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AICPA Town Hall
Tax bill discussion draft, risk management strategies and AI tools for tax
01:00:48
Topics include: DC update: Impacts of the first 10 days of the new administration Risk management strategies: Minimize scope creep and billing risks AI and tax: Ways you should be using AI in your tax practice if...
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Welcome to the AICPA Town Hall Series.
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Your resource for the latest news and.
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Updates on pressing issues facing the accounting profession.
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Good afternoon and welcome to the AICPA Town Hall. I'm Eric Ouskerson, one of your hosts for today. We've got a power packed hour in store for you. As you see here on this slide. We've got nine presenters joining us today and I immediately want to bring up Mark Peterson who's in our D.C. office. And you all know him well. He leads the advocacy area for the aicpa. So welcome, Mark. But before we get going, I know you're, you know, our office is very close to the Potomac and quite a tragedy. So our thoughts are with everybody in D.C. and everybody impacted by the plane accident.
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A
No. Awful news. Awful news, Eric. I crossed the Potomac this morning when I came into work and it's, it's obviously tough for our community here, but actually across the country, so a big tragedy and our hearts go out.
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C
Well, Mark, we've got a lot to talk about today. We're going to kick things off with a DC update. We're going to talk a little bit about the role of the trusted advisor here during this time of change. Melanie Laritson is going to be joining us for a portion of that and she's going to then take us through the technical update section. Lisa Simpson is going to lead a risk management discussion with our partners at aon, Stan and Sarah. And then Michael Cerami is going to lead a session with Ashley Francis and April Walker related to how you can leverage AI for your tax practice. So a lot to cover. So let's get right into it, Mark. First off, man, the news cycle is, it is, it is, it is fast and furious. We could have had nine articles here. We've got four articles here. You're going to kick us off talking about all these executive orders and how we should think through it. The Fed, you know, usually when the Fed meets, that's all you pay attention to during, during that, that, that week the Fed did meet, this week held rates steady. Chairman Powell is right now still keeping his eye on inflation. And one thing that he's very focused on is related to tariffs. So right now the forecast is to potentially hold rates steady for the first half of the year. We will be having an economist back on the town hall sometime soon. The year ended with overall gdp growth at 2.4%. And then also this week, a very significant new entry in the AI space. Deepseek, a China based company, it knocked $1 trillion mark out of the market. I think on Monday or Tuesday, a lot of that has recovered. We're going to be talking about AI in the tax practice later today. So something that we're thinking a lot about. When you look at this slide, Mark, this is a slide that we've been using a lot as we've kicked off 2025. It does remind us a lot of the early stages of the pandemic where there was so much change occurring. So we've got a lot of change going on even right now on the administration change area of this slide. We've, you know, we replaced DOGE with the executive orders. I think everyone's really focused on what that impact is having on the economy, on clients, the tax legislation. Mark, we got a new acronym here that the Task act that you and Melanie will be explaining shortly. Pretty exciting. A lot going on related to the business outlook and client activity. Any thoughts that you want to share at a high level here?
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Well, I think it's the intersection of the trusted advisor, which is a lot about sorting through it. I mean, when you think of the news that you just put up, all the things that are going on, how do you sort through what matters for a client and what to focus on? Because, you know, there's just a lot of instability. You know, changing government brings, you know, real change and that's kind of what we're seeing. And then also opportunity, opportunity for clients, opportunity for practitioners. Think of tax bills. There's going to be significant change kind of in the audit environment as well. So we're going to do the best we can to sort through it all, Eric.
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C
That's right, Mark. And one thing that, you know, you and I have been talking about, talking to Mark Ozil and others about this as well, is that it's probably not best to just pay attention to the 24 hour news cycle. A lot of these executive orders, there's changes that occur in the next news cycle. So what we're trying to do here in the town hall is to help you interpret what's occurring. But in some ways, one of our roles here is to not amplify the anxiety is to kind of produce some stabilization and quality thinking that you then can leverage with your clients or your employers. So, Mark, why don't we just jump right into it and talk about this very, very long list of executive orders.
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A
Sure. So, you know, the President Trump got born in the 20th, that was after our last town hall, Eric, and immediately started to kick out executive orders. That's not unusual for a new administration. I Think the breadth and the aggressive nature of some of these, that some of them push boundaries. And we're going to talk about that, is definitely getting a lot of attention. And then, you know, President Trump's style always gets a lot of attention. But it really is kind of normal that you undo the previous administration and then start to insert the powers that you can within, within the executive function, which also lays the groundwork. And some of this will have to be followed up with legislation. So, you know, again, when Biden came into office, he undid the executive powers of President Trump in his first term. President Trump did the second thing. That part's not unusual. And even these numbers, by the time you get to an end of a four year presidential term, there's going to be a lot of executive orders. So what we're trying to do through all of this, and some of them, again, are directional. It's directing my agency to reduce consumer cost. Others are very specific, like some that we're seeing here focused. And we'll talk a lot about the impact on the federal employee base, which, which again, we're going to follow very closely. Because you think of a tax, the irs, treasury, you think of the SEC reg freezes, those types of things. So we've got that in store.
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C
Well, Mark, I mean, let's talk a little bit about some of this is politics and some things that the executive orders can do and some things they're not able to do.
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A
No, that's exactly right. Now, again, President Trump, as some of these directives definitely are pushing the boundaries and we're gonna see the pendulum swing back. And I'm going to talk about what you can do. But there is great latitude and power within the executive function. You know, once the law is passed, right. You get a lot of ability to implement it and to give guidance through implementation. You know, you can create committees and agencies. Think of doge government efficiency. Right? So that's been created. Obviously there's a lot of power related to, you know, emergency action. And we give the presidential function a lot of power dealing with, you know, foreign affairs and, you know, military issues. But what you can't do through these executive orders is impact the Constitution, which I would say is a pretty good thing. Direct federal spending outside of Congress. So within the implementation of some of it, you can shape it, but you can't redirect it. And then you can't overturn a Supreme Court ruling and then again, bypass the legislative process. Now, there's a couple there that I just listed that you can't do, which I think some of these executive orders may have pushed up to. Although to your point about, you know, maybe a little patience to figure out how this is all going to play out, not getting caught up in the 24 hour news cycle, it takes a little time. It takes a little time to figure out whether there's going to be court pushback, whether it's going to be effective or to be honest, whether the administration will continue pushing forward with the direction of the executive order.
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Well, Mark, I know not. So let's focus. There's a lot of executive order. Some things do not impact the profession or the client base out here. So these are four areas that you've highlighted and welcome, Melanie. It's great to have you.
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Thank you for having me.
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No, absolutely. So we're trying to look at them, we're looking at all of them and we're trying to discern which ones we think have the most practical impact on the profession or on the agencies that we work with that would have kind of a collateral impact on us. And again, a lot has to play out. You know, Melanie is going to give you some details around our focus on the IRS and potential impact on the irs. But there are other issues as well. Okay. Because we hit the economy, things outside of the United States, the federal workforce and obviously immigration. And what we try to do is really focus in on what do we think will have the most impact on the profession. You know, when you think of tax, we've got pulling out of the OECD. When you think of high skilled global mobility, H1BS for high skill labor as people come in and out of the US to serve clients. Although there's not a specific prohibition, we definitely think there will be some slowdown in processing and we're going to watch that. And there was a focus in some of the executive declarations, the hiring freeze and the regulatory freeze. You know, again, big focus on the IRS because of what we've got ahead of us. But it's going to impact other, you know, there are regs that we're looking at Department of Labor at the SEC and the pcaob. What is going to be the impact on again, reconstituting those agencies as the new administration heads get in? It's not unusual, I'm going to repeat that, that they will freeze regs and they will hold on hiring until the agencies are the heads are in place and you know, they can start to move forward. Having said that, this is, this has been very, very aggressive.
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So Mark, to echo what you just said about the aggressiveness. It's been unchartered territory, a lot of this for us and especially for the irs. So a lot isn't known immediately and there's a lot of speculation. And the way I'm looking at this is we really need to continue on as business as usual until we hear otherwise and we hear directly the horse's mouth. So essentially until we hear directly from the irs. Now, regarding the hiring freeze, we have been told by the IRS that the seasonal employees should have already been hired in the fall timeframe and they already received the training to begin working from the January through May timeframe. And they've also stated that they'll reallocate workers within the IRS in order to help cover the filing season. However, and this is a big however, historically the IRS has not performed great when there has been a hiring freeze. And even former Commissioner Redig and Aaron Collins, they've stated that every facet of the IRS operations will be affected, which could indirectly affect the tax filing season and ultimately it could jeopardize the improvements that the agency has had in these last couple of years. Now, we have always known that attrition, and that's the key with all of this is an issue for the IRS. And even now, 63% of their workforce can retire within six years. And today 18% of the workforce can retire. And that means that there are more people that can retire or choose to leave than the IRS is capable of hiring. And when you throw in a hiring freeze, that's when it starts to become a concern for the regulatory freeze. Again, historically, like you said, this is not unusual. This happens whenever new administration takes over. And the new executive order also asks to stop and pull any regulation that is going to the Federal Register or that hasn't been published by the Federal Register. The executive order also asks for consideration of 60 day implementation, but it's not mandatory. So at this moment in time, the IRS is going to issue comments on a case by case basis for regulation that was recently published. And so far we haven't seen changes. We've seen some things be taken down for them to review but not change so far. And some notable regulations that we are looking at and providing comments to are the proposed changes to circular 230, which I'll touch on base later. And also things like the partnership basis shifting regulations. And those are both on track as originally planned by the IRS and another EO that has to do with the DEI that's also impacting the irs. So if you're out there, you may have noticed that the IRS actually removed sections of the Internal Revenue Manual from public viewing, which they've never done that historically. But it's our understanding that the IRS is reviewing everything, including audit technique guides, to be able to look for possible DEI scrubbing that they may need to do. And I need to make it clear that throughout all of this, IRS services is a top priority for us, for our members, for taxpayers. It is something that we stated in the past. We'll continue stating we believe there should be a balance. We will continue to monitor this and we will take appropriate action as necessary.
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That's right. And you know, the impact of that scrubbing or going through a lot of the, you know, the online information at these agencies is true beyond the IRS and Treasury. So other agencies are going through that as well. I will just to add to that, Melanie, the return to work, the return to work mandate, the potential for a buyout for those that are not interested in returning to work or looking at retirement in the next few years. So all of that kind of has to play out. The buyout, which again, just popped. As we've Talked about the 24 news session, the senators from Maryland and Virginia are saying, well, we want details before we're going to recommend that any federal employee takes an opportunity to take those buyouts. So so much has to play out. And again, we're going to be watching closely to try and anticipate the impact.
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Absolutely, Mark and Melanie, I'll tell you this, we're getting some great input related to all that our members are experiencing. So keep, keep these comments coming on what, on what you're hearing from your clients related to some of these, you know, executive orders and changes. And Mark here, there is questions about the executive order. And also, I mean, just more broadly, I mean, this, this happened during, as you said earlier, this happened during the Biden administration. This happened during the Trump administration. It's right now the change may be a little bit larger, but this is something that has occurred, you know, when the Democrats take over and when the Republicans take over, it does.
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I think, again, the numbers are bigger at the moment. You know, maybe after four years we'll see it flatten out. Compared to historical norms, some of these have been fairly aggressive. And I like the word that Melanie uses of unchartered. You know, we saw the freezing of grants that were going out and OMB very quickly, you know, reversed themselves under legal challenge after it was paused. So there's, you know, if we look at kind of the I gave you the parameters of what they can do and what they can't do. But there's also the possibility for challenge. So Congress can challenge executive orders. Do I think a Republican majority is going to have a vote where they will actually vote against one of these? I suspect not. Having said that, there have been some of these executive orders that have raised significant concern for both sides of the aisle, Democrats and Republicans, because of the potential impact and because a lot of anxiety that they're creating and a lot of questions that start to pour in from constituents into the congressional offices. The one where you're probably going to see the most pushback, which again, we're going to have to work through when we get back to what's the practical impact is the judiciary. So many of these, between the judiciary, the courts and the unions, you know, the federal employee unions, the tax employees unions, you know, you look at all the agencies they're going to be going through, what is the potential impact on things like a hiring freeze or, you know, a return to work or, you know, these buyouts. And so we're going to see it play out. Several of these have had significant legal action very quickly, which again will be played out over the next few weeks and days.
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C
Well, Mark, want to let's move on now to some other things. There's a lot going on besides just executive orders. So this is, I mean, this is only, I guess it's been probably about five days ago or so that Besson late last week got the, got the confirmation.
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That's right. He passed the Senate 67 to 23. I think 10 didn't vote. He has to move quickly. Right. He's going to be implementing tariff and trade policy as being directed by the White House. But he's also going to be shepherding this significant tax bill. And that's going to be a primary focus of trying to deal with Congress to try and thread the needle to get that done, which as we know is going to be a challenge because of those tight majorities that we've talked about. But what it also does is this is the setting up of government. Right. So, you know, the president gets sworn in and then he gets to build his Cabinet. And by and large, most of the nominees are going to be confirmed. We know there are several that are controversial where there may be some challenge. But now that there's a secretary of treasury, we will see at some point the scheduling of confirmation for the IRS commissioner and confirmation for the chair of the sec. And as they get into place, it will actually have an impact on those executive orders Right. So they'll be able to move forward and move off of the regulatory freezes. They'll be able to make determinations around the hiring freezes as those heads come in. So what we will see is a impact of the confirmation process intersecting with the executive orders and then a clearer path forward.
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And we're looking forward to seeing our old town hall attendee, Michael Faulkinder, be appointed as Deputy Secretary. So we'll be tracking that.
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That's great. You know, this is the other thing we got to think about. So we've talked about confirmations, I guess. How many days have we been at this? It's only been 10 days since he was sworn in, but there's a lot going on, Eric. So you got the confirmations that are rolling out. You've got these executive orders that we're sorting through, but we've also got some unfinished business, which is actually really kind of the warm ban for reconciliation. As you recall, they. They closed out government funding last year by kicking the can into March. March 14, I believe. So that's on the table. They've got to negotiate a budget deal for March 14. The other thing that's sitting out there is we did hit the debt limit in January. Now the Department of Treasury gets to use extraordinary measures in order to buy some time, so that maybe actually the pinch happens in the summer, but they will try and deal with that early. What that sets up is some political tension. Right. If you think about the debates over leadership on the Republican side, the fight over the speakership has been over these government funding decisions. So they've got to figure out how to reconcile those things, hold the votes, and not create an environment where they alienate any of their own Republican members, because they're gonna need them in order to get a budget passed and a reconciliation bill passed. And people are gonna be talking about the. Again, if we're passing a spending bill and we're gonna have an expensive tax bill, what happens to debt and deficit? So it's all swirling together. Keep an eye on this, because this is gonna kind of give us an indication of the politics and their ability to plow through those issues.
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C
Well, now, let's just move into the next big topic here. We got two tax bills we're going to talk about here.
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So reconciliation. Just to remind everybody we're doing the best we can to figure out timing. And that's a big question we get from the town hall. I will tell you, and Melanie and I talk about this. Capitol Hill doesn't know, you know, the Leaders of Ways and Mean and Finance don't know. They were. The Republicans were just at a congressional retreat which included President Trump. Part of the goal of the retreat was to come back with the parameters of a budget deal. They were not successful on that. So just to remind the town haulers, you got to get a budget done first. That's supposed to be transmitted to the Hill the first Monday in February. We'll see if they hit that deadline. You got to get the budget done in order to move to reconciliation. The budget gives you the parameters, the size of that reconciliation bill, which is where the, you know, the tax package is going to end up. There's still a debate about whether, again, there's one reconciliation bill that's got everything in it, tax, defense, border, energy, or whether they divide those and do one tax and one with the other issues. There's a disagreement among the Republicans about the best way to move forward. First thing, though, is, is to get that budget done. You know, we're going to see if they what hitting these deadlines works. They could get it done by the end of February. We'll see. But as we watch that, that's going to tell us not only the size and shape of the bill, but the timing of the bill. So we're going to keep an eye on that and we'll be informing the town hall, you know, every time we see some movement.
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C
Mark, this is a great slide for town hall attendees to share with their clients or employers. It's a great summary. I mean, of what, what could happen with some quality information. And here's another good list of a lot of the items I know your.
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A
Team'S thinking, well, you know, we start you don't do it when a new Congress is sworn in and there's an opportunity for a reconciliation bill. A lot of these issues we've been discussing for years. We've reported on them to the town hall in the past. They've worked their way through the tax executive committee with Melanie and you get them positioned in order to get have a shot for inclusion. Right. Most of the things that end up in a significant tax bill have been considered in some way, shape or form in the past. So they may have gone through either the House or the Senate, Ways and Means or Finance Committee. Legislation has been reduced. So there's text. They may have been scored. So do they cost money or do they gain revenue? And we've got a great list of priorities that are very, very, very well positioned and have had bipartisan support.
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C
Well, here's some breaking news Mark?
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Yes, yes. Melanie's happy just today. Bipartisan again, I just mentioned bipartisan. So it does happen. The chairman of the Senate Finance Committee and the ranking Democrat, Senator Crapo from Idaho, who's a Republican, and Ron Wyden from Oregon is the ranking Democrat, announced a discussion draft. So that is really a discussion draft in order to get feedback. Again, a lot of time and thought went into this in the making, but it has a large number of issues that Melanie's going to take you through that have been really important to the profession that we've had discussions over the years related to this. And again, if you have the two leaders of the Finance Committee aligned on provisions, doesn't mean it's a guarantee it's going to make it into reconciliation. But it's a head start. And then if you want to go to the next one, I love all these resources.
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You got all the resources down here for the town hall community, all of those active links. Go ahead.
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And I love turning this slide over to Melanie because she's the quote.
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Okay, so we are so excited for this package and it really is going to make a difference, particularly for our members and also taxpayers and really starting to lay the foundation to try, try to simplify some of those processes that we see in the filing season and if we jump to the next slide. And again, I can't echo how excited I am to announce that this bill has been or this draft discussion draft has been released by Senator Crapo and Wyden. It really is important and one thing too to note, this is not the reconciliation bill that a lot of people like get the big tax package, but this could be a starting point and a foundation for it. Now, we've actually been working with Wyden and Crapo staff for over a year on various pieces of this package. And there are about 65 total provisions and roughly 20% of those provisions in the discussion draft are AICPA endorsed items. And of course, there are other several items that we will most likely be endorsing. Now, some of the most prominent ones are on the slide. We see disaster trigger relief and that just would allow for the IRS to offer tax filing disaster relief without a presidential declaration. But at the governor level, which that's huge for the victims and also for the preparers in those areas, we also have PREPARE regulation. Now, this is about 12 years in the making since the Loving case. And it's huge in that the chairman and ranking member of the Senate Finance Committee are throwing their weight behind this proposal. And it also signals that this issue will remain bipartisan, which is super important. And we're also confident that other tax preparation groups like H and R Block, Jackson Hewitt enrolled agents that they're going to back this language in it, too. So please watch the next town hall. We are going to take a little bit of a deeper dive on that proposal. And then things like true quarterly estimated deadlines and payments. We have the SAFE act, which would help with the extension process and simplify it by being able to pay $125 per prior year for individuals. The mailbox rule, which as we all know, if you submit a return through the post box, that gets postmarked, that is the date that it's accepted, but it didn't apply electronically. And that would be applying to the electronic returns that we submit. So again, lots of other provisions in here. It really is improving a lot of our lives and there's just more to come.
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C
Yeah, well said. More to come. We got a new acronym here which is used in other areas as well. Tas, we sometimes we call Tax Advisory Services. This is going to be the Taxpayer Assistance and Service Act. So more to come on that. Melanie, we are, we've got your technical update section and then we got two more sessions after that. So Mark, look forward to having you back on Open Forum.
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Thank you, Eric.
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Thanks.
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Great. So let's go ahead and jump into boi. And I know there is a growing frustration with all the ups and downs with BOI and actually to continue that perpetual yo yoing. A week ago on January 23, the Supreme Court lifted the injunction in the Texas Top cop shop case. However, there was another case, the Samantha Smith case, and everybody looked at that one because it was only applicable to the plaintiff. So there wasn't as much concern. The courts in that particular case decided to place a nationwide injunction, which created a lot of confusion as to what was happening. So at this moment in time, filing the BOI report remains voluntary since there is a nationwide injunction in place and the AICPA position maintains to be the same advice. Talk to your client, gather the information, be prepared to file. And we have been talking to FinCEN, but again, nobody really knows what is going to happen because there's so many different, different facets to this. Now if you're looking for a refresher and some background, please check out Lisa's update from the town hall last time. And there's a link on this slide. And moving on to the next slide to cover the circular 230 proposed regulations. This set of regulation is the Department of treasuries and IRS's proposed regulations on how to govern certain tax professionals who practice before the IRS. That's what Circular 230 is. Now, there are some proposed changes. One of them is just to update language from the Loving case. Again, that's 12 years old. And if this were to go through, and after we discuss the discussion draft, if that were to go through, this again would be changed. Another update has to do with the contingency fees arrangement where the IRS came forward and said it would become disreputable conduct and they made zero exceptions. Now, AICPA does have a rule for contingency fees and in general we don't allow them, but we do have exceptions for various cases and very narrow exceptions which are necessary. And of course, we'll be commenting on that. The final piece has to do with the preparation of the valuation reports for AICPA members. And this one's important in that they're dictating a standard which is not from our organization. So that is something we're definitely going to be pushing on and asking them to just be more general that it could be something acceptable in the marketplace. The next slide is just a round robin of information that you might be interested in for the irs. It talks about IRS kicking off files that can be formed electronically and chatbots that are now available through E. Services. And on this final slide, it has the next slide. Yep, it is on International Center. If you are interested in international Tax, there are some links here that you can go to to take a look to see how those executive orders impact. So with that, I turn it over.
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D
Another lightning round of technical updates, but a lot of good content and a lot more to talk about in future town halls. So thank you for carrying all of that heavy update stuff. I'm going to zig a little bit and as we enter into busy season, I want to bring back our friend Sarah Ferencz, who is a Risk Control Director with cna, and Stan Sterna, vice President of the Professional firms division at Aon. And they're both highly engaged with the AICPA's professional liability insurance Program. So we are going to continue our ongoing conversation addressing some of the professional liability, risk management, I'm calling them pillars, and we've got those outlined on the next slide for you. So we've gone through four in previous sessions and you'll find links to those. I'd encourage you that if you're a little unsure on one of those topics, to dig back into the archives. And today we're going to talk about a really fun one around billings and collections. I just remember the stress as a tax practitioner wondering when my client was going to pay that bill, wondering how much more work I should continue to do for them before they pay that bill. And that's what Sarah and Stan are going to talk with us about because there are some pretty serious implications around billings and collections. Welcome, Sarah. Welcome, Stan. Let's dig in.
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E
All right.
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D
Sarah, I think you've got some concerns that you've given us around how this can lead to disputes or misunderstandings.
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E
And, you know, with all the change going on, it's really nice to know that our five pillars of radio risk management remain the same. So I hope we'll find some comfort in that. But if we go to the next slide, when we talk about unpaid fees, I mean, a lot of people, a lot of firms think that, okay, if I have a write off or I don't get, or if I have a bad debt, that's just a financial issue. That is a business impact. It's difficult and hard. But unpaid fees can signal more than just financial risk. Maybe your client's having some financial difficulties and maybe you need to revisit your scope of service to right size, what it's going to be for what the client can actually afford to pay. If they are having some financial difficulties and there's an audit, does that signal a going concern issue if they can't pay their bills when they come due? The other thing from a professional liability standpoint is that it complicates that relationship. A lot of firms will have a very difficult time walking away from a client with an unpaid balance. Like Lisa, you said, I want to know how, like how long do I continue services if I don't get paid? But that bill, that balance just grows and grows. And that makes the decision to walk away or suspend services just that much more difficult, which can lead to disputes later on. Then we also see, you know, if you get to the point where you have a large balance and you want to send your clients to collection or you want to sue for fees, it's a decision that we really try to prevent CPAs first from getting into that position. But then once you're there, we really discourage fee suits or any kind of aggressive collection efforts. It usually just invites a counterclaim from the client. And you will spend more time defending that counterclaim or addressing or dealing with the time and the headache than you would have collected in the first place. And then finally, if your client's not paying you, they could be either lazy and they need to be reminded, or maybe they're not happy. And if they're not happy with the service and are signaling that unhappiness by not paying you, that's probably an issue you're going to want to address sooner rather than later, rather than letting their unhappiness fester and get worse.
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D
So I think basically I'm developing a mantra of just go ahead and address the issue. And I think that's what you're going to signal to us on the next slide is just, let's just do some things proactively. And then when the situation occurs, no.
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E
One I know, and including myself when I was in practice, likes chasing a client for an unpaid bill. So there's things that we can do to help just prevent that situation from occurring in the first place. And the first one starts with your client acceptance and continuance process. If you have a client, that's new. If you don't want to do a credit check, fine, I understand. But maybe take a big chunk of your fee up front so that if you do have to suspend or terminate services, you're not left with a big balance at the end. Discuss with the prior cpa. If it's a current client and they're historically a bad or slow payer, maybe get a retainer, get a bill up front, or maybe that's one to put on the chopping block for termination. Your engagement letters. Yeah, sorry, go ahead.
- [35:47]
D
I'm sorry, Sarah. I just wanted to ask you about doing credit checks, because I think when we were chatting about this, you mentioned that you may not do that for all of your clients, but if it's a substantial fee involved, then that might be one to consider it. Another tip that I know I've picked up from hanging out with you two is just do a quick search and see what you find out online about a potential client so that you can see if there's something out there that might smell a little rotten.
- [36:15]
E
Yes, absolutely. And then our next. You know, one of our favorite risk management tools is the engagement letter. You know, spell out your billing and collection protocols, including suspending or with or termination for non payment, and then the next step after that is to hold clients accountable to it. It's kind of like a toddler. If you tell them what might happen and then you don't follow through with consequences, they're never going to believe you in the next instance, they're going to continue to push that boundary. So if you suspend for non payment, follow those billing and payment protocols that you lay out in the engagement letter. Then once you've started, services bill timely. It's kind of a silly thing to say, but don't wait until three or four or five months after tax season to actually send a bill for the return that you prepared in April. You want to make sure you're billing close to when you deliver the services or even in advance.
- [37:15]
A
Continue.
- [37:15]
E
Consider retainers or other kind of billing, alternative billing practices like billing up front or billing of milestones or breaking it up maybe a third, a third, a third. Just so you are not waiting till the very end and putting all your eggs in one basket and you know, potentially having those all get broken. Call the client to tell them that an invoice is coming. Make sure they address any questions proactively. So many people don't like to actually pick up the phone and tell the client that a bill is coming. They'll just send the email and maybe hope and wait for a collection or response. So pick up the phone, have that proactive communication. That's always a good, kind of smooth things out too.
- [38:03]
D
I'm sorry, I just want to be conscious of time. So I want to skip over to the after and I think a lot of your bullet points, points there are pretty self explanatory but I want to dig in on that. Consider negotiated settlements and leveraging others internally. Let's start with the leveraging others and then we can really quickly hit on the negotiated settlement.
- [38:21]
E
Leveraging others, others within the firm. So let someone else be the bad guy when they, when they call. You can be the client service professional, you can be the good cop, they can be the bad cop. You know, use someone else to help you, help you collect that, that amount due. And then the negotiated settlement is, you know, you've reached a tipping point with the client. They owe you say $10,000. You would love to collect $10,000. The client doesn't want to pay $10,000. Maybe what you all do is choose to pay it. You know, take a haircut, collect 7,500 in agree, they take, they get a discount, you get something and you both walk away. Maybe not, you know, 100% happy, but at least getting something in that, in that better than nothing. So when I say negotiated settlement, it's really just discussions and agreeing to maybe some sort of a discount to just resolve things a little bit more amicably than a collection agency or suit.
- [39:24]
D
Okay, got it. And Stan, I think you're going to help us with some tips around the actual billing practice. So you've got some Suggestions on risks and then how to deal with them.
- [39:37]
F
Sure, Lisa. So when you're dealing with or defending a scope creep type of claim, when you have ambiguity in the billing descriptions or inflated hours, they can be construed by claimants, counselor, plaintiff's counsel as showing additional services were undertaken. So what we try to do is we have, we can go to the next slide. We have some tips for better billing narratives. And I would first note that you should describe, describe the services to which the services or to which the invoice relates. So you don't have to be very descriptive, but it should align with the services, the agreed upon services. This next point is important. Reference the engagement letter. That gives us some foundation to say that these services are in accordance with the agreed upon services in the engagement letter. You could do that in an entry that says, as we indicated here, these are for services in accordance with the engagement letter. Some firms will actually attach the engagement letter to the invoice for further proof that it aligns with the engagement letter. The next thing is to identify, identify. If your work is out of scope, look at your WIP periodically and if you see a scope issue, address it. If additional services are being asked or contemplated, you should really ideally have another engagement letter and make sure that those services are defined. And you're also noting what additional fees.
- [41:18]
A
Are going to be paid.
- [41:18]
F
Because if you're going to do additional services, you should be paid. And then lastly, train and communicate with your staff. Tell your staff about the proper billing procedures. Be descriptive, don't inflate hours or watch for inflated hours. And also make sure that you're monitoring the consistency of the engagement and consistency with regard to the scope of the engagement.
- [41:45]
D
That's great. And as we, as we flip to some of the resources that you've made available to us, I do want to clarify that as we were chatting, we're not talking about the billing detail that you get with attorneys invoices. That we love our attorneys, don't we, Stan? But, but if you've looked at attorneys invoices, you'll see some really descriptive billing lines. We're not talking about that level of detail, but giving some insight into the services that were performed.
- [42:14]
F
You certainly don't want to block bill or just have no description at all.
- [42:18]
D
Got it. So here's some resources and I think you'll have all the links to those if you download the slides. And we have a new podcast out with Stan and Nicole, one of his colleagues, about navigating professional risk. So all good reminders as we head into busy season on ways to mitigate risk in the profession.
- [42:40]
C
Well, thanks, Lisa, Stan and Sarah. A lot of great questions came in. We'll see if we can get to one during opening Open Forum. If not, we'll try to address a couple of these in the newsletter. So thanks. Thanks a lot.
- [42:51]
E
Thank you.
- [42:52]
C
So now we're going to pivot and bring up Michael Cerami to lead this AI Strategies for Tax Practices. Welcome, Michael. It's great to have you here in the New York studio.
- [43:03]
G
Thanks, Eric. Great to be here. It's a first for us, actually, which is kind of fun.
- [43:09]
C
You know, AI is truly going to disrupt the solutions related to the tax practice. So I know today we're going to take a a little bit of a deep dive related to tax research areas. So, Michael, I'll let you take it away from here and bring up the other panelists.
- [43:24]
G
Great. Well, thank you, Eric, and hello to the town hall community. Great to be with you here today. Want to welcome in April Walker. April is a key part of the AICPA's tax team. So welcome April and Ashley Francis. Hello, Ashley. Ashley is the CEO of the Francis Group. Ashley is a sole practitioner, a very progressive firm specializing in personalized tax and accounting services out of Seattle, Washington. Many of you may know Ashley. She's pretty visible online and offers up a lot of great advice and insight to other practitioners. So great to be with you both here today. So, you know, as Eric said, it's been a pretty busy week in general, but there have been a lot of big, major announcements. He referred earlier to the Deep SEQ announcement, which is Deep Seq, for those that may not know, is an open source large language model out of China launched really back in May and most recently this Week launched their R1 release, which brings reasoning into the AI model. So a lot of, a lot of noise was made around that big impact. And so what we wanted to do and what we want to do with some of these town halls moving forward is just kind of, you know, bring AI into this a little bit more. I mean, we are living through probably one of the biggest technical technological advancements of all time. And what we really want to do with the town hall is to try to bring, you know, simplify things, bring a little clarity. And today we kind of wanted to look at the intersection of AI and tax and begin to talk with the town hall community about maybe the impact that it's having. So before we do that again, just a reminder, I'm not sure I need to remind the town hall community, but just to the current tax landscape. I mean, we've got a growing complexity of tax laws and regulations. Firms across the board continue to figure out how to increase capacity and bandwidth. Client demands continue to rise in expectations. We are staring down the barrel of a major federal tax bill that we anticipate this year. And then again, swirling around us is the proliferation of AI, really across all practice areas. But tax is clearly an early area of opportunity where we're seeing some real use cases. And that's really what we want to talk about here today. If you think about the future of tax, the tax practice with AI, really, what the promise is is that significant enhancements are going to help improve both productivity and accuracy. So you be able to assist practitioners with what they're doing today and really increase productivity at the same time. It's probably going to change a lot of different roles in the tax practice. And we'll explore that a little bit more in just a minute. But, Ashley, maybe I'll invite you in to talk a little bit more about, in a simple way, there's benefits and there's limitations of what Genia can do today, particularly in the area of tax. And what can it do? What can it do? At least not yet.
- [46:44]
H
Yeah, absolutely. I will say, and I want to preface this with anyone in the audience who early on went into one of the LLM models, one of the early LLM models, and tried to ask it a really hard tax question and discovered that it couldn't answer that tax question. We have moved forward so much in just this short time period that I'm not saying go into your local LLM and ask it a really hard tax question, but it's definitely emerging now where we're seeing that promise. We're having these tools come out that can do that tax research that gets us the correct answer. So the benefits are that we're getting closer to this situation where once AI can do the tax research side, everything after that is so much easier. It still can't, on its own, reliably do math. And I feel like for accountants, that's one of the things where a lot of early CPAs were like, well, I can't do math. I'm never using this again. And the other thing is that it does struggle with getting 100% of the answer correct. And so I ask people, when they're looking at these technologies, to think of it less like our traditional platforms, our traditional software, where if it doesn't give us exactly 100% the correct answer, that's A bug, but thinking of it Instead as an 8020 device where if it gives us 80% of what we're asking for, we're still required to be the 20% in the mix no matter what. And we just need to keep that in mind to take that into account.
- [48:45]
G
That's great. And so again, I think the upshot here, as it says in the slide, is that we're always going to need the human expertise. So it should augment what we do, not replace what we do. And April, so I think one thing that's going to be clear is that the role of the tax practitioner will change. I mean there's been so much talk in early stages that roles will be eliminated. Maybe, I mean maybe the mundane or the transactional, but I think we're thinking of it more in the context of the evolution of roles and how news, you know, if certain roles change or are replaced, you know, different roles and opportunities will, will present. So maybe talk a little bit about that shift.
- [49:29]
I
Yeah, definitely something you have probably already heard from town hall before. But we definitely don't expect the need and for trusted advisors and CPAs to diminish. Right. The roles are just going to change and you know, the important staying right there. I like to think about it like some of the routine things, some of the things that you don't enjoy doing are going to be potentially handled by either AI or automation or technology. So it's going to allow for more higher level work earlier. So in the entry level you'll be able to do more higher level work. Also allows the opportunity for more advisory type work. So I really, from my perspective, I just see it as like all upside instead of a doom and gloom kind of situation.
- [50:27]
G
That's great. And I think one of the things we'll need to tackle together is to figure out how do we get people training and the skills so that even if that more mundane work goes away, that they're still learning and can still do reviews effectively and that that enhanced role. So we thought it'd be fun to maybe, you know, have Rachel, Rachel Ashley in April talk about a real world use case, tax case where we apply genai to help manage sweeping, you know, taxes, legislation and build a client engagement. So you know, a little of this is we're anticipating, like I said, a pretty big change this year but it'd be kind of a fun exercise. Maybe talk through how would you leverage the Genai model. Maybe you know, navigate that as from a practitioner's perspective. So April, I'll invite you.
- [51:22]
I
I just Think back. I was at the AICPA when TCJA came out, and I just remember the scrambling that happened and trying to understand it and how far we have been advanced in opportunities now. So I'd love, Ashley, if you kind of walk us through some ways that we can use AI in a, you know, in a helpful way, help filter the noise, maybe help communicate with clients. So I'd love to hear what you have to say.
- [51:52]
H
Absolutely. Actually, so I want to reference back to something that happened last week where CPA.com announced a partnership with Bluejay. And that is one of the tools like this. The AI tax research area is such a huge advancement because if you think about it, we're having a ton of tax law changes come through, and we have to parse through all of that information, you know, 100 pages, 120 pages, and then not only figure out what it says, understand it, summarize it, and then communicate it. And then, because people don't always remember, when we tell them the first time, we have to find different ways to communicate it to them eight or nine times. So one of the reasons I'm very excited about this is that not only does it do a great job of summarizing, but once you get that summarization, once you vet it as the human, then you can turn it into a whole bunch of different ways to support other people. So I'm talking about, let's say you have a big legislation come through and you're the person who has always traditionally been the person that stays up overnight and does it all. Well, now you can ask different people in your group, you can empower them with AI to help you with pieces, and then have it turned into checklists, have it turned into a whole bunch of emails, have it turned into articles, like, very simply taking all of this stuff and making it easier to digest mentally.
- [53:36]
I
Yeah, go ahead, Michael.
- [53:38]
G
No, I think that's great, Ashley. And I think one of the goals we would like to do is working with you is begin to create these tools and resources that just kind of guide practitioners in creating some of this output. But, April, did you want to add. I didn't know.
- [53:55]
I
I just wanted to talk like you talked generally. But maybe give us some details about and some best practices as practitioners are exploring, like how to explore the legislation and how to do the output.
- [54:09]
H
Oh, absolutely. So anyone who is using Genai, I would absolutely recommend, if you have 150 pages, focus on one small part, don't go all in. Focus on one tiny bit, because it's going to get confused and give you too much, too much information. And then the other thing is once you've, I call it micro prompting. Right. You're just, you're trying to focus in. And then once you get those pieces, just double check. Be that human in the loop that that was actually what it said because it can sometimes add in things based on what its prior understanding is. And then once you get those, those chunks of information about a certain topic, you get the summary, then you start transforming it into different types of tools for your clients.
- [55:05]
B
Right.
- [55:05]
I
And so, Michael, I don't know if you want to talk a little bit more about Blue Jay and our partnership with them and information to learn more about it on the February 12 webinar. Blue J is a AI tool to you to for tax research. So rather than just like going into ChatGPT or a copilot, it offers a real background of tax research, which is a really helpful tool.
- [55:39]
G
Yeah, I think. And you know, Ashley reminds me this all the time. You know, probably the biggest coaching we give to practitioners with AI is to get out and experiment with it responsibly. And so we encourage everyone to begin to familiarize yourself with that. And probably the easiest place to start with testing is in the research area. It really, you can kind of do very controlled activity. And so, yes, we thought it was a great opportunity to, to build this program with Blue Jay for members. They've committed to a very deeply discounted price to make this really advantageous and easy to test out. And so next week, that February 12th webinar, we're going to dig much more deeply into how you can leverage a tool like that within the tax practice to deliver value. But April, Ashley, thank you very much. And we're going to continue to talk to the town hall community about AI and its impact.
- [56:38]
C
Yeah, that was fantastic. Michael, Ashley and April, so thank you very much. Let's bring everybody back up. You can drop the slides. We're going to see the. I guess we'll have seven squares here. So. Wow, this is a great town hall. Lisa, I don't, you know, give you the opportunity. We've got hundreds of questions here. Is there one that you want to bring to the group? And then you and I need to move to, you know, closing slides.
- [57:05]
D
Sure, I'll pick one. On risk management, since that was my segment, there was a question about what do we mean by block billing? And Stan, I think that was a term that you threw out. So just really quickly, what do we mean by block billing?
- [57:17]
F
Yeah, I've seen. I've seen some bills in the past where not only did they not include a description, but it'll just be one block bill for a certain time in a given day. So it might be 6.5 hours for, you know, tax. It might say something really non descriptive. And as a matter of fact, in one of the more difficult cases we defended, we had to defend a scope issue and that issue came up and it was very difficult to explain what was agreed to and what wasn't agreed to or what was not agreed to in terms of the services by having even faced with like block bills like that.
- [57:57]
G
So.
- [57:57]
D
Got it. Thank you. All right, Eric, I think we've got just a minute left to wrap this up.
- [58:04]
C
Yeah. Well, this was a power hour. Mark Peterson, great opening with Melanie there. Lots of lots of important information on what's happening there in D.C. so we are going to digest all these questions and some people are asking about the newsletter. We've got information on how to subscribe to that. If you're not subscribed to that coming up. So first, Lisa, I do want to.
- [58:26]
D
Give a quick shout out to the next issue of the ANA Focus, which is our monthly webcast. We have a couple of special guests next week. Rich Jones, who is the chair of fasb. So as a nerd, I think that's so exciting. And Sarah Lord, who is a wonderful volunteer that chairs our Auditing Standard Board. So that's going to be a great conversation and I encourage you to register for that one.
- [58:52]
C
And here's the Town hall resources you can watch on demand. You can make sure that you're subscribed to the newsletter. Go to cpa.comtownhall here's our upcoming lineup. Lisa, One thing that you and I and the Town hall team have done over the over the years is we will do a special broadcast if we need to. These are our scheduled ones. So we may do a special one in early March if there's a lot happening. So make sure these are on your calendar. We do have this calendar invite capability to kind of get the registration information efficiently added to your calendar. So thank you very much for today, Lisa, Great being with you. Michael, great being with you and hope all of you have a good end of the week. Thank you.
- [59:43]
A
Thank you for your participation. You can now subscribe to the AICPA Town hall series on your favorite podcast.
- [59:51]
D
Platform, as well as watch archives on YouTube and AI.
- [59:56]
A
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