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The AI Trust Problem Accounting Can’t Afford to Ignore

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Here’s a thought experiment. You ask ChatGPT to write you a research summary. It comes back 70% accurate. You tweak a few paragraphs, fix some facts, and you’re good to go. Now imagine that same 70% accuracy rate applied to your general ledger, audit workpapers, or financial statements.

As Mark Hickman, Sage’s Managing Director for North America, puts it bluntly, “You go to jail for that.”

That line from Episode 34 of The Unofficial Sage Intacct Podcast cuts straight to a tension every CFO, controller, and accounting professional grappling with AI needs to understand. The technology promising the biggest efficiency gains in a generation operates in a profession where approximate answers are a liability.

Hosts Doug Lewis, Matt Lescault, and Emily Madere sat down with Mark for their second annual Sage Future conference preview episode. Mark oversees Sage’s largest and fastest-growing region. He’s watched the Intacct acquisition grow more than 10x over the past 11 years. He’s in front of customers and partners constantly.

When he talks about what finance leaders say about AI, it’s field intelligence from someone who’s been in tech for nearly 25 years and has seen every major shift from dial-up internet to cloud computing.

He argues that while every corner of technology races to bolt on AI capabilities, accounting demands a fundamentally different approach built on trust, traceability, and human control. And the companies best positioned to deliver that are the established platforms sitting on vast reservoirs of trusted data.

Accounting AI Can’t Be a Black Box

Strip away all the marketing noise around artificial intelligence and you land on a simple question: where did that number come from?

In most industries, that question is nice-to-have. In accounting, it’s everything. And it’s why Mark frames Sage’s entire AI strategy around three pillars: trust, control, and accountability.

“When you type into ChatGPT, write me an essay on this or write me a paper on this, it can be 70% right and you can tweak it,” Mark explains. “You can’t be 70% right in accounting.”

  • Trust means AI outputs can’t disappear into a black box. Sage built what Mark calls a “trust label.” It’s a mechanism that lets users click into any AI-generated output and trace exactly where the data came from and how AI reached the conclusion. Think of it as an audit trail for the AI itself.
  • Control means humans stay in charge. “Accounting is different,” Mark emphasizes. “We can’t just have AI running everything behind the scenes. We need humans to control that AI and deliver what they need from those outputs.” The AI changes day-to-day workflows, but it assists rather than drives.
  • Accountability means everything is traceable. “We don’t want some large language model that somebody’s just pumping stuff into. It’s coming back. You have no idea where it came from, how that data was trained. Is it hallucinating? Is it not hallucinating? You need to be able to trust that that AI is credible, and you’re going to be able to use it in your accounting when you produce that to the auditors.”

Emily pushed Mark on a question many Intacct users ask: what about these new solutions flooding the market that claim to be “AI first”?

Mark’s response was diplomatic but pointed. New organizations saying “we’re AI native” and driving innovation are “good things for our industry.” But “how do you train AI? You train AI with data. We have a lot of data.”

Beyond raw data, Sage just kicked off what Mark calls its “Agentic AI marketplace.” This is a framework where partners build specialized AI agents that work across the broader Sage ecosystem. “We’re building hundreds and hundreds of agents that will be available to our customers,” he notes. The company is taking a platform approach where domain expertise gets layered onto trusted financial infrastructure.

The Adoption Paradox: Faster Than Cloud, Slower Than the Hype

Mark brings perspective from his 25 years in tech. He remembers when the internet arrived on dial-up connections that took five minutes to load. He watched the cloud evolve from radical concept to default infrastructure. Now he’s seeing AI reshape everything again.

“People thought it was going to move much quicker than it actually is,” he observes. “Adoption in these things is way more complicated than actually delivering the tech for it.”

In each major tech shift, people overestimate adoption speed. “The cloud is still being adopted in some places,” Mark points out.

The hosts brought up a perfect example of the hype-reality disconnect. Allbirds, a shoe company, rebranded itself as an AI organization and watched its stock rocket 600% in a single trading session before promptly crashing. “It’s reminiscent a little bit of the dot-com boom,” Mark says, “where people had a website and therefore their business was worth billions. And then everybody figured out they didn’t actually have a business case.”

But he distinguishes this moment from that bubble. “If you look at AI, it’s being driven predominantly by very large companies that are established with lots of customers and lots of money.” The recent tech stock dip “is just a reset on the adoption.”

So what are finance leaders actually saying when Mark sits across from them?

“We’re hearing this is game changing,” he reports. But it’s game changing in specific, practical ways:

  • Efficiency that enables strategy. “They look at AI to help them be more efficient so they can be more strategic,” Mark explains. The role of the CFO is becoming “significantly more strategic.”
  • Faster closes. “We’ve been talking for years about reducing time to close and eliminating the month-end close. AI is really going to speed that up.”
  • Immediate productivity gains. “When we let customers use our agents, they’re like, ‘I’m three times more productive. I cannot believe how much faster we’re getting things done.'”

But adoption takes time. “You can’t just inject things like that into your business overnight,” Mark cautions. “It’s got to be done in a way that makes sense to your workflows and your teams and how your processes roll.”

The conservative pace of AI adoption in finance is an essential feature in a profession where errors carry legal consequences.

Beyond the AI Headlines: What Else Is Changing

Matt asked for more insight into some other things happening at Sage that might not get as much attention because of how much focus is on AI.

Mark shared several initiatives that may have immediate impact:

  1. Speed to market and faster implementations. “How are we going to implement faster? How are we going to get customers’ time to value reduced?” Mark asks. Matt reinforced why this matters. “If we have implementations that take three, six, eight months, we’re going to lose on that side of things.”
  2. Vertical and micro-vertical specialization. “Our solution addresses the needs of those businesses within those verticals, which is something we’ve always done, but we’re doubling down on that,” Mark explains.
  3. Strategic acquisitions filling gaps.
    • Expense management. “We’re about 12 months into it and it’s done incredibly well. Overachieved all targets. Customers love it.”
    • Sage HCM (payroll and HR). “It’s a great technology that’s really going to help us grow our business and deliver for our customers in a complete solution.”

Emily confirmed these acquisitions address real needs. “That was a big gap. In the past, a lot of clients asked for an expense management solution and wanted it all in one.”

What to Expect at Sage Future 2026

The Sage Future conference runs April 28-30 in San Francisco. Based on last year’s feedback, Sage restructured the entire event.

The new three-tier structure includes:

  • Keynotes now feature primarily external voices. Mark will interview Scott Krug, CFO of the New York Yankees. “He closes the books and does audits just like everybody else,” Mark says. Kara Swisher will discuss AI trends. 
  • Super Sessions are new, product-specific deep dives. 
  • Breakout sessions provide the next level of detail for features that caught your attention.

Matt made an important observation: “I’ve seen a lot of clients implement Intacct and then don’t go back to reconfigure over their lifetime. They’re not getting the full feature set out of the product.” The Super Sessions directly address this education gap.

Other highlights include:

  • Three embargoed announcements that Mark calls “very exciting and game changing for customers and partners”
  • CPA.com as titanium sponsor, validating Sage’s positioning as “accountants who serve accountants”
  • Monday night at Oracle Park (Giants stadium) and Thursday’s Sage Fest at an undisclosed “top” San Francisco venue
  • Post-event content distribution through webinars for those who can’t attend

“We want people to leave understanding where we’re going as a business and how we’re supporting them,” Mark says.

The Question Every Finance Leader Should Ask

The thread running through Mark’s conversation reframes how accounting professionals should evaluate every AI pitch landing on their desk.

A 70% accuracy threshold works for drafting marketing copy, but it’s a non-starter when the output feeds financial statements and regulatory filings. That constraint reshapes everything about how we build and deploy AI in accounting.

Whether you’re a CFO weighing technology investments, a controller separating AI substance from hype, or a partner building around the Sage ecosystem, listen to the full discussion. And if you’re heading to Sage Future 2026 in San Francisco, you now know exactly what to look for.

Grieving, Relieved, Scared, and Strong All at Once: None of That Has to Cancel the Other Out

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Imagine you just finished reading 31 pages of divorce paperwork. Your hands are shaking. Then a package arrives. It’s a gold star chart, the kind you got in elementary school, sent by your podcast co-host and friend. You stick a gold star next to “getting through it” on your to-do list, and cry because you’re happy and sad at the same time.

That moment kicked off the Season 3 premiere of the She Counts podcast. Co-hosts Nancy McClelland and Questian Telka had a raw conversation, with Questian opening up about navigating divorce while running her nonprofit-focused accounting firm, raising kids, speaking at conferences, and watching her client base lose government funding all at once.

The thing about divorce is it doesn’t wait for a convenient time. It crashes into tax deadlines, client crises, and keynote presentations. The women navigating it don’t need permission to feel relieved and devastated in the same breath. They need radical acceptance, a practical framework for stopping the fight against reality so they can redirect that energy toward the decisions that actually matter.

 

What Radical Acceptance Really Means (And Why Your “It Is What It Is” Mug Might Be Right)

Nancy learned this lesson from a mug.

Years ago, while doing consulting work, she constantly tried to rewrite the past. “If only this had happened, then we wouldn’t be dealing with this.” The company’s COO was blunt, “Dude, it is what it is. Let it go.” She eventually bought Nancy a mug with those words printed in big letters. It became one of Nancy’s favorite possessions and a simple summary of a concept that sounds academic until you desperately need it.

Radical acceptance comes from dialectical behavior therapy (DBT). “Dialectical” means acting through opposing forces. Two seemingly opposite things can be true at the same time. The framework doesn’t ask you to like your situation or pretend pain isn’t real. It asks you to stop burning energy arguing with reality so that pain doesn’t turn into prolonged suffering.

“You can choose something and still grieve it,” Questian explained early in the episode. “Relief and struggle can sit at the same table and neither one cancels the other out.”

Nancy tested this with an exercise therapists use regularly. She asked Questian, “What is something you keep wishing were different?”

Questian’s answer came fast. She wishes she’d chosen a partner who fit her better. She was young, didn’t fully understand herself, and after 13 years of marriage, she knows her ex is a good person, just not her person. The “what ifs” circle endlessly.

But Nancy pressed, “You can’t go back in time. What changes when you stop arguing with that reality?”

“It leads you to acceptance,” Questian said, “which ultimately gives me a lot more peace.” Then the crucial follow-up, “What can I do?”

That shift from fighting what happened to focusing on what’s possible transforms radical acceptance from therapy-speak into a tool for business, parenting, and survival.

When Professional Success and Personal Crisis Collide

Divorce doesn’t happen in a vacuum. For Questian, the paperwork was just one layer of challenges that had been building for over two years. North Carolina requires an excessively long separation period before divorce proceedings can begin, prolonging the emotional and logistical limbo.

The financial fear hit first. “When you have a partner, if one of you is having a tough time professionally or financially, you have the other person to lean on,” Questian explained. Remove that buffer, and every business decision gets heavier. She became noticeably more risk-averse. Each client contract or slow-paying invoice shifted from uncomfortable to existential.

Then came the client crisis. Questian’s firm serves almost entirely nonprofits. During her separation, they started losing government funding. She was managing her own anxiety and emotionally supporting executive directors who were terminating employees and watching their missions shrink. “I feel like I should change my LinkedIn profile to nonprofit therapist,” she joked, but the exhaustion was real.

Through it all, she kept showing up on stages, looking polished in front of 500 people while privately unraveling. But she refuses to fake being fine. “Divorce rates are high,” she pointed out. “There must be so many other women in our industry going through this at the same time.”

She shared a moment from the Advisory Amplified tour. When Valerie Heckman asked how she was doing, instead of the automatic “I’m fine,” Questian told the truth: her stepfather, who was like a second father, was dying. Valerie responded with genuine warmth and compassion. That exchange reinforced the idea that honesty permits others to be honest too.

In an ironic twist, Questian’s professional success contributed to the divorce. Her partner wasn’t supportive of her conference speaking, travel, and growth. “When the person you’re doing life with isn’t cheering you on,” she said, trailing off. Nancy filled the silence by sharing how her partner, Mark, travels with her, helps with her neuropathy treatments, and celebrates every win. She offered it as heartbreak, not comparison, knowing how much that support matters and wanting every woman to have it.

Building While Everything’s Still Burning

Questian isn’t waiting for neat closure before rebuilding. She’s emotionally reconstructing while still deciding whether to divorce in the first place. “I don’t think it’s ever like, okay, I have to have this thing done before I start making plans for what comes next.”

Resilience built through years of practice gave her courage. “I will figure it out. I always do,” she said, half-joking that she should stick it on a Post-it above her computer.

Nancy offered her own mental escape hatch for feeling trapped: “I can burn it all down.” Knowing that option exists changes everything. “When I remind myself that’s an option, I realize, ‘oh wait, I want to stay here. I have agency. I’m choosing this.’”

The hosts referenced a Winston Churchill quote that Nancy’s former colleague kept above her desk: “If you’re going through hell, keep going.” Sometimes forward is the only direction that makes sense.

Nancy led Questian through one final exercise. For 30 seconds, she had Questian imagine the worst-case scenario. Revenue drops. Custody shifts. A soul-crushing job with zero flexibility. Just sit with the fear.

Then she asked, “Is it happening right now?”

No. It wasn’t.

That gap between imagined catastrophe and present reality is where distress tolerance lives. You can picture the worst and survive the picture. The actual worst case is probably unlikely. But even if it happened, you’d survive that, too.

The Practical Moves That Can’t Wait

The hosts distilled their conversation into guidance that comes from someone still in the middle, not reflecting from the other side:

  • Practice radical acceptance like exercise. It’s not a one-time revelation. Catch yourself in the “what if” spiral and redirect to “what now.”
  • Know your earning power and numbers. Always understand exactly where you stand financially. This gives you confidence to act and clarity about actual worst-case scenarios.
  • Don’t outsource your financial awareness. Women in accounting manage everyone else’s money. Make sure you’re managing your own with the same attention.
  • Build contingency plans before crisis hits. Think through “what would I do if…” while you’re calm, not panicking.
  • Lean on your network. Questian named her professional and personal connections as her number-one resource.
  • Take care of your body. Nancy quoted Max Ehrmann’s Desiderata. “Many fears are born of fatigue and loneliness.” Eat. Exercise. Rest. Connect. It’s infrastructure, not indulgence.

Questian delivered the line that anchored everything: “My marriage ended, but I didn’t. And neither will anyone else.”

Let It All Be True

This conversation is about being honest that sometimes you show up at conferences while reading custody paperwork on the plane. Sometimes you teach others while desperately needing to be taught. Sometimes you grieve and feel relieved in the same moment.

Nancy mentioned she’ll be teaching about vulnerability as strength at Scaling New Heights in June. This episode demonstrated there’s strength in admitting you don’t have it figured out, in asking for gold stars when you need them, and in saying “thank you” when someone calls you emotional because, yes, you are, and it’s your superpower.

As Questian said in closing, “I’m grieving. I’m relieved. I’m scared and I’m strong. And none of that cancels the other. I am just learning to let it all be true.”

If this resonated, whether you’re navigating divorce, rebuilding after upheaval, or holding opposing truths, listen to the full She Counts episode. Nancy and Questian walk through exercises you can do alongside them. Sometimes the most professional thing you can do is admit you’re human.

The $450,000 Worth of Clients DBA Walked Away From on Purpose

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In 2010, Marcus Dillon sat down to hand-write more than 50 letters to retiring CPAs, asking if they’d be willing to sell their practices. One of those letters launched Dillon Business Advisors, a firm that grew from a $400,000 acquisition into a multi-million-dollar advisory practice by strategically reinventing itself every five years.

On a recent episode of the Who’s Really the Boss? podcast, Marcus and Rachel Dillon celebrated the firm’s 15th anniversary by sharing its origin story and the evolution of DBA. In the first of a two-part series, they walked through specific revenue numbers, margin targets, acquisition details, and the personal sacrifices behind each phase of growth.

The Foundation: High School Sweethearts to Business Partners

Marcus and Rachel’s story started long before DBA. They met in driver’s ed at 15 and 16 and have been together ever since. By their first wedding anniversary, they had a one-and-a-half-month-old daughter, Kinley. That young family shaped every business decision that followed.

Marcus came out of Ernst & Young’s audit practice, where travel demands didn’t work for family life. He landed at a smaller Houston-area firm with around 15 employees and under $2 million in revenue. The owner took a chance on a 23-year-old kid to build an audit practice from scratch.

“I was able to get paid 45% of my effective billings, including write-ups,” Marcus said. “So I learned really early on how to price things so it was acceptable to clients.”

At his peak, he was billing close to $400,000 a year and taking home up to $180,000. But Rachel noticed a problem. Marcus had to match the owner’s hours, and he would stay at the office until 11 p.m., midnight, or sometimes 1 a.m.

“I didn’t want to be a single mom,” Rachel explained. “I was a teacher getting off at 4 p.m. and wondering, where is my husband and the father of my kids?”

DBA 1.0: Building Through Acquisition (2011-2016)

The Dillons prepared carefully for acquiring a firm. They paid off every debt except their mortgage. Rachel kept teaching for a steady income and benefits. Then Marcus wrote those letters.

One landed with Bob, a CPA in his 70s or 80s, who recently had a health scare. First Command Bank financed about $320,000 of the $400,000 purchase price. There was a 10% seller note, and Marcus brought 10% cash to closing.

Unexpectedly, clients followed Marcus, despite his non-compete agreement with his old firm. He fully honored the agreement, paying a third of the collections back to his former employer for three years. But the client migration pushed DBA from $400,000 to about $700,000 almost immediately.

The first office wasn’t glamorous. Marcus inherited a lease in what he calls a Class D building right off a major Houston interstate. “It had the old school atrium, and it just smelled like crap whenever they brought new mulch and plants into that atrium,” he recalled. He worked alone until 9 or 10 p.m., and his was often the only car in the parking lot.

Rachel’s first day at DBA in 2013 was moving day. “I remember doing a couple of collection calls on the floor as we were packing up,” she said. “I was not coming to work with you at the other place regularly.”

By then, they’d built their own 2,500-square-foot standalone office, figuring, if they were paying rent, they might as well pay it to themselves.

From the start, the Dillons prioritized same-day invoicing. Returns would flow to Rachel for client delivery, then straight to Marcus for billing that same day. “That’s something that was always a priority to get done immediately,” Rachel noted. “I hear some people spend days doing billing and invoicing, sometimes months after the fact.”

That diligence paid off. By 2016, DBA reached $1.5 million in revenue. The Dillons had paid off the acquisition loan and bought a lake house. They were successful, but as Marcus observed, “Every time someone wished me success, it was because I had just gone into debt.”

DBA 2.0: The Merger That Taught Them to Let Go (2016-2020)

In 2016, Marcus had breakfast with his mentor, Tom, who was winding down his practice. Marcus asked a question he now admits was the wrong way to evaluate an acquisition: “How would we be worse off by coming together?”

Tom brought about $400,000 of work, pushing DBA past $2 million. On paper, it looked perfect. In practice, it was a disaster.

“Tom’s clients loved Tom,” Rachel said bluntly. “Tom’s clients hated us.”

These weren’t just any clients. They were survivors of three or four rounds of exits, and they stayed for Tom personally. Plus, Tom’s service model was completely different. He offered every client two in-person meetings during tax season. DBA didn’t operate that way.

Meanwhile, the Dillons built a 12,000-square-foot office building: 7,000 for DBA, 5,000 to lease out. Marcus describes it as having “an attorney feel with wood wainscoting and leather-bound books.” It was supposed to be their forever office.

But the cultural problems didn’t solve themselves. So DBA started strategically shedding clients.

They spun off about $100,000 to their friend Julie, who mentioned she wasn’t as busy as she’d like. “She made that mistake of telling us that,” Marcus joked. Another $100,000 went to a CPA closer to Tom’s office. The next year, they went bigger, spinning off $250,000 along with Tom’s office location.

In total, DBA shed about $450,000 in client work. Yet they never dipped below $2 million in revenue. “That was definitely a consideration,” Rachel explained. “We never wanted to dip below $2 million.”

By 2019, things had stabilized. The team was mostly part-time working parents who arrived at 9:30 and left by 2:30 to match school schedules. All work happened in the office.

Then came January 2020. At their annual team retreat, Marcus asked, “If you could do anything in this life and not fail, what would you do?”

The leader of their audit practice answered, “I would be a stay-at-home mom.”

“When you have a leader in the firm respond that way,” Marcus reflected, “it’s like, okay, this is likely not going to be the person to help lead that aspect of the business.”

By March, the COVID-19 pandemic sent the team home, and they never came back. DBA funded home office setups and kept the physical office available. Nobody used it.

The audit practice spun off during 2020. Tom pursued receivership work full-time. And DBA hit $1 million to the bottom line for the first time, maintaining 40-45% margins before officer compensation. That’s a target Marcus has carried since his days at his old firm.

But remote work didn’t mean balance. “We did the kids’ routine of dinner, activities, bath, and bedtime,” Rachel said. “And then we just went straight back to work again for the next three or four hours.”

The Hard-Earned Wisdom of 15 Years

Looking back, Marcus is clear about what drove their early success. “We were successful because we put the hours in. We weren’t necessarily working smarter. We just worked more than others around us and said yes to others around us, which doesn’t work anymore.”

Other firm owners likely recognize patterns in the Dillons’ journey:

  • Financial preparation matters. They eliminated personal debt and kept Rachel’s steady income before taking the acquisition risk.
  • Invoice immediately. Same-day billing became a cornerstone cash flow practice. You have to send out the invoice to get paid.
  • Not all acquisitions are equal. When clients survive multiple rounds of exits, they’re bonded to a person rather than a firm. Tom’s clients proved that.
  • Set a revenue floor and defend it. DBA shed $450,000 in work but never went below $2 million because organic growth and price increases filled the gaps.
  • Listen when people tell you who they are. One honest answer at a team retreat revealed the future of an entire service line.
  • Hours aren’t everything. The model that built a $1 million firm through sheer effort won’t build the next phase.

Growth isn’t just about what you build. It’s about what you’re willing to walk away from, whether that’s clients who don’t fit, service lines that aren’t growing, office space you no longer need, or the version of your firm that got you here but can’t take you further.

This is just the first half of DBA’s 15-year story. In part two, Marcus and Rachel will share how the firm evolved after the pandemic, what they’re seeing in today’s market, and where they believe the profession is headed. For now, listen to their full conversation in Part 1, including all the specific numbers, deal structures, and decision points.

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, Collective by DBA, supports and guides accounting firm owners and leaders with firm resources, education, and operational strategy through community, groups, and one-on-one advisory.

IPA Survey Data Reveals What Best of the Best Firms Actually Do Differently Than the Rest

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“I can’t wrap my brain around how we’re going to utilize technology and make our work more efficient. How do we bill that if we’re billing by the hour? Are we going to start having reduced fees on their invoices? No. So what does that look like?”

That question from Chelsea Summers, Executive Director of Inside Public Accounting, captures the paradox facing the profession right now. Two-thirds of accounting firm revenue still comes from hourly billing, even as AI promises to slash the time it takes to complete work. Something has to give.

On a recent episode of the Earmark Podcast, host Blake Oliver sat down with Chelsea to dig into firm performance data heading into 2026. Inside Public Accounting has been benchmarking accounting firms since 1987. Its latest survey includes over 600 firms, from Deloitte all the way down to firms around $6.5 million in revenue. The numbers tell a story that’s both reassuring and challenging for firm leaders.

The reassuring part is the playbook for outperformance isn’t complicated. Top firms charge what they’re worth, leverage their staff better, and embrace offshore teams. The challenging part is the profession’s attachment to hourly billing might be the single biggest barrier to capturing value from technology investments.

The Best Firms Don’t Work Harder; They Work Smarter

Every year, IPA identifies its “Best of the Best” firms based on 30 different operational metrics. These firms are profitable, but they also have low turnover, succession plans, marketing strategies, and overall organizational health. “Operationally, you’re a high performing firm that’s going to succeed,” Chelsea explained.

The performance gaps between these top firms and everyone else are striking:

  • Revenue per employee: The best firms generate $272,000 per full-time equivalent versus $220,000 for all firms
  • Leverage ratios: Top performers maintain 17.7 professionals per partner compared to 11.8 for average firms
  • Partner billing rates: Best firms charge $588 per hour while others charge $448

That last number deserves emphasis. Top firms are charging $140 more per partner hour, a 30% premium.

But these high-performers don’t necessarily burn out their people to get these results. “The big myth is that high performing firms push people harder, and that’s why they’re making more money,” Chelsea said. “But in reality, those high performing firms often have healthier capacities because they’re using that leverage and they’re using more specialized roles.”

When IPA compared utilization rates and chargeable hours between Best of the Best firms and everyone else, the numbers were nearly identical. Same hours worked, dramatically different outcomes.

The secret is putting the right people in the right roles. Top firms use more client service staff for production work and keep partners focused on partner-level activities like training, business development, and client relationships. When partners step back into production work and start micromanaging, it hurts morale and growth.

Offshoring Has Reached a Tipping Point

Over half of IPA’s survey participants now use some form of offshoring or outsourcing, and less than 5% plan to decrease it. Nearly everyone else plans to grow or maintain their offshore headcount. This is the new normal.

The performance data backs up the strategy. Firms with offshore teams reported 8.1% organic growth versus 7.5% for firms without them. They also saw a 9% improvement in margins.

“Nine percent is a lot,” Blake noted during the conversation. And he’s right. That kind of margin improvement can transform a firm’s economics.

What’s changed is how firms use these teams. The old model treated offshore staff like a processing center for data entry. Today’s successful firms fully integrate offshore team members. They have branded offices, firm email addresses, training opportunities, and direct client communication.

“Really making that individual feel a part of the team is very helpful in correctly utilizing them and making sure they feel the value of working at the firm,” Chelsea explained.

As technology automates the basic data entry tasks that initially justified offshoring, these team members are moving up to manager-level work, supporting advisory services, and contributing to internal operations. The offshore strategy and the technology strategy work together.

Firms Have More Pricing Power Than They Think

One pattern emerged repeatedly in Chelsea’s conversations with firm leaders: they consistently underestimate what clients will pay. “We have all these D and F clients, we want to cull them so we raise their prices 40%. But they all stay,” she shared.

A 40% price increase, and the clients don’t leave. That should make every managing partner pause and reconsider their pricing strategy.

In today’s inflationary environment, not raising prices can actually send the wrong signal. “When your CPA firm doesn’t increase their prices, then you almost say, are they not very good? Do they not believe in their work?” Chelsea observed.

Blake connected this to a broader pattern he’s seen across firms of all sizes. “We talk a lot when we talk about small firms about how they’re underpricing. It’s the same tendency in the midsize and the larger firms where some firms just don’t charge enough. They have pricing power and they’re not using it.”

The Advisory Pivot Is Slower Than Expected

Despite years of conference presentations about the shift to advisory, most firms still generate less than one-third of their revenue from advisory services. Tax and assurance continue to dominate, accounting for about two-thirds of revenue at the average firm.

“That’s really contrary to all the talk that we’re hearing on advisory,” Chelsea said. “I think it is [the future], but the data just isn’t showing that that is yet the predominant model inside most firms.”

Client accounting services, once positioned as the gateway to advisory, are growing but not explosively. Larger firms have shifted their thinking about CAS. “It seems like a lot of firms, especially the larger firms, have shifted away from feeling like that’s a foot in the door to like, that might be a strategy, but that’s not our only strategy going forward,” Chelsea explained.

For firms succeeding with advisory, a few patterns stand out. They have a dedicated internal champion who isn’t juggling 15 other responsibilities. They invest upfront and accept that returns take time. And they recognize that advisory service lines need different processes than tax and assurance work.

AI Faces Cultural Barriers More Than Technical Ones

When Chelsea asks firms about their return on technology investments, the responses are telling. “They’re like, how do we even do that? What does that look like? What does an ROI even mean?”

That said, firms are finding value in specific areas. Tax research stands out as a clear win. Being able to have AI synthesize complex tax code information saves significant time. Workflow automation, document processing, data extraction, and AI-assisted drafting also deliver results.

But adoption is slower than expected, and the blockers are mostly cultural. Partner skepticism leads the list, followed by change management resistance. “The accounting profession is certainly not known for being early adopters,” Chelsea noted.

There’s also a timing problem. Many firms shelved their AI discussions in December for tax season. When they picked them back up in May, there was different software, different models, different capabilities. “You’ve missed all of that research time and possible adoption time just because you’re too busy doing tax season,” Chelsea explained.

We Can’t Ignore the Billing Model Problem Much Longer

Throughout the conversation, Chelsea kept returning to the incompatibility between hourly billing and efficiency gains from technology.

She actually expected the 2025 data to show movement away from hourly billing. Instead, it went slightly in the other direction. Two-thirds of revenue still comes from billable-hour models, and much of what firms call “fixed fee” pricing is just hourly billing in disguise: time estimates multiplied by rates, presented as a flat fee.

Blake shared his own experience to illustrate the problem. When his CAS firm adopted cloud technology early, efficiency gains were 80%. “We couldn’t bill hourly or we’d lose all our revenue,” he said. “We were forced to switch to fixed fees.”

If AI delivers even half those efficiency gains for tax and audit work, firms clinging to hourly billing will face the same reckoning. Except unlike CAS, which was easier to start fresh with new pricing models, tax and audit are where hourly billing is most entrenched.

For firms evaluating technology investments, Chelsea recommends asking three questions:

  1. Does this reduce manual work in a measurable way?
  2. Does it integrate with existing workflows?
  3. Will it free staff to do higher-value work?

If the answers are yes, the investment probably makes sense, even if you can’t calculate a ROI yet.

The Clock Is Ticking

The IPA data paints a clear picture of where the profession stands today. Top performers are executing on fundamentals. They charge appropriately, leverage staff effectively, and embrace offshore teams. Meanwhile, the broader profession remains tied to hourly billing, is moving slowly toward advisory services, and is largely waiting for clearer signals on AI.

For firm leaders, this creates opportunity and urgency. The playbook for better performance isn’t complicated, but the window to adapt might be narrowing. Firms that figure out how to decouple revenue from hours worked will be positioned to benefit from technology investments. Those that don’t may watch their revenue shrink as efficiency gains eat into billable hours.

“I’m crossing my fingers that 2026 we’re going to see some change,” Chelsea said about the billing model evolution. Given what’s at stake, the entire profession should be crossing their fingers with her.

For a deeper dive into these insights, including specific benchmarks on compensation trends, capacity planning, and technology adoption, listen to the full conversation between Blake and Chelsea on the Earmark Podcast. You can earn free NASBA-approved CPE credit for listening.

Your Client Got a W-2 and a 1099 from the Same Company. Here’s How to Handle It

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Your client slides a W-2 and a 1099-NEC across the desk. Both are from the same company for the same tax year.

“Can this be right?” they ask.

Your gut says error. Often, it is. But sometimes that dual reporting is perfectly legitimate. Knowing the difference, and what to do when it’s wrong, separates a competent preparer from the advisor clients can’t afford to lose.

This is the territory Jeremy Wells, EA, CPA, covers in Part 2 of his worker classification series on the Tax in Action podcast. If you caught Part 1, you already know the common law control test for determining whether someone is an employee or contractor. Part 2 goes deeper into the statutory categories that break that simple binary wide open.

Statutory Employees: The Hybrid Category Most Practitioners Overlook

Beyond corporate officers (always employees) and common law employees (determined by the control test), the Internal Revenue Code creates a third category that confuses even experienced practitioners.

IRC Section 3121(d)(3) defines four occupational groups treated as employees for FICA and sometimes FUTA purposes, but not for federal income tax withholding. This hybrid status creates unique reporting requirements you need to understand.

The four groups are:

  1. Agent or commission drivers (FICA + FUTA): Workers distributing meat, vegetables, fruit, bakery products, beverages other than milk, or laundry/dry cleaning services
  2. Full-time life insurance salespersons (FICA only)
  3. Traveling or city salespersons (FICA + FUTA)
  4. Home workers (FICA only): Traditionally textile workers, but now including typing and transcribing services

Jeremy emphasizes an important point. “Home workers” doesn’t mean anyone working from home. It’s a specific statutory category.

To qualify as a statutory employee, these workers must meet three requirements. First, the contract must state the worker will personally perform all the work; no delegation allowed. If they can subcontract, they’re an independent contractor. Second, they can’t have substantial investment in facilities beyond transportation. Owning a delivery truck is fine; investing in other equipment probably disqualifies them. Third, there must be an ongoing work relationship, not a one-time gig.

Here’s where it gets interesting for practitioners.

Statutory employees receive a W-2 with box 15 checked. But that W-2 doesn’t go on page one of the 1040 as wages. Instead, it goes on Schedule C as gross income. The worker can then deduct related business expenses. That’s a huge advantage regular employees lost when the Tax Cuts and Jobs Act eliminated unreimbursed employee business expenses.

But there’s a catch. This income isn’t subject to self-employment tax because FICA was already handled through employer withholding. You must keep this Schedule C completely separate from any self-employment activity. And you can’t use this income to fund a SEP IRA or Solo 401(k).

Full-time life insurance salespersons get special treatment. They’re eligible for certain employee benefits from their companies. The other three statutory employee categories are independent contractors for benefit purposes. But even insurance salespersons can’t use their compensation for self-employed retirement plan contributions. “This is one of those cases where tax law just kind of won’t make sense,” Jeremy notes.

When Workers Are Never Employees, and When They’re Both

The code also designates three categories of workers who are never employees, no matter what.

First, sitter placement services under IRC Section 3506. Someone who only connects babysitters or caregivers with families isn’t the sitter’s employer as long as they’re paid on a fee basis and don’t handle wages. They’re just a third party making introductions.

Second and third are qualified real estate agents and direct sellers, covered by IRC Section 3508. Real estate agents need a license, commission-based pay, and a written contract stating they’re not employees. Jeremy notes this is “almost a universal arrangement” between brokerages and agents. Direct sellers follow similar rules. They sell products outside permanent retail establishments with commission pay and non-employee contracts.

This brings us back to our opening question. Can someone legitimately get both a W-2 and 1099 from the same company?

Yes. Revenue Ruling 58-505 tackled this exact situation. Insurance company workers served as corporate officers (running the company) and independent sales agents (selling policies). The IRS said they were employees for officer duties but contractors for sales activities.

“Imagine a corporate officer who also sits on the board of directors,” Jeremy says, offering a common example. “In fact, this is fairly common for a lot of companies, especially smaller family held companies.” If board service warrants separate compensation, they could receive employee wages for their officer role and contractor pay for director duties.

But dual reporting isn’t always this clean. “I’ve seen cases where the worker did not have the necessary paperwork to the employer in time to be on payroll when that worker had already been working,” Jeremy says. Sometimes a bookkeeper or tax advisor discovers mid-year that someone’s been misclassified all along. “I’ve been in the position where I’m the one having to have this conversation with a client,” he admits.

When you see both forms from one company, ask questions. What services generated each form? The answer determines whether you’re looking at a legitimate dual arrangement or a classification problem that needs fixing.

The Relief Toolkit When Classification Goes Wrong

Classification mistakes happen. Jeremy calls them “inevitable.” Knowing which relief mechanisms to use can mean the difference between a manageable fix and a disaster.

First, understand the employer is ultimately responsible. IRC Sections 3402, 3101, and 3111 require employers to withhold and pay employment taxes. Section 7501 requires holding these amounts in trust, with serious penalties for non-compliance.

There’s one escape valve. Under Section 3402(d), if an employer didn’t withhold income tax but the employee paid it anyway, the employer is off the hook for that amount. But only if the employee actually paid.

IRC Section 3509: Relief for Honest Mistakes

This applies when employers misclassify workers without “intentionally disregarding” their withholding duties. If they filed 1099s, the liability drops to:

  1. 1.5% of wages for federal income tax
  2. 20% of what should have been withheld for FICA

If there are no 1099s, those rates double to 3% and 40%.

The lesson is, always file 1099s for workers you’ve classified as contractors. Even if you’re wrong, it cuts potential liability in half.

Section 3509 won’t help if the employer intentionally ignored the rules, withheld income tax but not FICA, or if the worker is a statutory employee.

In Mescalero Apache Tribe v. Commissioner (2017), the Tax Court ruled the IRS must share taxpayer information with employers in these cases, letting them verify whether workers paid taxes on their 1099 income.

Section 530 Relief: Wiping the Slate Clean

Section 530 of the Revenue Act of 1978 can eliminate employment tax liability entirely if three requirements are met:

  1. Reporting consistency: Timely filed 1099s
  2. Substantive consistency: Didn’t treat similar workers as employees
  3. Reasonable basis: Relied on prior audit, court precedent, or industry practice

The consistency test looks at actual duties rather than job titles. If you treat one delivery driver as an employee and another as a contractor, you’ve got a problem.

Worker-Side Relief

Workers can file Form 8919 to report their share of uncollected Social Security and Medicare taxes. They’ll need a reason code:

  • A: Received SS-8 determination saying they’re an employee
  • C: Other IRS correspondence confirming employee status
  • G: Filed SS-8, waiting for response
  • H: Received both W-2 and 1099 from same firm

Jeremy offers practical wisdom here. “I’ve actually been involved in situations where I thought my client really should have been treated as an employee. I told them about that, and they were perfectly fine going along with the status quo.” Your job is to inform, not insist. It’s ultimately the taxpayer’s decision.

Form SS-8 requests an official IRS determination. Either party can file it. The IRS gets both sides’ perspectives, then issues either a binding determination or non-binding advisory letter. This isn’t a tax return examination, so normal appeal rights don’t apply, though you can submit additional information for reconsideration.

Your Action Plan

Worker classification isn’t binary. Treating it that way gets practitioners and their clients in trouble.

Key takeaways from Jeremy:

  • Statutory employees live in a genuine hybrid space. W-2s that report on Schedule C. Business expense deductions that regular employees can’t claim. But keep that Schedule C separate from self-employment income.
  • Some workers are contractors by law. If real estate agents, direct sellers, and sitter placement services meet the statutory requirements, the common law test doesn’t matter.
  • Dual status is real. When you see both forms from one company, investigate before assuming error.
  • Always file the 1099. Getting classification wrong but reporting right cuts liability in half. Skip the 1099, and you double the pain.
  • Know your relief options. Section 3509 for honest mistakes. Section 530 when there’s reasonable basis. Form 8919 for workers needing FICA credit. Form SS-8 when you need the IRS to decide.

These aren’t rare edge cases. They’re the messy realities that walk through your door regularly. Having command of both the categories and corrections is what makes you indispensable.

For the full technical detail and Jeremy’ classroom-tested explanations, listen to the complete episode. And if you haven’t already, go back to Part 1 for the foundational common law control test. Together, these episodes give you the information you need to answer any worker classification question your practice will face.