CPA Survey: What to Worry about Next

Future tax and accounting issues and opportunities for Small Business America.

What you need to know stay competitive:
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By Rick Telberg
CPA Trendlines Research

New research by CPA Trendlines provides clues to the small-business issues that a post-election America will be facing.

The upshot: Be prepared for new problems and complexities in corporate taxes, no matter which candidate or party prevails in the elections.

With busy season behind them and just the regular stuff to do until late winter, America’s CPAs are assessing the best ways to put the rest of their year to good use. According to a new research from CPA Trendlines in conjunction with the Ohio Society of CPAs and consultant Michael Ramos, the focus will largely be a matter of technical self-improvement.

"Firms understand that the key to success—however they define it—is to have good people," says Ramos of Michael Ramos + Associates.  "What’s unfortunate is that not enough firms are strategic and intentional in how they go about developing 'good people.'  It’s ironic; the profession is otherwise so focused on process and outcomes in service delivery.  That same kind of focus applied to professional development would make a big difference."

Tax issues for individual payers, complicated in recent years by issues such as new repair regs and the Affordable Care Act, takes the top spot, with about 60 percent of accountants nationwide reporting they will be devoting new and increased time and effort to the subject. Business tax issues come in a close second, at 59 percent, followed by accounting and financial reporting at 40 percent, tax preparation and busy season management at 39 percent, and then estate and gift tax planning, new technology for the firm, practice development, leadership and management, ethics, and, rounding out the top ten, new technology for clients.

The CPA Trendlines survey also examines a host of specialty technical skills—business valuation, employee benefit plans, fair value measurement, fraud prevention, government, health care, international accounting, and several others. It’s enough to make a CPA’s head spin.

Bjorn Zellner, head of Financial Navigation Group, LLC, in the Minneapolis area, plans to work on improving the practice itself, looking into the most effective information technology, developing staff and management skills, and recruiting and retaining the right people. “I’ll be trying to use technology to make things easier,” Zellner says. “Having the correct amount of staff for tax season has made a huge difference.  We’re going to spend time hiring better staff. Having better staff, better-trained staff, takes work off of the owner’s plate so we can grow.”

In between the lines of all these comments we're hearing reverberations going back to the infamous busy season of 2015. It seems that CPAs have climbed from the rubble, gotten their act together, experienced a better busy season this year, and are now making the improvements necessary to do 2017 right.

In a small town south of Columbus, Ohio, one senior manager feels the urgency of keeping up on various fronts, none of them simple. His firm, with a staff of between 26 and 50 professionals, has to keep up on GASB pronouncements, including the ins and outs of OPEB and leases, and a host of not-for-profit organizations that depend on the firm to keep up with their niche of accounting and reporting issues.

“Our firm focuses on government and non-profits, so those areas are critical to keeping up with,” this ambitious manager tells us. “Accounting and financial report and audit and attest are constantly evolving so again it is critical to stay ahead. Finally, staying ahead technology-wise is critical for our clients.”

But he is making a decision increasingly common under the pressures of modern finance, telling us, “Unfortunately with time constraints and work-load I will probably opt for more on-line options such as webcasts, online self-study, and related areas.  I enjoy going to seminars but being out of the office sometimes results in challenges in meeting deadlines and related areas.”

One junior staffer at another typical firm, also in Ohio, expresses the most common concerns: “There are always changes in all of these fields, especially business valuation,” she says. “Business valuation seems to be an important topic lately with companies buying, selling and merging.”

Her primary focus this year is also within the general drift: Personal Financial Planning. “Many people I meet believe all CPAs have financial planning insights.  Many are concerned with their investments for retirement and how to plan for retirement.”

“I want and need information that will help me do my non-public accounting job better!” says the CEO of a private company that deals in commercial mail room equipment, adding that his or her main focus will be “staying compliant with small business requirements.”

Why Some CPAs Are Focusing on Accounting & Financial Reporting This Year

This year’s tax business is done; mostly, anyway. Now it’s time to buckle down and do what CPAs – and only CPAs – are built for: Accounting, financial reporting, compliance, auditing, attestations, and, of course, the host of consulting services that range from business valuation to internal controls.

The also shows that about 42 percent of accountants are making accounting and financial reporting a top priority, second only to taxes, and almost twice the rate for two dozen other pursuits.

Julie Lepper at Lepper & Company LLC, which works with a lot of agricultural professionals in greater Pinckney, Mich., says upcoming efforts will be in accounting, reporting, practice management, internal control, and tax matters. “These are areas of particular interest to the direction of our firm,” Lepper says. “We want more monthly accounting clients, so we want to take classes related to that area that might give us some tricks and updates.  We are also want to help clients with process and internal controls.”

Ray Shuey at Shuey & Anzawi LLC in the Dallas area is also planning to focus on A&A issues. They’re a relatively small firm, but they do a lot of international work. Shuey listed accounting, reporting, audits, ethics, and tax issues as his main concerns. And guess why… “Passing peer reviews,” he says. “Small firms are at a disadvantage given that most of the funding for the AICPA and state administration of the peer review system is from large firms.” So guidance on passing peer reviews is something he’s going to be looking for this year.

Sixty-one percent will be working on individual taxes, 40 percent on a lingering busy season management, and 37 percent on estate tax planning. The next closest demands for time and effort are issues related to practice management, which will be a focus of a little under a quarter of respondents.

Virtually none of the respondents mentioned accounting and financial reporting alone. It seems that if a given practice is active there, it also plans to devote attention to at least a few other areas. Taxes, technology, and practice management are the most common. An accounting practice has never been simple, and from what this survey is showing, it isn’t getting any simpler. Even the best of accountants has a lot to learn.

A gutsy sole practitioner who prefers to remain unnamed is most interested in accounting, auditing, and technology for clients. That’s a lot for a professional working alone. He wants to “focus on risk assessment, controls testing, and documentation” while honing capability in “[being] responsive to marketplace changes, boards of directors, and PCAOB.”

A CPA chief finance officer in the Southeast construction industry plans to stick with issues in accounting, perhaps moving into personal financial accounting. “New lease accounting, which I need to check out,” he mentions first. “Business valuation—always an issue with acquisitions and liquidations. Personal financial planning—this has universal interest.”

And in Canada, a partner in a large trans-national firm says there’s some work to be done. “In Canada, we have new standards on revenue, similar to the U.S., new standards for review engagements, and we're expecting the new standards on auditor reporting later this year.” The firm plans to implement data analytics to improve audit quality and efficiency.

Busy Season Ends but Not the Focus on Taxes

Busy season is all about taxes, but according to the survey underway by CPA Trendlines, practitioners are by no means putting taxes away for the year.

Apparently, it’s the constant evolution of tax laws and loopholes that keeps tax prep professionals busy all year. Diane Merk, at one of Clark Schaefer Hackett’s offices in Ohio and Kentucky, says, “I only do tax work and structure my CPE to that area,” and she adds that this year she’ll be needing to focus on “Ohio's potential new changes in the taxable of pass-through entities.”

The survey is asking CPAs in which of two dozen areas they will be devoting increased time and effort this year. Tax issues—for individuals, business, and estate planning—won by a landslide. In preliminary responses, nothing less than 60 percent say they will doing something extra involving taxes for individuals, almost as many—59 percent—working on business tax issues, and another 38 percent doing more in estate and gift planning taxation.

The only other area that came close was the core function of CPAs, accounting, and financial reporting, at 40 percent.

Some of the comments from early respondents give us insight into the importance of preparing for tax preparation in today’s CPA practice.

A partner at a small firm in the Golden State says, “We concentrate on taxation issues.  But Congress has seen fit to make me an HR specialist.  I need to be able to address Affordable Care Act issues and their compliance side.  I must delve into personal health care issues to ensure insurance is for all 12 months for all members of the household and that it meets the ACA minimum qualifications.  Otherwise, it is my personal responsibility to put the penalty on the tax return and assess the penalty.  For people who use Covered California, I must reconcile their adjusted gross income to their estimated amount when they applied.  The differences are now an additional tax or refund. And I must explain that also.”

That said, the partner added, “We must be able to understand the law, know what loopholes are available, and teach our clients to use the loopholes so that they will arrange their affairs to pay the least amount of tax.”

Change is a constant concern in corporate tax departments, too. A senior staffer at a large (500+ employees) corporation tells us, “I am always looking for corporate taxation updates, state updates, and advanced taxation topics. I have been focusing on learning about international taxation and on becoming an expert on state taxes. I have also been trying to get stronger at accounting for income taxes/provision topics.”

And let’s stop and think about the ACA for a minute. Is it easy to figure out? No. Simple for the taxpayer? No. More work for the tax preparer? Yes. And are tax preparers are stepping up to the plate? Yes.

An anonymous junior staffer gives us an interesting perspective on how the ACA creates a year-round obligation that is also an opportunity. “Health insurance is top priority,” they say. “Clients have to be educated on the differences between the 1095s because they are blaming the preparer for their mistakes. In addition, more clients are working overseas than ever before.” Asked what will be most important topic, issue, or skill that firms will be addressing the year ahead, the staffer says, “Health insurance education because clients are requesting we plan a year ahead on whether or not a 1095-A is going to hurt their return.”

It will be interesting to see how the survey plays out as more professionals contribute their stats and concerns. But so far, it seems that the busy season for tax preparers starts sometime in early January and doesn’t end until late December, with a slight lull between Christmas and New Year’s. If there isn’t something to do, there’s something to learn.

• Rick Telberg is founder and CEO of CPA Trendlines Research, the tax and accounting profession's leading independent provider of market research and actionable intelligence, at cpatrendlines.com