. Maybe they don't realize that there's a better solution. Um, I saw a story that, you know, made me think about this. Uh, the Taxpayer Advocate released a report saying that, you know, the effort to revamp the IRS is struggling despite the multi-billion dollar infusion, because the IRS still struggles to answer the telephones. They cannot hire enough people to staff the phones and answer more than, you know, 20, 30% of calls. And. The solution is not to hire more people to answer the phones. The solution is to build portals that allow taxpayers and tax pros to self-service, so that you don't have to call and talk to somebody on the phone in order to get anything done. That's the mind shift. Think that's the mind shift that needs to happen.

David Leary: [00:55:25] They're trying just to hire. Yeah, instead of fixing the actual problem. Right. Just try to hire bodies and then like, well, we can't hire anybody because there are no bodies. Yeah. It's the same.

Blake Oliver: [00:55:33] Problem we have with, uh, uh, with everything where it's like the people in charge are fighting the last war.

Speaker3: [00:55:39] Right?

David Leary: [00:55:40] Last war.

Blake Oliver: [00:55:41] Right. They fight like that's why Russia invaded Ukraine with tanks. They were fighting the last war.

Speaker3: [00:55:48] Last war?

Blake Oliver: [00:55:49] Not the new war with drones. Uh, there's a.

David Leary: [00:55:52] Story I want you to talk about, because I think you kind of want to talk about for a couple of weeks about the the ghost town that's trying to be resold or something.

Blake Oliver: [00:56:00] Oh, China and Evergrande. Yeah. So. Well, we don't have time to get into it today because I know you have to get to a lunch.

David Leary: [00:56:06] Tease it, tease it.

Blake Oliver: [00:56:06] But the teaser is that, uh, China's Evergrande, which is one of the largest real estate companies, developers in China. A Hong Kong judge just said that it has to dissolve, liquidate because it can't even get through a bankruptcy. So. If this happens and Evergrande Liquidates. My feeling is that this is going to set off that real estate crisis that has been slowly chugging along in China. It could really, you know, precipitate a big, bigger crisis. Um, and the government's sort of been holding it in check because there's so many controls in China. Right. And you haven't seen that.

David Leary: [00:56:45] Don't tell us the controls tease this. This is a tease. But yeah.

Blake Oliver: [00:56:48] So so that's the teaser is like we'll talk about that. Um, I've been following this story for a while. I think China's economy is really screwed. Um, which in some ways is great for the United States. Right. Because, uh, as long as we're the strongest economy, this is where the money flows, right? This is where global investment comes and this is where economic growth will happen. So, uh, not good though for the Chinese. We have some comments here I want to address in the chat before we go, um, Ben says regarding mobility, California will get you if you're a sole proprietor and serving California clients. Well, my question, Ben, is like, how are they going to know that I'm serving California clients if I'm just doing it all online? Right. And that's the problem. I think a lot of this goes completely undetected. Um. Jg Tax Pro says, I think this is regarding like finding time to study. There's a chat going on about time to study. We don't have time to get to that. But thank you for commenting. Um, David says the decrease in supply of accountants has made the CPA license a nice to have, rather than a requirement for employment. Absolutely. I got hired as a manager at a big firm at a top 25 firm without being a CPA, and that would have been unheard of in the past.

Blake Oliver: [00:58:03] I did eventually get my CPA. Uh, but it wasn't a requirement to get there, and I probably could have made it. I'm guessing I could have made it to partner without being a CPA at that firm. And. I can't forget. David. We have a listener survey. Our first listener survey is now available. If you want to tell us what you think about the show. We would love to hear it. We want to tailor this show to what interests you. Our growing audience of live stream viewers and podcast listeners. Uh, go to accounting dot show slash survey. That's accounting dot show forward slash survey. It will take you 5 to 10 minutes. My wife took it. She said you can do this in 5 to 10 minutes. So, uh, she's not even an accountant. She doesn't really even listen to the show, so I bet you could do it even faster. Um, take the survey. It asks you a bit about yourself. This is to help us provide information to our sponsors, and that will help us sell more sponsorships on the show, help us continue to grow the show, invest.

Blake Oliver: [00:59:08] And then we also ask you what you think. What topics do you like? What do you think we could do better? Who should we interview like help us make this show better? We really appreciate it. So go to accounting show slash survey and we really appreciate all your help. And don't forget you made it to the end of this episode. You can get free continuing professional education credit for listening, download the earmark app on the Apple App Store or Google Play Store. Search for earmark CPE. Download the app, find this course, take a quick five question quiz and earn your CPE certificate. You put in the time you should get the credit, and you can get one credit for free every week with earmark. Uh. If you really like it, please subscribe to the annual Unlimited Pass. It helps support the work we do at earmark. And, uh, you can join like a thousand other people who have subscribed and are supporting earmark and its development. And we got lots of cool things coming in 2024. So thank you everyone for your support. Thanks, everyone. Great to see you. And uh, talk to you next week.