Beware of E-Filing Your Tax Return

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: [00:00:05] We had some information about how much the Big Four spend on lobbying.

David Leary: [00:00:09] That's what I was gonna touch on quickly lobbying Congress. I feel like it's shockingly a low amount all combined. They only spent their directly lobbying Congress. They only spent $9.4 million 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: [00:00:32] and I'm David Leary. And Blake, you're right again. Remember how you were right that crypto was a scam? And then two years later, it turned out like, yeah, like FTX happened. And it turns out it was a scam in many cases. Well, you're right about something else. And this is actually didn't even take as long. Like it wasn't a two year horizon prediction. I feel like you might have predicted this in April or May.

Blake Oliver: [00:00:53] I think it I think it was earlier this year we were talking about this deep fake technology and specifically with audio. That's where it started. These tools with generative AI started to develop that could mimic your voice. Right. So we can actually do this right now, David, we have technology. We have software that we use to produce this podcast where we can feed in me speaking for an hour, and then it can generate an artificial voice, and we can type text and it will sound like me. Yeah, I.

David Leary: [00:01:25] Can record your voice and call Bank of America, and it could do the voice prompts on the phone to get me into your account.

Blake Oliver: [00:01:30] Yeah, exactly. So like, that's already been done. Audio deepfakes are a real thing. You can't trust them. So if somebody calls you, there's no way to know if it's really them without asking them questions to verify. And a great example of this was the Joe Biden deep fake voice message. Did you hear about that one, David?

David Leary: [00:01:49] I, I think I heard something like encouraged people to not vote or something. Yeah. It was like yes. Yeah.

Blake Oliver: [00:01:55] So some some group we don't really know who I never heard who. Uh A paid to send deep fake voice messages as Joe Biden out to voters in one of these early states and told them, don't go to the polls, right. Trying to suppress turnout. And of course, that technology could be used to do fraud. Right? Call up the Treasury personnel, call up the CFO, pretend to be the CEO and make a transfer. Well, Snoop.

David Leary: [00:02:23] Dogg, remember he called me about my about getting an IRC loan. Remember that? Oh yeah. Yeah, yeah, yeah, yeah, I remember that.

Blake Oliver: [00:02:29] Um, so. It's gone another level. David, we are at the video deepfake stage of fraud now, and this headline in CNN is truly disturbing. Finance worker pays out 25 million after video call with deepfake chief financial officer. So the story here is that in Hong Kong, a finance worker at a multinational firm joined a video conference call. Think of it like a zoom call. I don't know what platform they're using, but probably teams zoom something like that, right? And they're on the call with who they think is the CFO and other people. There were multiple people on this call, but according to Hong Kong police, it turned out that the finance worker was the only real person on the call. All of the other talking heads in the video conference were fake. They were created by deepfake technology.

David Leary: [00:03:23] This is like movie movie type scenarios, like, we're going to do this big crime and everybody. Yeah, it's.

Blake Oliver: [00:03:28] Not that the worker wasn't suspicious. The worker had grown suspicious after he received a message that was purportedly from the company's UK based chief financial officer. Initially, the worker suspected it was a phishing email as it talked of the need for a secret transaction to be carried out. However, the worker put aside his early doubts after the video call because other people in attendance had looked and sounded just like colleagues he recognized. Believing everyone else on the call was real, the worker agreed to remit a total of 200 million HKD, about 25.6 million USD. This is one of several recent episodes in which fraudsters have used deepfake technology to modify publicly available video and other footage to cheat people out of money. It's really scary stuff. How do you know on a video call if the person is real?

David Leary: [00:04:21] And I know for a fact on this podcast, these words have came out of my mouth and yours as well. When it came to like a lot of AP fraud, we're like, oh, or people changing bank accounts or routing numbers. Like, you should probably work with your clients and get a second way to verify that, right? So if they send you an email, maybe get a phone call or maybe set up a zoom call, but apparently that doesn't that's not going to work anymore. Like how do you actually verify things now? Do you have to drive and meet in person?

Blake Oliver: [00:04:47] No, I don't think so. You and I came up with a simple solution that everyone listening should implement. We have a code phrase, a passphrase that you and I know. And so if you call me and tell me to transfer some money or ask me to do something, or if I call you and ask you to transfer money, you can verify that I am who I say I am by asking me for the passphrase. And we we haven't shared this with anyone else, right? So a fraudster would not have this passphrase.

David Leary: [00:05:16] And so do you have to have a separate passphrase for every single client?

Blake Oliver: [00:05:20] That's a good question. I think maybe maybe you put that in your one password or your LastPass. I don't know, uh, or, or another alternative is like use a secondary secure system to authorize payments and do not go outside of that system. Right. So you always want to have multi-factor. Multi-factor means more than one way of verifying somebody's identification. So if you're using a system like, say, a or a relay or Amelia with which has built in approvals, you can simply say, like, this is we've got to use this system.

David Leary: [00:05:53] Right? That's that's the other part. I think a bigger issue of this is. Shouldn't have gone through some approval. Like did he this one person just send the money or doesn't somebody else have to be like, okay, let me look at this before we hit send on this $200 million. I'm surprised that a.

Blake Oliver: [00:06:09] I mean, actually, I'm not surprised because this happens a lot in corporations, but like the fact that one person had authority to wire 25 million USD, the equivalent of 25 million USD, without any anyone else being involved. Like, it's not clear here if anyone else was involved or if there were any internal controls like that. That concerns me a little bit, but there are people in organizations that have to have that authority, right? Somebody has to have the the keys to the vault, right? Somebody has to have wire transfer authority. So I think the best way to overcome this is have some internal controls around this and and use passphrases with your people. Don't rely on just a video or an audio confirmation call. There's got to be something else going on. Thanks everyone who has joined us live today. Boring accountant. Great to have you here. Hope you're enjoying your coffee. Good morning Cameron. Boring accountant says any transaction that large should have multiple persons approving and verifying independently as part of controls. How did the vendor for payment get onboarded so quickly? Yeah, well, so that's a good question, right. Um, yeah. Where was this payment going to? And there should be a system. I've worked with some large companies and there's always like a usually there's a purchase order system. There's a.

David Leary: [00:07:26] Oh we do.

Blake Oliver: [00:07:27] Onboarding system.

David Leary: [00:07:28] It takes us 12 weeks to get a $1,500 payment from some companies. Yes.

Blake Oliver: [00:07:33] I mean, in that case it's like two too much control, right. Like maybe lower it for like something under $10,000 or whatever. Right. But anyway, we predicted this. It has happened. And I would expect to see more of this in the future. And the text is just going to get more and more sophisticated. So it's a brave new world out there.

David Leary: [00:07:52] That's because maybe we shouldn't use so much technology. Blake.

Blake Oliver: [00:07:57] All right, David, let's move on to QuickBooks news. You have a big update about QuickBooks Live tax. There was an email that went out to. It seems like every ProAdvisor in the country I looked through, I didn't get it at first, but then I looked through my like news folder where I filter out all the marketing stuff and I found it.

David Leary: [00:08:18] So yeah, there was an email that went out and it was like QuickBooks Live or tax update understanding QuickBooks customer's use of tax prep services. And the email kind of summarizes what they're going to do. So it's starting this month. So it wasn't even like this was a, uh, hey, we're thinking of doing this in the future. Like we're starting it this month. And I think this is what really rubbed a lot of people the wrong way. It just was like a surprise right here. You know, first week of February, second week of February, whatever we're in right now. Um, and so they dropped this in and essentially what they're doing. And I'll switch to the screenshots for the people that are watching the live stream, they're going to pop a message inside on the taxes tab of QuickBooks online. So this is not an email to your customers that could just get ignored or swipe swiped away or put in the junk folder or whatever. It's going to be in the QuickBooks online product, and they're going to have a screen that says, ready for taxes, your accountants here for you. And it looks so my client.

Blake Oliver: [00:09:15] Uh, is in their QuickBooks online. Yep. And they're going to see this message.

David Leary: [00:09:20] They will see this message if they click on the taxes tab apparently okay.

Blake Oliver: [00:09:23] What's it say.

David Leary: [00:09:24] And it says ready for taxes. Your accountant is here for you. And it looks like you're already connected with somebody who might be able to help. So they're recognizing that you are connected to a ProAdvisor already. Somebody is doing somebody help. There's an accountant helping you with your bookkeeping. It's very clear. And they say, does an accountant file your annual business taxes for you? And they give two buttons. One button says, no, I file annual business taxes myself, and the other button says yes. An accountant files for me. So Intuit's trying to determine you have the QuickBooks. They already know there's hundreds of thousands of QuickBooks online users that don't have accountants at all, but now they have this subset of QuickBooks online users that have an accountant helping them with QuickBooks online. And this is that next layer down. Okay. You hundreds of thousands of QuickBooks online users. Is anybody helping you with your taxes. So depending on how they click that button. Right. So if they say yes, an accountant files for me, uh, Intuit drops them to a new page, another window will pop up. These are just screenshots, so I don't know exactly how it's going to fully work. And they basically tell you to reach out to your accountant and start preparing your return. And they even give us some FAQs, like, here's documents you might need to give your accountant to do your return. So they're kind of at one level, they're sending people to the existing accountant to start doing the return. Right. And then on the other direction.

Blake Oliver: [00:10:50] If they click no.

David Leary: [00:10:51] If they click no. So if they click no, they get dropped into a product called Live Assisted Tax, unlimited expert help filing self-employed taxes. And then obviously it pulls your company type s-corp or whatever from your QuickBooks settings. And it offers the TurboTax business product directly inside of QuickBooks online for.

Blake Oliver: [00:11:12] Preparing my business taxes with assisted help. So it's not full service. It's the assisted product.

David Leary: [00:11:18] It's assisted product.

Blake Oliver: [00:11:19] Like the regular TurboTax for 1040 for individuals.

David Leary: [00:11:22] Yes.

Blake Oliver: [00:11:23] So people are upset about this. Yeah.

David Leary: [00:11:26] So people are all over the board. I mean you get the typical like Intuit is evil. I'm done with Intuit. And if we went back to when QuickBooks Live was launched and, you know, the same pitchforks were out there, but I was actually thinking about this. I was 20 years old, 21 years old, working at the mall when like QuickBooks desktop came out, DOS. And at that time, accountants were all upset with Intuit. So this has been like a 40 year old dance, right? That just never really kind of ends. But the opinions were kind of all over the board. I think most people were really upset because they didn't ask for feedback first. They just did it into it. You know, they're great. Sometimes Intuit's brazen and they just make decisions. But Andrew McDonald, I thought, summarized it pretty good. Um, that if you think they're your competition, you need to stop worrying about that and just focus on taking care of your clients. Because I think at the end of the day, if if your client's happy with the tax work you're doing for them, they're never going to click. No, I don't have an accountant doing my taxes. Right. So I think you have bigger problems, right? If Intuit steals them. Jason Statts had an interesting comment that he said that it feels like it's it's been communicated and all the feedback from QuickBooks Live like that's all been pretty stable. But the sentence that caught my eye from Jason Statts was, imagine what the tax system would look like without TurboTax.

Blake Oliver: [00:12:44] Right? Well, it wouldn't function if.

David Leary: [00:12:47] You had 40 million more individuals that need returns done that are just on the market, which we have no labor to. Yeah, to, to get to the finish line on that.

Blake Oliver: [00:12:57] So I think that's that's fair. Right. Like TurboTax fills a crucial role in the marketplace. And it's not possible for all the accountants, all the tax preparers to do this work. Like there simply aren't enough of us anymore. It's like half of all the tax returns in the country are now done by software, with with software. And we got to remember that this is an assisted service. So it's still do it yourself. The client if they choose this will have to do a lot of work in software to get their tax return done. And yes, there is the option with assisted to book a time with somebody who pops up in the corner of your screen in a video call. That's one way and will help you solve problems. But this is a very, very basic service. So if your firm is focused on this, like if your firm is that similar to TurboTax assisted. Where you're making your clients do a lot of work, then yeah, you should be worrying, but most firms are much more full service. They're doing it for the clients. And so it's a different product. Right. Like that's why you're not competing with assisted. And if and if your service is so bad that your clients would rather do it themselves. Like that's a problem for your firm. That's not that's not Intuit's fault.

David Leary: [00:14:14] Well, and that's I think the jump here is. If you're already offering them bookkeeping services, and maybe your firm itself doesn't offer tax services, you should already know every single client how they're getting their taxes done. Hopefully. Right. So in theory, if you're if you're doing bookkeeping services for a client, hopefully you're shepherding them to someone who's a professional that's helping them with their taxes. So in theory, every one of your clients should all be saying no to this question, right? Yeah, because every one of your clients should be working with a tax professional. And if if they say no, maybe they don't think you're a tax professional or they I don't know. It's like it's not like I think this is a more of a bigger play on the industry in the there's just too much work and there's not enough bodies to do it. And this goes back to me getting fired from an accounting firm. Yeah. Then I go to the next accounting firm down. I that accountant took me on as a client. I pay a little bit more money. He probably got through to 3 or 4 clients and it just trickles down. So you have this whole vast, a chunk of the population that don't have accountants and Intuit sees that and they're like, well, we're going to go take it. And that's that's kind of what's happening here. But it's not just Intuit. I'll share this article here. So in TechCrunch they actually have I'm sorry, not TechCrunch. This is Crunchbase news. They had a big article come out this week about how I will be be doing more accounting of startup investors have their way. Right. And they have a chart in here of like all these AI related stuff or accounting related startups and how much money they've raised. And it's hundreds of millions of dollars these companies have raised. But if you really start looking at it, it's all volume plays. They're automating stuff with AI. That's volume play, volume play, replace work, help people get stuff done. And then just this week, when you say.

Blake Oliver: [00:16:00] When you say volume play, you mean like restaurant. 365 is going after massive numbers of restaurants and automating the accounting, inventory, scheduling, payroll and HR for them?

David Leary: [00:16:10] Yeah. So then they're building okay. So they're they're doing it kind of all under one umbrella. Right. And when you do everything under one umbrella, you know, if you're the point of sale and you're the restaurant, uh, inventory management system and restaurant expense management system all in one thing, you're going to be able to scale more and do more work, right? Um, and so what caught my eye, though, was three raises happen this week. Or there was four, but three of them I saw Penny Lane.

Blake Oliver: [00:16:34] Penny Lane was a big one right.

David Leary: [00:16:35] So we can start with Penny Lane. So Penny Lane had a raise. They raised another $40 million and now they're valued at $1 billion. Now Penny Lane is based in France. So if you go to their website you have to like do Google Translate to read the actual website. But basically they're the QuickBooks or Xero of France. They have relationships with small business owners, but they also have relationships with accountants. Now they say right now they don't want to damage that relationship, but they're professionals, right? But if it comes down to the same thing where there's people that there's more work than there are accountants that do it, I would not be surprised if Penny Lane starts to get into this space as well. But their play to scale is they're they're connecting to everybody's, uh, APIs and using AI. Right, to do a front end for the small business and then the back end for the accountants. Right. But but it's it's scale, right? They're trying to scale that way. Um, another one.

Blake Oliver: [00:17:31] Because when Penny Lane started, it sounded more like a services business to me, like an accounting firm than a software company. But it seems like they're now more of a software company than a services business. Which makes sense, because if you want to be a unicorn, you can't do it as a service business quickly.

David Leary: [00:17:47] And I don't know if it's a marketing thing. I know the one corner of their website clearly says, um, Penny Lane is not an accounting firm. They're going out of their way to say that. But I think you're right. I think I remember it being more of an accounting firm with tech. Right? Yeah. Uh, another interesting race. So this is a, this one, uh, data snipper, if you can pull it up, if you want data snipper. Com they raised $100 million at a $1 billion valuation. And basically their play is to do more with with less labor and what their app is. I mean, we've all done played with OCR apps. You know the the bills aren't you scan the bill. It's on the right hand side of the screen. On the left hand side of the screen is the field. So you click on the date and it populates on the other side of the screen, the date field. Imagine if that was an Excel for auditors. So now every bill, W-2, tax form, anything you have to tick and tie, it'll scan that. And then you click the field and it puts it into a field in Excel. And this company apparently they're saying they now have 400,000 auditors using this product. Mhm. Now and they might be like oh we got a contract with Deloitte. So let's count all their employees. I don't know how they're counting this but it just seemed like a lot of usage.

Blake Oliver: [00:19:02] Interesting. They're listing Deloitte, KPMG, RSM Baker, Tilly, BDO Hilton uh Siemens, Grant Thornton. Yeah. Frontier Airlines. So basically take a bunch of documents, drop it into this system, and it makes an Excel table with all the fields that you want. And then you can click on a field and it shows you the document takes.

David Leary: [00:19:22] You back to the source doc. Right. Yeah.

Blake Oliver: [00:19:23] So this is this is a great example of technology that can be used in accounting in a lot of different ways, especially audit. But I could see this being really useful for anyone who has to make work papers from source documents.

David Leary: [00:19:36] Yeah. And this is you could argue this is competing. It's taking away people's jobs, taking away auditor's work. Right. You could think.

Blake Oliver: [00:19:42] Of I don't want to do that work. Yeah.

David Leary: [00:19:45] And and then the other one that came out or this weekend had another race, um, platform accounting group raised $85 million and its platform ag comm. Essentially the play here is let us help you scale your boutique accounting firm by us doing your back office. Right.

Blake Oliver: [00:20:04] I like I like the name because it says what how probably how they describe it to investors. Right. We are a platform for accounting firms. We're just going to call it Platform accounting Group.

David Leary: [00:20:16] But at the same time they're going to scale too, because now they have your office and your employees working for them. So it's a it's a little confusing because it looks like it's a it's really a play for them to acquire. And by this surge in firms this.

Blake Oliver: [00:20:29] Is a roll up scheme. It's a roll up scheme.

David Leary: [00:20:31] But it's it's all about scale. Now they just took another $85 million to go do more of this. Um, and then the last one to kind of touch on is uh, finally. So finally we've talked about them before because I think they had a great pricing page at one time. We had them up on the show. They raised $10 million. Now, previously, they had a round of $95 million in 2022, but their product used to be called back office. I don't know if you remember that at all. No. But finally, if you go there, essentially the website, uh, finally like finally com. Yeah. Finally. Com. Okay. And in the play there, is there really an accounting firm with tech. Right. But the reason the reason they're going to scale and solve for labor problems is they're doing everything. So example, if I go there and I click to get tax services done, the first thing they do is they make me either by bookkeeping service, their bookkeeping product, their banking product, so my accounts receivable and bank accounts or I do um, my spend management card. So they, they're controlling all the data and that's how they're going to scale, um, to their tax returns. So you can't just sign up and get your tax returns done. You have to become a client of their products first.

Blake Oliver: [00:21:45] And that is.

David Leary: [00:21:46] How you data and.

Blake Oliver: [00:21:47] That is how you build scale in a services business is you you put rails on your clients by making them use the software that you use to do the service.

David Leary: [00:21:57] Yeah. And so they they have their own bank. They have their own spend card. Right. Mhm. So they're forcing people to use their whole product stack in order to get your taxes done. And that's how they're going to scale.

Blake Oliver: [00:22:09] Yeah. Amazing. Well thank you for that. Round up David. The the platform one. Um that one I want to go back to that one. Yeah. Was it called platform accounting. That's it I think this one this is, this is going to be big this or something like it. There are so many small firms that do not have succession plans. And currently their only option is to merge into a mid-size accounting firm, um, which has significant downsides for, you know, it can be a good thing, but it can also be not a great thing. So this is an alternative is merge into one of these private equity backed groups. Although maybe the mid-sized firms and these platform plays are going to end up being the same thing because we just saw that Baker Tilly is now private equity owned, majority private equity owned. Accounting today reported that Baker Tilly got private equity investment. A pair of firms, Hellman and Friedman and Vilas Capital Partners are giving, taking a majority stake in Baker Tilly. And it's the biggest accounting firm to date to accept PE funding. This is a top ten firm. There's no say how much.

Blake Oliver: [00:23:17] Uh, well, they said that it's a 55% majority stake in Baker Tilly Advisory. So, um, in order to do this, Baker Tilly has to split the firm into two groups. There's the group that has the audit attest because there's restrictions on ownership of that. And then everything else gets put into a corporation. And now the private equity firm is going to own 55% of the. Well it's not. It's called Baker Tilly Advisory Group LP. So I don't know what the corporate form is of that, but that's the idea. Um. The firm had $1.8 billion in revenue. So this is a 1.8 billion revenue firm that's now going to be privately owned. And it's in the top ten. So there's been a lot of chatter on Reddit, on forums. You know, um, is this going to be good for the staff? Is this going to be good for the future partners? It's certainly good for the partners because they get an immediate payout today. They don't have to wait till retirement. But if you are about to make partner now, what's going to happen to you? Right.

David Leary: [00:24:24] Yeah. You're you're in this limbo now.

Blake Oliver: [00:24:27] Yeah. So it's very interesting. We've got traditional accounting firms, traditional partnership model firms now competing with private equity backed corporate firms. Basically these are corporations the way they're being run or the way they're set up now. And we'll see what what wins. I feel like the problem with the partner model, as Dan Hood wrote in Accounting Today this week, is that it's slow and difficult to adapt because you have to get consensus from everyone. Whereas with a corporation, right, your board of directors appoints the CEO and there they go. So we'll see.

David Leary: [00:25:00] Do you have any other big four news?

Blake Oliver: [00:25:02] We had some information about how much the Big Four spend on lobbying. That's how I was.

David Leary: [00:25:07] Going to touch on quickly.

Blake Oliver: [00:25:08] Lobbying Congress.

David Leary: [00:25:09] I feel like it's shockingly a low amount. Like, what would that keep in mind? What did a UI do? Did they do like $60 billion in revenue? Like what were some of these numbers? Right. Yeah, it's.

Blake Oliver: [00:25:20] Tens of billions of dollars in revenue.

David Leary: [00:25:23] It might be $100 billion if you add all four of them together. Right. How much do you think they should spend on lobbying, like to actually help the accounting industry?

Blake Oliver: [00:25:34] I mean, maybe they could pitch in a billion copy all combined.

David Leary: [00:25:39] They only spent their directly lobbying Congress. They only spent $9.4 million.

Blake Oliver: [00:25:44] It seems rather small. I mean, I don't know, maybe it's a lot.

David Leary: [00:25:48] I don't know, man. And I know how this is. I'm just pretend I'm a congressman. I know how this works. I see. Well, you're you got $60 billion in revenue. Like, I need you to donate more to my campaign, to more to my lobbying and my my interest, whatever those might be. It just feels like, no wonder we have the problems. We do. We're not we're not getting the political influence we need as an industry, because there's not enough money being spent on lobbying. Other industries are spending hundreds of millions of dollars on lobbying.

Blake Oliver: [00:26:16] So this was reported by Amanda Aiken in on Bloomberg And the major thing, apparently, that they've been spending this money on lobbying for is to include accounting and Stem. Yeah, right. Science, technology, engineering, math and put accounting in there so it becomes Steam. And I guess that would somehow help solve our pipeline crisis by getting more students interested in accounting in high school. But like, you know, I think I think there are there are better ways to improve the pipeline other than just, you know, a designation. That accounting is part of Stem. Yeah.

David Leary: [00:26:52] There's no lobbying on making. But you.

Blake Oliver: [00:26:55] Know what? How much does the AICPA spend on lobbying is the question, because a lot of the money from these big four firms goes to AICPA and then AICPA lobbies. So that's what I'd be curious to know.

David Leary: [00:27:06] Yeah, I CPA spend.

Blake Oliver: [00:27:09] Lobby while you look that up. Let's take a look at the comments. Uh, we've said. Regarding data snipper I use it every day, used it for vouching and audit, using it for tax return version comparisons, catches, missed amounts, boxes you didn't hit. That's so cool. And regarding Baker Tilly as someone who knows someone who is a young staff that works there, they told us that we should be excited but didn't go into details. Did you find out? David, I did find out.

David Leary: [00:27:39] It's very depressing. The AICPA only spent $375,000 on lobbying in 2023, making them the.

Blake Oliver: [00:27:48] What.

David Leary: [00:27:48] 13 hundredth rank of 9000 lobbyists.

Blake Oliver: [00:27:53] Did you say 100,300?

David Leary: [00:27:55] 300,375. Let's round it up. 400,000.

Blake Oliver: [00:27:59] How is that?

David Leary: [00:28:00] You wonder why nothing gets better.

Blake Oliver: [00:28:05] Oh, boy. Well, let's talk about the worst Wall Street Journal opinion piece I have ever seen in my time on this planet, David. And that is. The headline beware of e-filing your tax return. Yes, somebody wrote an opinion piece in the Wall Street Journal and their argument is beware of e-filing your tax return. This is by Jay Starkman. And I saw the headline. I looked at it with disbelief and I thought. Do we really? We don't need anyone helping to push the accounting profession backwards in time. Right. But this guy is actively trying to, like, hold us back from technological innovation and encourage taxpayers to get their accountants to file on paper. Like, why? Why does he feel the need to do this is my question. And and then going beyond motivations, I read the article and it just doesn't even make sense. He's saying in this article that it's safer. Starkman says it's safer to file on paper than to file electronically. And he calls out some data breaches that happened years ago. But he also never even examines the risks of filing on paper, like sending stuff through the mail, which people could open or misplace or make copies of. Well, he doesn't even.

David Leary: [00:29:31] Better because you get a post stamp, a certain date and time, and you don't have to deal with time zones and computers like, and then you won't be late. I don't know the whole I was kind of I read it and then I was like, is he arguing that people shouldn't? It's hard to comprehend, right, what the argument is.

Blake Oliver: [00:29:48] So most of his examples have to do with CPAs who didn't file in time. And so the client got penalized or simply didn't file at all. But that could happen with a paper return too. Like it doesn't even make sense. I am shocked that the editors at the Wall Street Journal opinion the desk even saw fit to print this because it doesn't make logical sense. And I'm going to read one of these to you. Here's an example Wayne Lee's CPA failed to e-file his client's returns for 2014, 2015, and 20 1603 years. He didn't file his returns. Continuing on, the accountant told the IRS that the software he used couldn't handle Mr. Lee's complex returns. But Mr. Lee said the accountant never told him about this problem. In 2019, the IRS assessed Mr. Lee more than $70,000 in penalties and barred him from applying a six figure 2014 overpayment to taxes owed. In 2015 and 2016, an appellate court ruled that the reliance on the CPA wasn't an excuse for making errors, so. Let me get this straight. The argument for filing on a paper return. I mean, like in this case, the CPA couldn't file electronically, so he just didn't do it. And then. The client was hit with penalties. I don't see what that has to do with paper versus e-filing. He just didn't do the job. Yeah, it has nothing to do with paper or electronic filing. Um, another example is. Somebody. Roy Nutt. What a great name. Roy Nutt with two T's. He filed his tax court petition on the day it was due, at 11:05 p.m. central time. That meant it arrived at 12:05 a.m. the next day in Washington, where the tax court is located. The court rejected the filing because it was five minutes late. An appeal is pending. Had Mr. Nutt mailed a hard copy to the tax court postmarked before midnight, it would have been accepted. Uh, find a post office that's open at midnight. I would like to see that. Yeah.

David Leary: [00:31:56] And I don't think they they don't do that on tax deadlines anymore. Where you when everything was in mail and you drive by and they have lines of cars sticking there. Your returns in the mailbox like that doesn't exist anymore.

Blake Oliver: [00:32:07] What this makes me think of is the, uh, Simpsons episode where Homer is, um, trying to get his tax return in on time, and he he he, like, finishes it the last minute and he puts it in the envelope, and the envelope is, like, shaped like a football. And and he ends up like throwing it into the bin at the post office. Hail Mary. Yeah. He Hail Mary's it and it makes it into the bin and gets postmarked.

David Leary: [00:32:33] Yeah, it's better than e-filing. So I dropped a little link in the private chat for you if you'd want to click on that, because this is probably even worse than the story itself. So there's a blog site called Best Life, and it's about like personal finances, investing, things like that. It's a it's a, you know, it's a it's a destination site on the internet. They basically took his article, fact checked it. If you see that it got the it got that little stamp fact checked and they wrote a whole article on using his op ed piece about his opinion. Piece about. Not doing any taxes. So so so. This crazy piece he wrote. This crazy opinion piece he wrote is being now used as a source of expertise in another blog site.

Blake Oliver: [00:33:21] So now now this is going to infect the generative AI large language models because they're going to take an opinion piece from the Wall Street Journal and start telling people. All the false arguments about why you shouldn't file your tax return electronically.

David Leary: [00:33:39] And then put a check mark on it that says fact checked because his his article is now the source of truth for crappier articles being written.

Blake Oliver: [00:33:49] Going back to the Baker Tilly story, a commenter in the live stream is fact checking me live, which is great because I don't have to issue a correction in a later episode, Nicholas says. Asks Nicholas asks, is the new entity created by BT a partnership, not corporation? And yeah, it looks like it has L.P. at the end, so I'm assuming it is a partnership. But I think the point is that it's going to be run more like a corporation, like regardless of the legal structure. Now, with private equity having control of this entity, you can expect it to run more like a corporation versus a partnership where a bunch of people got a vote to get anything done. I mean, if it doesn't work like that, then it's not going to. I don't see how the private equity firms are going to make money because the thing's gotta like, really move for them to get a return on their investment.

David Leary: [00:34:42] I have some more propaganda. Maybe that has to do with taxes.

Blake Oliver: [00:34:46] Okay.

David Leary: [00:34:47] So and then we I think we've seen some articles over the last couple of weeks about how, you know, the cost to get your taxes done is going to be more expensive this year. Right. And then it's been pretty mainstream articles. Well, this article was an NBC news. And it says higher tax filing costs could take a bite out of your refund. And it talks about the shortage of accountants. And everybody's going to pay a little bit more for the return on average. So in 2013 or I'm sorry, in 2021 it was $213. And now it's raising it's in 2023, it's going to be about 248 for the average return. And then the article goes in and really starts to plug the IRS's direct file service. So in a way, this feels like a propaganda article on plugging the IRS's new service. Right. Look, you could use this for free, the direct file so that propaganda is out there. And then I don't know if you saw, um, 13 states attorney generals are suing and signed a letter decrying the new IRS direct file system. Did you hear about this? No. At all. So going back, remember the, uh, Inflation Reduction Act, they kind of put together, I think it was $15 million at the time to research their own file system for the IRS.

Blake Oliver: [00:36:00] You put that in air quotes, but they actually did do that, right. They actually.

David Leary: [00:36:04] Built it. They did not just research it, they built it and launched it. And so these attorney generals are saying that this is unconstitutional. You basically circumvented the entire Constitution by launching this as a pilot program and not just doing the research. So there's just there's a lot of.

Blake Oliver: [00:36:21] You could argue.

David Leary: [00:36:22] Propaganda out there.

Blake Oliver: [00:36:23] You could argue that a pilot program is part of the research.

David Leary: [00:36:26] I that's probably where I would come in on. Yes. Well.

Blake Oliver: [00:36:30] Listeners of the show. Fans of the show know that I love to talk about the pipeline problems in our profession and. I know sometimes I do it too much, but I can't help it when a headline like this pops up in my feed. This is from MIT Management Sloan School, the MIT Sloan School of Management, I should say. Uh, it's from research done by Andrew Sutherland, who is an associate professor of accounting at MIT Sloan. And the headline based on his study is 150 Hour Rule for CPA certification causes a 26% drop in minority entrants. And the simple fact is that according to this study, when the 150 hour rule was enacted, it caused a 26% decline in Black and Hispanic CPA, uh candidates entry into the profession, and a 14% drop overall. So we have, from 1986 to 2019, a 14% decline overall in new CPAs entering the field following a given state's 150 hour rule enactment. 150 hour rule goes into place 14% drop. And remember, that's not just one time thing. That's like year after year after year. And then for black and Hispanic populations, 26% drop in candidates. And we wonder. Why does the accounting profession have a diversity problem? Perhaps, as the survey suggests, it's because we put up expensive and unnecessary barriers to entry that deter candidates who have fewer financial resources. Um may have fewer financial resources and time.

David Leary: [00:38:18] It and it goes against I mean, the ACPa for years keeps saying how they're strong. These diversity initiatives diversity, diversity, diversity, and the most obvious fix is right in front of them. Yes. The most the most obvious root cause.

Blake Oliver: [00:38:33] Yeah, if they actually care about solving this problem, this is what they should do is get rid of this requirement.

David Leary: [00:38:39] And when it comes to barriers to entry, this was the biggest takeaway. And I may have said it on the show before I went to the National Association of Enrolled Agents, their big conference, it was up in Scottsdale and I was shocked at how diverse it was. And because a lot of accounting functions we go to is a bunch of old white guys. Right. And but but then the bell hit me. The reason it's so diverse is there's no barriers to entry. And for months you could become an E. Right. You don't have to get 150 credit hours. You. I don't even I don't even know if you have to graduate high school to become an E. You just got to become the E, right?

Blake Oliver: [00:39:13] You just pass the exams, pass the exam, and they're challenging, you know, there's three of them. It's not easy. Yeah, but.

David Leary: [00:39:19] The diversity there was amazing. And and maybe that's another way with this research is they should compare it to the diversity and ease maybe over time.

Blake Oliver: [00:39:29] Now the counter to the argument that we should get rid of the 150 hour rule is no, we can we can keep it. We can keep this, you know, high standard and we can help increase the number of minority entrants by, uh, creating more scholarships, subsidizing the cost of the education. Well, I don't think that's possible, because the cost of the 150 hour rule is not just the cost of the education, but it's the lost wages of that first year working. So I have calculated that the cost of the 150 hour rule in the United States is $2 billion a year. And that cost is mostly borne by the staff who are giving up wages and paying it instead to universities for their Mac programs. Or, uh, it's also borne by the firms who then have fewer staff, so they can't do as many engagements, they can't make as much profit. Right. And so, um, I don't think there's, you know, billions of dollars out there to subsidize all this stuff. Like, do we really want to be giving more money to universities that, uh, and this is a key point from the study, the universities programs are not increasing service quality. There is no evidence that over this time, adding the extra year of education has increased service quality. And they studied that and multiple studies have confirmed this. So the extra education does not lead to higher quality. It's just red tape and wasted time. Now I'm not saying that all masters are. I think there's plenty of people who go get a master's in accounting. They get a lot of value out of it, and that's great because they'll continue to do that even after the rule is eliminated. If the Masters actually adds value and increases your value in the marketplace, and you'll go do it regardless of whether or not it's required. That's my argument.

David Leary: [00:41:15] Yeah, there's no rules that you have to get an MBA, but people do it because they see some financial gain and benefit from getting their MBA. That makes sense.

Blake Oliver: [00:41:24] Enough about that. Let's move on. Speaking of certifications, here's a story that I spotted in CPA Practice Advisor a while ago. It's called dual certifications mean big bucks for accountants. So if you get your CPA we know that you make more money. But what if you get more than just the CPA? Right. What if you get the CMA as well? This article says that accountants in the US, who are both CMAs and CPAs, earn over 38,000 more than their non-certified peers. That's a lot of money every year. And there's a table in here. This is a study by the IMA which administers the certified Management accountant, the CMA credential. Um, if you have just a CPA, your median base salary in the Americas is $126,000 a year. If you have just the CMA, it's $120,000 a year. If you have neither, it's $99,000 a year. But if you have both, it's round up $138,000 a year. So that's a big difference a big jump. Yeah. So you know if you're thinking about getting the CMA let's say you already have a CPA. You could make an extra on average $10,000 a year.

Blake Oliver: [00:42:46] Um, and if you have a CMA and you get your CPA, you could make another $6,000 a year. Or no, you can make another seven $18,000 a year. So let's say let's just say roughly, you could make 10 to $20,000 more per year if you already have one certification and you go get the other. And if you have none, you know, if you if you take the time to go out and get your CPA and your CMA, you've just increased your annual earnings by $38,000. That's a really good ROI, actually. Of course, then you have to balance that with going back to school to get five years. 30 extra hours of education, right? That's a lot of time. You got to sit for both exams, so you got to do this calculation. But I think this is really helpful. Um, so it shows that there still is value. Now, now one question is is this causation or correlation. Right. So are people who tend to get dual certifications just more likely to make more money in general. And I don't know if if that's true or not.

David Leary: [00:43:51] I think that that's similar to that. Uh, parents that pursue or try to get their kids into a certain school. It's not really the school, it's just that the environment the parents have are caring about their children's education actually helps the child be successful. It has nothing to do with the school. But yeah, you're right. It's, you know, are these people just making more money because they're just better people?

Blake Oliver: [00:44:12] I don't know, yeah. I'm jumping around David a lot. Um, let's go back to tech news. Google has released Gemini and they are retiring Bard. So anyone who has attended my artificial intelligence webinars that I've been doing recently knows that I'm not a big fan of Bard because it's not a great large language model. It lagged behind ChatGPT and Claude, so I just haven't really even used it. Google has been has been playing catch up, and they have a new model out that they say is almost as good as GPT four. And they've replaced Bard. They've renamed Bard. It's now Gemini. It's using this new model and you can try it out now. So if you have a Gmail account or if you have a Google for work account like you and I do, David, you can now go to Gemini and you can test it out.

David Leary: [00:45:07] Yeah, I was just looking at my phone to see if they shoved an app on my Google Pixel, but I didn't see one yet.

Blake Oliver: [00:45:12] So I might as well just go to it, you know, let's let's see. Um, here's Gemini on the screen. For those of us who are listening, do we want to try something like what would be something that is tough to do in ChatGPT David? Maybe let's just ask it the question, like, um, you know. Should I get both a CPA and a CMA? Let's see if I can figure this out. Whether or not you should pursue both a CPA and CMA depends on your specific career goals and aspirations. Both certifications are valuable in the accounting field, but they offer different benefits and they cater to different career paths. Here's a breakdown. And then we've got bullet points under CPA and bullet points under CMA. Here are some things to consider when making your decision. Three bullet points. It's generally not necessary to have both certifications and most have just one. Interesting. And it gives you some resources. Um, what's the difference in salary? Would I make more money? And hopefully it'll go do a Google search and it'll give us the answer.

David Leary: [00:46:24] So is that the big difference with this new launch from Google is it's going to utilize Google searches and then give you source docs in the same way that Microsoft, Bing one or whatever that's called. Now copilot in the browser. I they they all keep renaming their things now.

Blake Oliver: [00:46:38] So this is like where Google has an advantage because Google search is the best search. So if they pair it with the I and now I can do Google searches inside of Gemini. I think that is a real competitor to Copilot and could keep Microsoft from stealing Google's core search business. Um, the question is just, you know, how well is it implemented? So it's got links here now to an IMA article on salary data comparisons. Yeah. Like this is not bad. I'm going to play around with this more. Instead of doing Google searches. I'm going to try using Gemini to start and see how it goes. And I'll report back to you guys on that.

David Leary: [00:47:18] It's interesting how all of these, uh, AI tools, these chat tools are all starting to look and taste the same. And it's kind of like the the four door sedan, right in America. Right. The four door cross cross hatchback car, they like, you get 20 different brands and they all look the same. Essentially. It's almost like, what is it going to be like? Oh, it's the coffee cup holder. Slightly different in this one. This one. Will it be to the point where it doesn't matter which one you pick? They're all pretty much equivalent.

Blake Oliver: [00:47:47] Well, that's the thing about LMS is that there's nothing proprietary. About the technology. Anyone can make one. So like, yeah, like you said, this might just become a commodity. But I think what's going to become the proprietary is the data set that is trained on. So if you have really good source articles, your LLM will produce good results. Right. And that's why it's really important when you are doing research that you upload PDFs or you provide explicit directions to ChatGPT to only research a certain website. And that way it doesn't hallucinate results that you don't want. Yeah.

David Leary: [00:48:29] So so speaking of the data it's been trained on, ADP just launched their assistant. And of course it's a very creative name ADP assist because nobody has any good names for these tools as they come out. Everybody just keeps putting the word assist next to their brand name. But what's what caught my eye with the ADP one is what they trained it on. So they trained it on over 1 million ADP clients and 140 countries and 40,000,041 million wage earners. Now.

Blake Oliver: [00:48:58] So wait, what is it?

David Leary: [00:48:59] What does it do? This. We it. So they have some screenshots. Let me add this to the live.

Blake Oliver: [00:49:06] I'm thinking okay. They've trained it on wage data and HR data. But what is that. What can I do with that? Well that's what's.

David Leary: [00:49:14] Funny about this because what they show in their screenshots on the website, when you actually try to, you know, because you can't play with it, right? It's not open for us to do. And in one example, they give where it detects that some of these wages are higher than normal.

Blake Oliver: [00:49:27] Oh, but that's cool on.

David Leary: [00:49:30] Pay already does this in their app. And they've been doing it for every time. Every time the payroll is a little over 15% different. They pop a message like this, right. Um, it also has, uh, you know, oh, you're missing some tax IDs for, uh, these. I'm assuming these are W-9 or 1099 vendors, right. And that's like, do you have the tax ID say, yes, I have the ID, please enter the ID. Right. So there are examples they give actually are not good. So I would really love to see what they're using that amazing data to do. It would be great to play with it or see what that is because the examples they give are just not great. Um, it's actually disappointing to see the examples they're doing.

Blake Oliver: [00:50:07] But but that is a good example. The one you gave. Even though payroll companies have been doing this for a while, some of them anyway, is is looking at the historical data and then. Figuring out if the payroll you're about to process is wrong somehow differs from the trend. So that's how you detect stuff like fake employees or bank accounts that have been changed. And in the past, this has all been done with rules based programing. The payroll companies themselves had to decide what are the issues we want to detect, and then code rules to then identify that. But with an AI, ADP or any payroll company that does this can simply feed the historical payroll for your company into the AI, and then ask it to detect potential anomalies, such as changed bank accounts. It can, and we can suggest you don't.

David Leary: [00:50:58] Have to think of everything yourself.

Blake Oliver: [00:51:00] We don't have to tell it exactly right. Like detect a significant material change in somebody's salary. Right. Or I don't know, what are the other issues that can have whatever all the other issues are that can happen with payrolls going wrong.

David Leary: [00:51:12] Right. And I think, uh, you know, an easy one is and I've seen this forever, is you always forget to put your unemployment rate or you put it in wrong, or they send it to you as a percentage. But then the app has you type it in as a decimal. And those types of things, like you're right, they think you compare that against other similar businesses like, hey, you might not have this unemployment rate set up correctly or versus the other peers. So I just feel like they're considering the data they use to train it. I want some more exciting examples of what it does, and maybe we'll maybe we'll get more. Um, eventually.

Blake Oliver: [00:51:44] Going back to Gemini, I forgot to mention that Gemini now generates images too, so I asked it to generate an image of a happy accountant, and I got two images. I got an old white guy wearing glasses with slicked back hair and kind of a boring business suit and a yellow tie and a and a. Is that a taupe colored shirt? You know, like a like like tannish brownish. Yeah.

David Leary: [00:52:09] In that range.

Blake Oliver: [00:52:10] Yeah. It's perfect. He looks exactly like what I would the stereotypical image of an accountant. But then also it gave us a woman sitting on her desk in a yellow jacket and shirt, uh, perhaps Indian descent, uh, raising her fist up in the air. So, like, she's not the the stereotypical accountant. That's great, I guess for two.

David Leary: [00:52:31] Pictures or it just did that on its.

Blake Oliver: [00:52:32] Own. It just gave me two. And then I can say generate more. And now I'm waiting for it to generate two more images of happy accountants. We got a black guy here with his coffee mug. Um, kind of like cheersing. Somebody whose hand looks like. Oh, my God, it's always the hands.

David Leary: [00:52:49] The hands.

Blake Oliver: [00:52:49] This is disturbing right here. This is. This hand is missing all fingers. It looks like a lobster claw. And I want to.

David Leary: [00:52:58] See that video of the fake.

Blake Oliver: [00:53:01] And then we've got a young, a young, perhaps Hispanic or Pacific Islander woman in a red jacket holding a pencil. And she looks like she has the correct number of fingers here. With sort of like longer, but you gotta.

David Leary: [00:53:15] It has a weird left forearm or left forearm. Seems weird. Like it's it's like half a hand sticking out. It's kind of strange, that's all. I want to see this video of the fake for the the zoom call. Which I want to see. Like, is it, is it that good or is this guy just. Doofus. Well, he didn't he couldn't detect it.

Blake Oliver: [00:53:35] And maybe it had. It was possible because of the like. Cultural differences like so. Apparently this is a call with the UK CFO. And this guy's in Hong Kong, right? And maybe he doesn't. Maybe he's never even met this person in person, this person in real life. And you could say, oh, connection issues like my video is not very good. So like the blurriness of the video, the lack of quality that the the distortions could pressure.

David Leary: [00:54:04] Just the pressure, you're going to not notice things because you're. Yeah, yeah.

Blake Oliver: [00:54:07] This this is the CFO calling me, telling me to do something a secret and urgent. Right. I'd better do it. Yeah, yeah, that's how I think that probably happened. Well, that's all the time we have for this week. If you are a regular listener and you want to give us feedback, we are eager to hear it. Go to Accounting Show survey and take our listener survey. It takes 5 to 10 minutes, and I know that because I asked my wife to take it and she's like, this takes about 5 to 10 minutes. So. It's only 5 to 10 minutes. You tell us a little bit about yourself, and then we ask you what what you like about the show, what you don't like about the show, what topics you want to hear from us more. You know, if there's certain things you want me to stop talking about, you can tell me that if you want to hear about more things, you can tell us about that. We are very eager to get your feedback and improve the show, and it helps us in terms of our sponsors. They want to know who's listening. So giving us some information about whether or not you're a CPA or an E or where you work, do you work in public accounting or corporate? That kind of stuff really helps us.

David Leary: [00:55:11] And I think we've had 100 people fill it out. Now, I would love at like, we get to 500 of you to fill it out and then we could come to the show. A lot of that's data we could share. It's kind of interesting. Like here, here's who you are, listeners of the podcast, here's the other people that are listening. Because sometimes podcasting is it's it's very intimate and, uh, solo. Right? It's me, you and the person we're in the ears of and they don't know who else is listening to the podcast. It'd be great to paint that picture for them. And, you.

Blake Oliver: [00:55:39] Know, 100. It's I don't know, actually statistically how many responses we need to get to have a statistical sample. We should probably ask that of I, um, but, you know, we reach like over 100,000 people with this show in a year. And so I don't think 100 is enough. I think we need to get to more.

David Leary: [00:55:59] Yeah. I feel like right now just friends and family filled it out and I can tell by what we posted verbatim responses. But we just started.

Blake Oliver: [00:56:04] This survey, right. And we should probably talk about it at the beginning of the show, not at the end. Uh, it'll be in the show notes, but also you can just go to Accounting Today show slash survey. That's accounting show survey. And don't forget, you can earn free continuing professional education credits. Nasba approved CPA is available for listening to this show and other podcasts on the earmark app. Go to earmark Cpcomm or search for earmark in the App Store or Google Play Store. Download the free app. Find this episode. The course will be available in about a week after this episode releases. And, uh, get your free CPE and don't wait until the end of the year and be happy and get outside.

David Leary: [00:56:47] Don't sit on the outside. Right. You're heading out?

Blake Oliver: [00:56:49] Yeah, I'm going skiing this weekend. I'm so excited. Cannot wait. I got to actually, like, sign off and pack, finish packing and go to the airport.

David Leary: [00:56:57] It's going to be good though, because it did this big winter river, whatever atmospheric river that. Oh yeah. Yeah, yeah. Dumped lots of new snow.

Blake Oliver: [00:57:04] I guess I was super worried because Southwest Colorado, where I'm going, had not nearly enough snow and it just got dumped on this last week because of this atmospheric river, as we call it here in Arizona. It's just a monsoon, right? But, uh, yeah, lots of snow. So I'm really excited and going to go relax, take a breather, come back, get focused and, um, work on building your mark.

David Leary: [00:57:31] Enjoy.

Blake Oliver: [00:57:32] Thanks, David. Thanks, everyone for joining us. And we'll see you here next week.

Creators and Guests

David Leary
David Leary
President and Founder, Sombrero Apps Company
Beware of E-Filing Your Tax Return
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