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Archives for July 2024

The IRS Tidal Wave: How Tax Pros Can Ride It to Success

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“The IRS tidal wave is here.” That’s how CPA Trendlines described the latest surge in tax enforcement, and they’re not exaggerating. After years of pandemic-induced leniency, the Internal Revenue Service has resumed its collection efforts.

The IRS isn’t just targeting average taxpayers. They’ve also set their sights on bigger fish, focusing on high-income individuals owing significant tax debts and wealthy individuals who haven’t filed taxes for years.

For millions of Americans, this enforcement surge spells trouble. But for intelligent tax professionals, it’s an ocean of opportunity. This wave of IRS activity, powered by billions in new funding, creates challenges and possibilities. Those who adapt quickly can turn this surge into a lucrative new service offering.

In a recent episode of The Accounting Podcast, we explored the full scope of the IRS’s actions, examined how they’re spending their increased funding, and mapped out practical strategies for accountants looking to expand into tax resolution services. Let’s dive in and see how you can turn this IRS tidal wave into your next big opportunity.

The Scale of the IRS Enforcement Surge

The numbers behind the IRS’s enforcement surge are jaw-dropping. We’re looking at a full-scale offensive that targets millions of taxpayers across the board:

  • Over 11.3 million non-filers are in the IRS’s sights
  • More than 15 million taxpayers with outstanding balances are facing scrutiny
  • 1,600 high-income individuals owing significant tax debts are under investigation
  • Over 100,000 wealthy individuals who haven’t filed taxes for years are being targeted
  • Hedge funds and real estate partnerships are facing increased audits
  • The IRS is even cracking down on the misuse of corporate jets for personal travel

How serious is the IRS about these high-value cases? They’ve assigned 1,500 officers to handle those 1,600 high-income cases. That’s nearly a one-to-one ratio. As my co-host David Leary quipped, “If you cheat the government of a significant amount of money, you’re going to get a personal IRS agent just for you.”

This isn’t just tough talk. The IRS’s enhanced enforcement has already yielded $1 billion in collections. And they’re just getting started.

How the IRS is Spending Its New Funding

The fuel behind the IRS’s enforcement surge is a massive influx of cash from the Inflation Reduction Act, which allocated about $80 billion to the IRS. This funding was then reduced to around $57.3 billion. But they’ve only used about 10% of that money so far. This enforcement wave is just beginning.

Let’s break down how they’ve spent that initial $5.7 billion:

  • $2.3 billion for operations support
  • $1.4 billion for taxpayer services
  • $1.3 billion for system upgrades
  • $691 million for enforcement activities

Despite all the talk about increased enforcement, the IRS has spent the least on that. The IRS is playing the long game, investing in infrastructure and services to make future enforcement more efficient and effective.

We’re already seeing improvements. The IRS is getting faster at responding to correspondence. Two-thirds of tax professionals report it takes over 90 days for a substantive response from the IRS. That might sound slow, but it’s down from 81% previously.

What does this mean for tax professionals and their clients? Expect the pace of enforcement to increase as more funding is used. The IRS will have more resources to pursue non-filers and those with outstanding balances. But here’s the real opportunity: millions of taxpayers will need help navigating audits, settling back taxes, and negotiating with the IRS. Are you prepared to meet this demand?

Riding the Wave: Offering Tax Resolution Services

It’s time to consider adding tax resolution services to your practice. But how do you structure this new offering? I recommend a subscription-based model.

Here’s why: tax resolution isn’t a one-and-done deal. It often takes months, even years, to fully resolve issues with the IRS. A subscription model allows you to provide ongoing support while ensuring a steady revenue stream for your firm. For clients, it offers predictable costs and ongoing protection against IRS issues.

This approach is a significant shift from traditional hourly billing. You can decide how many tax resolution clients you need on a subscription to cover the fixed cost of hiring people to provide this service. So it doesn’t have to be about billable hours anymore.

Here’s how to implement it:

  1. Designate a person or team specifically for tax resolution work.
  2. Calculate how many clients you need to cover costs and generate your desired profit.
  3. Estimate the average time each client will require per week or month based on typical notice frequency and response needs.

Consider offering tax resolution as a discounted subscription to all tax prep clients, not just those facing issues. As my co-host, David Leary, pointed out, “Most won’t ever need it because they’re already working with you.”

This approach turns tax resolution into a form of insurance or preemptive protection. It’s a win-win: clients get peace of mind, and you have a new, steady revenue stream.

Of course, implementing this model isn’t without challenges. You’ll need to price your subscription carefully to ensure profitability, and clients used to traditional billing methods may resist. However, the long-term benefits—both for your firm and your clients—make it worth considering.

Are You Ready for the IRS Tidal Wave?

This isn’t just about surviving a temporary storm—it’s about positioning your practice for long-term success in an era of increased IRS scrutiny. The firms that adapt quickly to this new reality will thrive in the future.

To get the whole picture and arm yourself with all the knowledge you need, listen to this episode of The Accounting Podcast. You’ll get more in-depth analysis, practical tips, and strategies to help you ride this wave of change.

Raising Prices Without Losing Clients: A CPA Firm’s Success Story

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Setting the right price for your services can feel like walking a tightrope. How do you increase your rates without alienating your loyal clients? Can you boost your bottom line while maintaining strong client relationships? For many CPA firm owners, these questions aren’t just theoretical – they’re critical to the success and growth of their businesses. Today, we dive into a real-world success story that proves it’s not only possible but potentially transformative for your practice.

In a recent episode of the Who’s Really the BOSS podcast, Rachel and Marcus Dillon, owners of a family-run CPA firm, share their journey of transforming their pricing model. By aligning their pricing with the value they provide, the Dillons have streamlined client relationships, better communicated their worth, and optimized their practice for growth.

Let’s examine how adopting a value-aligned pricing strategy can benefit your firm.

Strategic Approach to Price Increases

The Dillons successfully raised prices without losing clients using a strategic approach. They simplified their pricing process by implementing evergreen engagement letters in 2022, eliminating the need for annual renewals.

“We used to send out updated engagement letters every year with pricing to every single engagement. And that was stressful,” Marcus Dillon explained. The shift to evergreen letters allowed the firm to focus on value-based pricing rather than annual negotiations.

The timing of the price increase announcement was also crucial. The Dillons announced their increases on February 15th, with an effective date of April 1st. This timing, while unconventional as it fell during tax season, was strategic. It allowed clients ample time to consider the changes and ensured that most tax work was completed before potential client transitions occurred.

Marcus emphasized the importance of regular, small increases: “Always go get a small price increase every year. If it’s 3%, 5% something. That way people are always in the habit of expecting a price increase that goes along with inflation.”

Transparent Communication and Client Management

Central to the Dillons’ success was their commitment to transparent communication. They used QuickBooks Online to create detailed estimates that showed the full market rate for their services and a “loyalty discount” for 2024. 

“We put the year 2024 on there. That way, they could see that that reduces or goes away over time,” Marcus explained regarding the loyalty discount. This transparency helped clients understand the pricing structure and set expectations for future adjustments.

Rachel Dillon was in charge of communicating the price increases to clients. “We never want to hurt the relationship of the “team of three” with the client and have to have awkward conversations,” Rachel explained. So pricing almost always goes through Marcus and myself.”

The Dillons used email tracking software to gauge client reactions and follow up as needed, ensuring no client felt ignored or undervalued.

Balancing Client Retention and Profitability

The Dillons’ approach yielded impressive results. For Client Accounting Services (CAS), the client base decreased from 81 to 75 over three months. However, the average revenue per CAS client increased from $1,823 to $2,103. Their AIM (individual tax) service saw a similar trend, with client numbers decreasing but average revenue increasing.

The Dillons were strategic about which clients they were willing to lose. “We knew that clients under $1,000 a month under the legacy pricing are going to have to go up beyond a thousand,” Marcus explained. This approach allowed them to focus on clients who valued their services and were willing to pay for the expertise provided.

They also thoughtfully handled special cases, such as clients selling their businesses. Rachel emphasized the importance of this approach: “Any time a client is going through an M&A deal, our team’s hours go up. There are just more requests, more clarifications.”

Overall, the firm achieved a 94.15% acceptance rate on CAS price increases by June 1st, with total monthly recurring revenue increasing by 6.46% despite client attrition. This outcome aligns closely with what Marcus calls the “80-10-10 rule”: 80% of clients accept the increase, 10% have questions but ultimately accept, and 10% leave.

The Dillons learned valuable lessons from this process. “Creating capacity seems to attract more ideal clients,” Rachel noted. Letting go of clients who were no longer a good fit created space for new, higher-paying clients better aligned with their service model.

It’s worth noting that the process wasn’t without emotional challenges. “The two to three weeks and even the week and two after we sent these out, there were tons of conversations between [Marcus] and me with our leadership team,” Rachel shared. You know, just going through all the scenarios.”

The Dillons also emphasized the importance of having a network of professionals to refer clients when they no longer fit the firm’s service model. This allowed them to maintain positive relationships even when parting ways with clients.

The Dillons’ experience shows how CPA firm owners can successfully implement price increases while maintaining strong client relationships. Their story proves transparency, clear communication, and strategic timing can boost profitability without sacrificing valuable client connections.

For CPA firm owners, the broader implication is clear: when handled thoughtfully, price increases can be a powerful tool for business growth. However, success requires a delicate balance between valuing your services appropriately and maintaining the trust and loyalty of your client base.

To gain more detailed insights into the Dillons’ strategy and hear about their experiences firsthand, listen to the full “Who’s Really the BOSS” podcast episode. Their story offers practical advice for any CPA firm owner considering a pricing strategy overhaul.

Remember, as a CPA firm owner, you provide valuable expertise and services to your clients. Don’t be afraid to price your services accordingly. With the right approach, you can increase your profitability while strengthening, not weakening, your client relationships.

Rachel and Marcus Dillon, CPA own a Texas-based, remote client accounting and advisory services firm, Dillon Business Advisors, with a team of 15 professionals. Their latest organization, DBA | FIRM, supports and guides accounting firm owners and leaders with free resources, education, and operational strategy.

Familiar Interface, Cloud Power: Meet the QuickBooks Online Desktop App

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In a recent Unofficial QuickBooks Accountants podcast episode, accounting gurus Hector Garcia, CPA, and Alicia Katz Pollock, MAT, explored the new QuickBooks Online desktop app.

As the accounting profession continues its shift towards cloud-based solutions, the QuickBooks Online desktop app is proving to be a vital transitional tool. It provides accountants who are used to working in QuickBooks Desktop with a familiar interface while introducing the benefits of online platforms to streamline workflows and enhance client services.

But what exactly makes this app such a powerful ally for accountants navigating the choppy waters of technological change? How does it balance the comfort of traditional desktop software with the advantages of cloud-based systems? And most importantly, how can it help you serve your clients more effectively?

The Comfort of Familiarity: Navigating the New Interface

For many CPAs, transitioning to a new accounting system can be daunting. Will it be intuitive? How steep is the learning curve? The QuickBooks Online desktop app addresses these concerns head-on with its familiar interface and enhanced navigation features.

The core of this user-friendly approach is the Desktop View feature. When you open the QuickBooks Online Desktop app and log into a company file, it defaults to Desktop View, but you can toggle a checkbox at the top left side of the screen to turn it off, transforming the left navigation bar to mirror the QuickBooks Online interface. As Alicia Katz Pollock enthusiastically noted, “Turning on Desktop view made QBO look like traditional QuickBooks Desktop.”

A customizable shortcuts feature allows users to tailor their experience to their needs. As Hector explained, “You can pick and choose what shortcuts you want to put in there in order to quickly access things.” This flexibility means you can set up your digital workspace to match your unique workflow, boosting your efficiency and productivity.

The app also introduces a traditional menu structure and a new set of keyboard shortcuts. While there’s a learning curve involved, these features offer the potential for significant time savings once mastered. 

These features collectively create an environment familiar to CPAs accustomed to desktop software while gradually introducing the benefits of online platforms. 

Juggling Made Easy: Improved Multi-Client Management

Picture this: It’s tax season, and you’re juggling financial reports for a small business, tax returns for multiple individuals, and a quick consultation for a new client. In the past, this scenario involved logging in and out of different accounts or even switching between multiple applications. The QuickBooks Online desktop app aims to transform this hectic juggling act into a seamless, efficient workflow with improved multi-client management capabilities.

The app’s multi-instance, multi-company usage feature is at the heart of this improvement. Hector explained, “You can connect to multiple companies simultaneously without logging off.” This functionality allows you to switch between company files without logging out and back in. Imagine jumping from reviewing your small business client’s profit and loss statement to updating the books for your individual tax client with just a few clicks. This streamlined process can save precious minutes that add up to hours throughout a busy season.

The app further enhances this efficiency with enhanced tab and window management. You can open multiple tabs and windows, creating a command center for all your client work. Hector highlighted this feature, saying, “Essentially, all the windows you have open and all the tabs you have open, they’re listed in the top right. And if you hover over each of them, it gives you a little preview of the screen.” This means you can have a client’s tax return open in one tab, their financial statements in another, and perhaps a research window open in a third—all easily accessible and manageable.

For accountants, these features translate to significant productivity improvements. Seamlessly switching between clients and tasks can dramatically reduce the mental overhead of context switching. You’re no longer constrained by the limitations of traditional desktop software, where each client might require a separate login or company file. Instead, you have a unified workspace that adapts to your needs.

This improved multi-client management also opens up new possibilities for serving your clients. Do you need to quickly compare the financial performance of multiple clients in the same industry? Or perhaps you want to simultaneously apply a tax strategy you’ve just researched to several relevant clients? With the QuickBooks Online desktop app, these tasks become efficient and straightforward.

The Best of Both Worlds: Unique Bridging Features

The QuickBooks Online desktop app offers unique features that bridge the gap between traditional desktop applications and cloud-based solutions.

The crown jewel of these bridging features is the Split Screen function. As Hector enthusiastically demonstrated, “I want to see a profit and loss and a balance sheet next to each other. I don’t want to be moving too many things around. I can pull one report up on the left side and another report on the right side, collapse the shortcuts list, and close the open tabs window to make the most use out of the two screens.” This side-by-side analysis can significantly speed up your work and reduce the risk of errors when constantly switching between tabs or windows.

However, it’s essential to acknowledge that the QuickBooks Online desktop app, like any technological solution, has its own trade-offs. While it offers unique features like Split Screen, it lacks support for browser extensions that many CPAs have come to rely on in their daily work. And Hector pointed out that the app just feels slow. So, users will likely still need to have another browser open to use extensions like a password manager or Grammarly for proofreading. 

“So now you’re going to put a double strain on your computer; you’re going to do all your email, banking, whatever on your browser. And then the QuickBooks app will only be QuickBooks,” Hector says. 

Accountants should be aware of these potential limitations and consider their typical usage patterns and hardware capabilities when deciding whether to adopt the desktop app.

Despite these challenges, the QuickBooks Online desktop app represents a significant step forward in bridging the gap between traditional desktop accounting software and cloud-based solutions. It offers a unique hybrid experience that combines the best of both worlds: the familiar interface and robust features of desktop software, coupled with the accessibility and collaborative capabilities of cloud-based platforms. 

Embracing the Future of Accounting Technology

The app’s familiar interface with enhanced navigation offers a comforting starting point for accountants and other QuickBooks users venturing into the cloud. Its improved multi-client management capabilities promise to streamline workflows and boost productivity. Its unique features, like the Split Screen function, exemplify the potential of hybrid accounting solutions.

For many accountants and business owners, this app could be the key to unlocking the benefits of cloud-based accounting while maintaining the workflows they’ve honed over years of practice. It’s not just a new tool – it’s a stepping stone to the profession’s future.

To truly grasp the potential impact of this app on your practice, we encourage you to listen to the full Unofficial QuickBooks Accountants Podcast episode. Hear directly from industry experts as they explore the nuances of this game-changing tool. You’ll gain invaluable insights into how the QuickBooks Online desktop app could revolutionize your workflow, enhance your client services, and position your practice at the forefront of accounting technology.

Alicia Katz Pollock’s Royalwise OWLS (On-Demand Web-based Learning Solutions) is the industry’s premier portal for top-notch QuickBooks Online training with CPE for accounting firms, bookkeepers, and small business owners. Visit Royalwise OWLS, where learning QBO is a HOOT!

Balancing Efficiency and Quality: How One CPA Firm Transformed Their Tax Season

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For many CPA firms, tax season means long hours, stressed employees, and a frantic rush to meet deadlines. But Marcus and Rachel Dillon, owners of a family-run CPA firm and hosts of the Who’s Really the BOSS? podcast, have found a way to break that cycle. 

In 2024, the Dillons filed 165 tax returns before April 15th while maintaining a strict no-overtime policy and growing their recurring revenue by 10%. How did they do it? By leveraging innovative tools, adapting their team structure, and fostering a culture of continuous improvement.

The Dillons’ journey wasn’t without challenges. Heading into the 2024 tax season, they faced significant changes:

• Their full-time tax director had left to start his own firm

• They had downsized by three full-time employees

• They had exited about 35 family-client relationships

To address these challenges, the Dillons made several strategic moves:

1. Implementing Innovative Tools

The firm rolled out Canopy software, replacing its existing practice management system. This improved internal project tracking and time management. More importantly, it enhanced client communication through automated tax status updates.

“What we did build out and tested during tax season was tax status updates being sent to the clients through Canopy,” Marcus explained. “It’s essentially the Domino’s Pizza tracker.” This system provided clients real-time updates about their tax returns without requiring additional staff time—a perfect example of technology improving efficiency and quality.

2. Adapting Team Structure

Rather than hiring a new full-time tax director, the Dillons hired a “tax director of counsel” on a flexible, as-needed basis. This arrangement allowed the firm to maintain high-quality tax services without the overhead of a full-time position.

They also hired a Director of Operations, Amy, who took on many administrative tasks previously handled by the tax director. This freed up other team members to focus on client work.

3. Fostering Continuous Improvement

When the Dillons identified knowledge gaps in their team, particularly for those without strong tax backgrounds, they implemented weekly training sessions. Marcus personally reviewed tax returns with team members, using actual client work as teaching material. This hands-on approach allowed team members to learn in real-time and improve their skills.

The Results

The Dillons’ strategic changes paid off. Here are some key metrics from their 2024 tax season:

• 165 tax returns filed before April 15th (down from 224 in 2023, but with fewer staff)

• No overtime or weekend work required

• Maintained half-day Fridays throughout tax season

• 10% increase in recurring Client Accounting Services (CAS) revenue

• Overall revenue on track to reach $3 million for the year

Perhaps most impressively, they achieved these results while maintaining a 36-hour work week for most employees. This focus on work-life balance starkly contrasts the grueling schedules often associated with tax season.

Lessons Learned

The Dillons’ experience offers valuable insights for other CPA firms:

  1. Embrace technology: The right tools can dramatically improve both internal efficiency and client communication.
  2. Be flexible with staffing: Consider alternative arrangements like fractional or on-call experts to fill skill gaps.
  3. Invest in continuous learning: Regular training sessions can quickly address knowledge gaps and improve team capabilities.
  4. Prioritize work-life balance: It’s possible to maintain high standards without sacrificing employee wellbeing.

As the accounting industry evolves, firms that can balance efficiency and quality will have a significant competitive advantage. The Dillons’ story shows that with the right strategies, it’s possible to thrive during tax season while still maintaining a healthy work environment. For more tips and tricks, listen to the full episode of Who’s Really the BOSS?

Rachel and Marcus Dillon, CPA, own a Texas-based, remote client accounting and advisory services firm, Dillon Business Advisors, with a team of 15 professionals. Their latest organization, DBA | FIRM, supports and guides accounting firm owners and leaders with free resources, education, and operational strategy.

Is the Secret to Solving the US Accountant Shortage Hiding in Argentina’s Economic Turmoil?

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In a recent episode of The Accounting Podcast, we stumbled upon a surprising solution to one of the biggest challenges facing US accounting firms today: the talent shortage. Believe it or not, it’s coming from a country known more for its economic struggles than its accounting prowess. 

I’m talking about Argentina, and if you haven’t considered it a source of accounting talent, you might want to think again. The strategy here is called “nearshoring” – a close cousin to offshoring, but with some key advantages. 

While offshoring typically involves outsourcing work to distant countries like India or the Philippines, nearshoring focuses on partnering with professionals in nearby countries, often in similar time zones. This approach aims to combine the cost benefits of offshoring with the collaborative advantages of working with a geographically and culturally closer team.

Let’s break this down and see why Argentina might answer your staffing woes.

Time Zone Alignment: The Game-Changer

First, let’s discuss the elephant in the room regarding offshoring: time zones. We’ve all been there, trying to schedule calls at ungodly hours or waiting overnight for responses. 

As Nicolás Villafañe, a partner at South Offices, pointed out in our podcast, “Timezone is a very, very huge challenge when working with Philippines or India. In South America, you’re mostly aligned. You can actually have people working on their daytime and the exact same time as Americans.”

Imagine having your offshore team working the same hours as you. No more late-night calls or day-long email delays. It’s like having a remote team just down the street, not halfway across the world.

This time zone alignment doesn’t just make scheduling easier. As Nicolás explained, “The overlapping of the working time is what gives you that sensation that you actually are building a team the same as if you had them two blocks away.” This real-time collaboration fosters a sense of team cohesion that’s difficult to achieve with traditional offshoring.

Beyond Cost Savings: Argentina’s Secret Weapon

Now, I know what you’re thinking. “Blake, we’ve heard about offshoring before. It’s all about cost savings, right?” Well, yes and no. While nearshoring to Argentina can save you 30-40% compared to US costs, the Philippines offers around 50% savings, and India provides the most significant cost reduction at about 60%. 

However, as Nicolás pointed out, these deeper cost savings come with trade-offs in quality and time zone differences. The real value isn’t in the cost savings. It’s in the quality of talent you’re getting for that price. Argentina’s economic challenges have created a breed of accountants unlike any other. 

As Nicolás explained, “The quality of the professionals in Argentina is actually quite high because of our problems. It’s not that something that we’re proud of, but it’s the outcome. The outcome is that if you if you learn how to navigate through the Argentinian economy, Argentinian accounting, you tend to be very good because you’re you have to reskill yourself every day.”

These accountants have had to navigate hyperinflation, rapidly changing regulations, and economic instability. They’re not just number crunchers; they’re financial ninjas. 

And get this: in Argentina, you need to be a CPA to do any kind of accounting work. Even bookkeeping. That means you’re getting CPA-level expertise across the board. 

Perhaps because of this, accounting is the second most popular profession in Argentina, right after law. This creates a large talent pool for US firms to tap into, ensuring a steady supply of skilled professionals.

Cultural Alignment: The Secret Sauce

Here’s where it gets really interesting. Cultural differences can be a massive headache when working with offshore teams. But with Argentina, that headache largely disappears.

Latin American culture aligns much more closely with US culture than, say, Indian or Filipino culture. This means better communication, fewer misunderstandings, and a team that feels like, well, part of your team.

This cultural alignment, combined with the time zone compatibility, creates a seamless working relationship that’s hard to achieve with traditional offshoring.

Rethinking Outsourced Accounting Talent

So, let’s recap. With nearshoring to Argentina, you’re getting:

1. Time zone alignment for real-time collaboration

2. High-quality, adaptable talent forged in the fires of economic challenges

3. Cultural compatibility for smoother communication and integration

And you’re saving a chunk of change, too.

But this approach isn’t just about cutting costs or filling seats. It’s about gaining a strategic advantage in an increasingly competitive industry. While other firms are struggling with talent shortages and quality issues from traditional offshoring, you could be building a dream team of highly skilled, culturally aligned professionals who work in sync with your US operations.

In a world where finding and retaining top accounting talent is becoming harder by the day, Argentina might be the ace up your sleeve.

Ready to dive deeper into the nearshoring revolution? Listen to the full episode of The Accounting Podcast.