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Blake Oliver

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.

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.

Work Smarter, Not Harder: The 3.3 Rule for Accountants

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Want to 2x your productivity while working way less? Sounds like a pipe dream, right? According to CPA John Briggs, it’s not just possible – it’s the key to thriving in accounting.

I recently chatted with John on my Earmark Podcast, and he explained his game-changing “3.3 Rule.” This approach challenges the traditional 70-hour workweek and billable hours model that’s been burning out accountants for decades.

John says the 3.3 Rule is the secret sauce for boosting efficiency, reclaiming work-life balance, and improving profitability.

So, what exactly is this magical rule? And how can you implement it in your firm? Let’s dive in.

Understanding the 3.3 Rule

The 3.3 Rule is based on cognitive science research showing that the average office worker is only truly productive for—get this—2 hours and 53 minutes in a typical 8-hour workday.

John takes advantage of this natural productivity pattern by structuring work in focused bursts of up to three hours, followed by strategic recovery periods.

As John puts it, “The rule, simply stated, is the most efficient workday consists of working up to three hours at a time, followed by a 30% recovery period.” So, if you crush it for three hours straight, you’ve earned yourself a full hour of downtime before diving back in.

The beauty of the 3.3 Rule is that it adapts to different work styles:

  1. 🏃‍♂️ “Sprinters” who work in short, intense bursts (think 60 minutes of work, 20 minutes break)
  2. 🚶‍♂️ “Joggers” who can maintain focus for 1.5 to 2 hours
  3. 🧘‍♂️ “Zen masters” who can work for the entire three hours straight

The key is to know your rhythm and match your work style to the task at hand. As John says, “If I feel like I’m losing focus after an hour, that’s totally fine.” It’s all about working smarter, not harder.

Implementing the 3.3 Rule

So you’re sold on the 3.3 Rule. But how do you make it happen in your firm?

First things first: mindset shift. John emphasizes the importance of self-awareness. “If I feel like I’m losing focus after an hour, that’s totally fine,” he says. The key is to match your work style to the task at hand.

By implementing this methodology, John’s firm has maintained an average of just 42 hours per week during tax season for the past three years. You read that right – 42 hours. In busy season.

So, what’s the secret? Two words: value pricing.

John advocates for setting prices based on the value provided to clients, not the time spent. “I don’t necessarily think billable hours is actually a great way to bill in general. I like value pricing or fixed pricing,” he says.

Value pricing complements the 3.3 rule by:

  1. 💸 Allowing firms to benefit financially from increased productivity
  2. 🙅‍♂️ Removing the pressure to “look busy” during less productive hours
  3. 🎯 Focusing on outcomes for clients rather than inputs from accountants

But wait, you might be thinking – how do you measure productivity without billable hours?

John’s firm uses job descriptions and result-based metrics. For example, they might track the number of tax returns completed or the complexity of clients managed. They use a weighting system where complex clients are equivalent to multiple simple clients, ensuring fair workload distribution and accurate productivity measurement.

Implementing the 3.3 Rule isn’t always easy. It requires a fundamental shift in how we think about work. But the payoff? Happier staff, better work, and a healthier bottom line.

What Happened at John’s Firm

What’s it like to implement the 3.3 Rule? John shares his journey of transformation:

“When I started my firm, I said, ‘I refuse to put my team through the same crap that I had dealt with,’” he recalls. For John, that meant hiring more staff to ensure everyone could work at about 80% capacity, allowing room for those crucial recovery periods.

And the benefits? They go way beyond just happier employees (though that’s a huge win in my book!).

John notes, “When you work, you work.” Those focused work periods lead to higher productivity and fewer errors. Plus, this approach helps retain top talent in an industry where competition for skilled professionals is fierce.

The 3.3 Rule doesn’t just benefit your team – it benefits your clients, too. You’re delivering real value by focusing on outcomes rather than hours logged. And when you’re not stuck in the weeds of busy work, you have more bandwidth for the high-level strategy and advisory work clients crave.

Of course, implementing the 3.3 Rule isn’t always a cakewalk. John recalls, “When I introduced it to my team, they were weirded out. They’re like, ‘Is this a trick to get me fired because you’re going to catch me not working?'”

Leadership buy-in and clear communication are crucial to overcoming these challenges. You’ve got to walk the walk and lead by example.

The 3.3 Rule, combined with value pricing, offers a blueprint for firms to align their work practices with human cognitive limitations and client needs. By focusing on outcomes rather than hours worked, firms can achieve the holy trinity: increased productivity, improved work-life balance, and enhanced profitability.

It’s a win-win-win for accountants, their firms, and their clients. And in an industry long overdue for a shake-up, that’s something to get excited about.

Get all the details by listening to this episode of the Earmark Podcast.

How an SEC Internship Led to a Thriving Career In Forensic Accounting

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Think working at the Big Four is the only way to make it big in accounting? Think again. Cody Turley’s story might just change your perspective.

On a bonus episode of The Accounting Podcast, Cody Turley, a CPA and CFE currently working at the SEC, challenges the notion that Big Four experience is the only route to success in accounting. He shares his experience to demonstrate that working at top organizations in industry or government can provide equally valuable experience and open doors.

The Power of Non-Traditional Accounting Internships

Cody’s path began with an unconventional internship at the SEC. And it wasn’t that difficult to get.

“So I really liked the show Suits,” Cody recalls. “And at one point they get in trouble with the SEC. And that just kind of peaked my mind about forensics. I should go and look at what that is. And I just applied online, and I got a call back and that’s it. That’s how I got that internship.”

Cody’s internship at the SEC exposed him to high-level tasks and responsibilities, such as reviewing complaints against companies of all sizes. The SEC’s name recognition also helped open doors for Cody in his subsequent career, even years after the internship.

A Government Job Doesn’t Mean Slow Advancement

After the SEC internship, Cody landed a job at the Arizona Corporation Commission. In his mid-20s, he was leading a forensic accounting team. “A year of experience, and I’m testifying, which just doesn’t happen at [public accounting] firms,” he shares.

Leading a team of more experienced employees was challenging but rewarding for Cody, as it provided opportunities to learn from their experience while guiding the team. His age did not hinder his ability to lead effectively, demonstrating that leadership skills and expertise can be developed early in one’s career, even in a government role.

Navigating the Complexities of Government Roles

Cody then returned to the SEC. His current role involves investigating offering frauds such as Ponzi schemes, tracing assets, and reviewing audited financial statements to identify errors. He collaborates with auditors and companies to investigate potential issues, often through subpoenas and interviews.

One of the challenges Cody faces in his role is interacting with large accounting firms. However, he emphasizes the importance of focusing on the learning process and gathering information rather than trying to be “better” than the firms in every instance.

How to Land a Government Accounting Role

For accounting professionals interested in exploring government roles, Cody offers some practical advice based on his own experience. 

He suggests applying online, as hiring tends to be more merit-based than the private sector. This levels the playing field for candidates who may not have extensive industry connections but possess the necessary qualifications and skills.

Cody also highlights the benefits of working in smaller teams within government agencies. These teams can allow for rapid skill development and increased responsibility compared to private accounting firms’ more structured and hierarchical environments.

A World of Possibilities: Future Career Options

Cody’s government background has created many potential future paths, including moving up in government, transitioning to state-level roles, or pursuing opportunities like internal audit at major corporations. His skills are highly transferable and sought-after.

“The biggest company I’ve received an offer from was Disney at one point to be on one of their internal investigation teams,” Cody reveals. This highlights the value that the private sector places on the skills and experiences gained through government accounting roles. His background in investigating financial crimes and navigating complex regulatory environments has equipped him with a unique skill set that is highly sought after by businesses looking to strengthen their internal audit and compliance functions.

The Bottom Line: Finding Your Own Fulfilling Path

Cody’s experience shows that there is no one-size-fits-all approach to building a successful and fulfilling career in accounting. While the Big Four path may be the right choice for some accounting majors, future CPAs need to explore the full range of options available and find the path that aligns with their unique interests, skills, and goals.

Whether it’s pursuing government roles, seeking out industry positions at top companies, or exploring specialized fields like forensic accounting, there are countless ways to build a rewarding career in this dynamic field. The key is to remain open to new opportunities, seek diverse experiences, and never stop learning and growing.

So, if you’re ready to take control of your accounting career and explore the exciting possibilities that await you, listen to the full podcast episode featuring Cody Turley. His insights and experiences are sure to inspire you and provide valuable guidance as you navigate your professional journey.

The Two Metrics That Can Double Your Accounting Firm’s Value in One Year, According to a Top Broker

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What if you could double your accounting firm’s value in a single year? Brannon Poe, a broker who’s handled over 500 firm sales, says it’s possible with the right strategic changes. 

In a recent podcast interview, Poe revealed that firms of any size can transform to maximize value and position themselves as attractive acquisitions by understanding what buyers want. The secret, he says, lies in mastering two key metrics.

We’ll unpack Poe’s road-tested insights on the levers of firm value and see how one traditional practice achieved a staggering valuation increase with clever strategic shifts. Whether you aim to sell soon or build a more valuable business, Poe’s wisdom will show you the way.

The Two Metrics That Move the Valuation Needle

Want to supercharge your accounting firm’s value? Brannon Poe says zeroing in on two key metrics can have an outsized impact.

1. Cash Flow to Owner  

“I always tell people, I’ve got two metrics. If you focus on these two metrics alone, you will increase the value of your firm,” Poe explains. “Cash flow to owner is probably number one.”

Your bullseye? For firms under $1.5 million in revenue, pushing cash flow to 50% or more of revenue. To calculate it, add your profit, owner compensation, and owner perks. For example, if your firm earns $1 million in revenue and your cash flow is $500,000, you’re right on target. The higher your cash flow margin, the more attractive your firm looks to buyers.

2. Owner Hours

“Owner hours is the other thing,” says Poe. “If you want the owner hours to be lower, lower is better – at least under 2000. But I have seen very well-systematized virtual firms get into the 500 mark for an owner. So you’re creating a real business at that point.” 

Minimizing owner hours reduces key-person risk and makes your firm more transferable. Buyers hesitate to acquire firms dependent on grueling owner hours, but a firm that runs smoothly with minimal owner involvement garners premium offers. 

Poe notes that adopting subscription pricing can drive progress on both fronts. Steady, recurring revenue and systematized work help boost margins while trimming owner hours. 

By lasering in on lifting cash flow and reducing owner involvement, firms of any size can transform into highly valuable, transferable assets. Next, we’ll see how one traditional firm put these principles into action to stunning effect.

From Surviving to Thriving: A Case Study in Strategic Transformation

The story of one husband-wife firm perfectly illustrates how powerful Brannon Poe’s value-boosting principles can be – even for small, traditional practices. 

Starting Point: A Traditional Firm in Need of Change

When the owners first approached Poe, they ran a classic mom-and-pop shop generating $1.2 million in annual revenue. Feeling overworked, underpaid, and unsure if they could keep going, they turned to Poe for help.

The Transformation Game Plan

Working with Poe, the owners implemented three key changes:

  1. Fired unprofitable clients: To free up much-needed capacity, the firm shed about 100 clients that drained time and resources but delivered minimal profits. 
  2. Raised prices: As Poe puts it, “If you don’t like your practice, keep increasing the prices until you like your practice.”
  3. Embraced subscription pricing: Transitioning clients, especially bookkeeping customers, to a recurring subscription model provided a steady, profitable revenue base.
  4. Launched advisory services: The firm created packaged advisory offerings and bundled them into subscription plans, enabling premium pricing.

Stunning Results in Just One Year  

The transformation was dramatic and swift. In just 12 months, the firm:

  • Increased annual revenue to $1.6-1.7 million
  • Expanded margins as new recurring revenue flowed to the bottom line  
  • Reduced owner hours while increasing employee pay
  • Landed an all-cash deal at their full $2 million asking price

The Power of Strategic Transformation

This firm’s journey embodies the incredible potential of Poe’s approach. By lasering in on profitability, recurring revenue, and owner efficiency, they morphed from a floundering traditional practice into a high-value strategic asset – in just one year. 

The Roadmap to a Firm That Works for You

This story powerfully illustrates that transforming your firm doesn’t have to take decades. With relentless focus on the right drivers, even tiny traditional practices can utterly rewrite their futures in under a year.

The key is strategically designing your transformation around buyers’ wants: powerhouse profitability with minimized owner dependence. Adopting the recurring revenue model, shedding margin-draining clients, and productizing premium advisory services are shortcuts for getting there faster.

Poe envisions a future where firm owners don’t have to choose between a profitable practice and a livable life. By architecting businesses that thrive without their constant oversight, owners can boost their bottom lines, free their schedules, and create thriving firms that are valuable today – and sellable tomorrow.

If you’re ready to build a practice that funds your ideal lifestyle now while setting you up for a profitable exit whenever you’re ready, the roadmap is clear – and it starts with learning everything you can from the best in the business. Take the first step now by listening to the full interview with Brannon Poe.