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David Leary

From Data Entry Nightmare to Automated Workflow in One Demo Session

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You’re ten days away from the 1099 and W-2 deadline, and you’re still wrestling with QuickBooks, fielding a flood of W-9 request emails, and dreading the inevitable data entry marathon. Sound familiar?

You’re not the only one. As David Leary admitted during a recent Earmark Expo webinar, “I’ve been procrastinating on issuing 1099s. It’s just not a great experience.” He described the dual frustration that many accountants know all too well. “It’s annoying work on both sides. I need to do my 1099s, but then, as a business that receives them, I get a slew of emails from other companies asking for a W-9.”

In the webinar, David and co-host Blake Oliver took TaxBandits for a test drive with Nikita Sullivent, the company’s Support Specialist, to explore how this IRS-authorized e-file platform handles over 70 tax forms. The live demo included the authentic technical hiccups we all face with real-world software and shared practical solutions for the compliance challenges that hit every January.

Getting your data in: from hours to minutes

Manual data entry for hundreds of 1099s is a bottleneck that keeps you from serving more clients. TaxBandits tackles this with multiple import options that meet you where your data lives.

The platform offers three main paths for getting data in. You can:

  1. Enter forms manually one at a time (perfect for that forgotten contractor),
  2. Use bulk upload templates for larger volumes, or
  3. Connect directly with accounting software (current integrations include QuickBooks Online, Xero, Sage Intacct, and Zoho, with Karbon integration coming soon).

The bulk upload process stands out for its simplicity. As Nikita demonstrated, “You’re reviewing the columns at the top and inputting the data beneath them. Once we have all of that data input, we’ll just download it as a CSV and drag and drop it in.”

David particularly appreciated one detail. “I like how on your templates, in the header of each column, you give the instructions for the values you accept in that field.” No more guessing whether to use “CA” or “California,” or whether TINs need dashes.

The workflow breaks down like this:

  1. Download the Excel template with clear column headers
  2. Fill in your data following the built-in instructions for each field
  3. Drag and drop the file into TaxBandits
  4. Review the automatic error check that flags issues like missing digits in EINs or duplicate records
  5. Fix any problems by either editing in the app or exporting just the error records for correction

For QuickBooks users wondering about the process, David confirmed you can export your vendor list, filter for 1099 vendors, and use the “upload your own file” feature. The first time requires mapping your fields to TaxBandits’ fields, but that mapping saves for future uploads.

One webinar attendee asked whether they needed to re-enter last year’s payees. “Absolutely not,” Nikita answered. “Everything stays in your account and rolls over year after year.” When you import this year’s data and the system finds a duplicate, you can either delete it or update the existing record with any changes.

The platform also distinguishes between importing only recipient data and importing both payer and recipient data. If you maintain TaxBandits throughout the year, importing just recipients during filing season works best since you’ve already set up your payers. But if you’re adding everything at once, the combined import saves steps.

With data flowing smoothly into the system, the next challenge is ensuring that data won’t bounce back from the IRS.

TIN verification: the new compliance reality

Getting data into the system efficiently matters only if it passes IRS validation. The agency’s transition from the FIRE system to IRIS (Information Returns Intake System) brings stricter requirements that every accountant needs to understand.

“The IRIS system is going to be far stricter on TIN matching than the FIRE system was,” Nikita warns. “Which means if the SSN, the EIN, the TIN, and the recipient name don’t identically match the IRS database, it’s going to kick the form back to you as accepted with errors, and you have to file a correction.”

The keyword is “identically.” A contractor who goes by “Mike” but whose Social Security card reads “Michael” could trigger a rejection. Even punctuation differences in business names can cause problems.

TaxBandits builds TIN verification into multiple touchpoints:

  • When collecting W-9s throughout the year
  • When adding recipients to your address book
  • During the 1099 workflow as a final check

The smart approach starts early. “When you get a W-9, when you get a new employee or contractor, you go ahead and do the TIN matching on that prior to the filing season,” Nikita advised. This prevents last-minute surprises when deadlines loom.

Verification typically returns within two to four hours during normal periods. But during peak season “it can be up to 24 hours,” Nikita warned. If you’re verifying TINs within the 1099 workflow itself, the system waits for results before transmitting, which is potentially problematic if you’re filing on January 31st.

For those worried about the cost of corrections, TaxBandits offers some protection. Their “TaxBandits Commitment” covers correction filings at no additional charge. But even free corrections cost you time and stress.

The platform also streamlines W-9 collection. Instead of chasing paperwork, you can send electronic W-9 requests. Recipients complete them online, and the data flows directly into your TaxBandits account, ready for immediate TIN verification if desired.

Once your forms are prepared and verified, you still need to get them into recipients’ hands compliantly.

Distribution flexibility that actually works

The old choice between hours at the post office or forcing everyone into electronic delivery is over. Modern distribution needs flexibility, and TaxBandits delivers exactly that.

“Everything is very customizable to your needs,” Nikita explained when asked about mixing delivery methods. “You can choose some postal mail, some online access, and some want both.”

The three distribution paths each serve different needs:

  • USPS postal mailing handled entirely by TaxBandits
  • Electronic recipient portal requiring just an email address
  • Both options for recipients who want backup

The electronic portal solves a critical compliance issue. The IRS requires formal consent for electronic delivery, so you can’t just email a PDF. TaxBandits automates this. Recipients receive a secure link, enter a PIN for verification, and provide documented consent.

If someone ignores that email, the system tracks everything. You can see who consented, who declined, and who never responded and then handle postal delivery for the holdouts.

For returning recipients, the portal builds value over time. “If you file for that same recipient next year, they’ll use the same link, and they’ll access all of the documents from the same portal,” Nikita noted. Recipients get their own organized tax document archive without any extra work from you.

State filing adds another compliance layer, but TaxBandits simplifies this, too. The platform tells you exactly what each state requires:

  • States requiring direct filing (you handle separately)
  • Combined Federal/State Filing participants (automatic forwarding)
  • States requiring no 1099 filing

Throughout the process, you get real-time status updates so you can see which forms were transmitted to, received by, and accepted by the agency. For postal mail, statuses are submitted to USPS and en route to the recipient. When a client claims they never received their form, you have documentation. After transmission, watermarks disappear from your copies, and you can reprint professional versions anytime.

For firms with multiple preparers, the platform offers even more control through team management features.

Scaling with teams and support

Larger firms need more than just bulk upload; they need workflow management. TaxBandits’ team management features let you maintain control while delegating the actual work.

The system offers three permission levels:

  1. No roles: Any team member can prepare, approve, and transmit
  2. Two roles: Preparers create forms, approvers review and transmit
  3. Three roles: Preparers create, approvers review, transmitters handle payment and filing

You can also create location-based groups. Nikita shared an example. “Say you have a group in Indiana and a group in Tennessee. Anytime you add a new payer and assign them to the Tennessee group, then all of the team members included in the Tennessee group have access to that payer.”

Support is critical when things get complex. During busy season, TaxBandits extends hours to 8 a.m. to 8 p.m. Eastern. They offer phone, email, and chat support, plus an AI assistant that pulls from both their knowledge base and IRS guidelines.

The platform’s YouTube channel provides step-by-step videos for specific workflows. For Sage Intacct users who asked about integration, Nikita recommended checking their channel for detailed walkthroughs showing the complete process from Sage to TaxBandits.

Pricing works on a credits system with bulk discounts. Buy more credits upfront, pay less per form—and credits never expire. As Nikita confirmed when asked about rollover, “Your credits will never expire. So if you want to purchase for the next five years now and get the best price we can give you, go for it.”

Making next year easier starts now

The strategies demonstrated in this webinar show a fundamentally different approach to information returns. TaxBandits treats compliance as a year-round process rather than a January panic.

The IRS’s push toward e-filing mandates and stricter validation isn’t slowing down. The IRIS system is just the beginning of modernization efforts that will continue tightening requirements. But the webinar demonstrated real workflows you can adopt immediately, from template imports to electronic W-9 collection to role-based team permissions.

Ready to transform your 1099 and W-2 workflow? Watch the full Earmark Expo webinar to see TaxBandits in action, including the complete demo of bulk uploads, error checking, and team management features. The platform offers over 70 tax forms beyond just 1099s and W-2s, making it a comprehensive solution for year-round compliance needs.

The Auditors Got Red Flags About $95 Million in Missing Funds and Signed Off Anyway

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In the last episode of 2025 of The Accounting Podcast, hosts Blake Oliver and David Leary kicked off the conversation with an unexpected problem: America is running out of pennies. David’s friend owns sandwich shops in Tucson and literally can’t get pennies from the bank anymore. Businesses are being forced to round to the nearest nickel, and point-of-sale systems are scrambling to adapt.

“Square admits one fifth of all the transactions on Square are still paid in cash,” David noted, highlighting how this seemingly small issue affects millions of daily transactions. The government claims there are 300 billion pennies in circulation, but as David pointed out, “Obviously this isn’t true because businesses all over America do not have pennies to use in transactions.”

But the penny shortage was just the warm-up. The hosts quickly moved to a much bigger story about missing money: $95 million vanished at Evolve Bank, yet the auditors still signed off on clean financial statements.

$95 Million Went Missing While Auditors Said Everything Was Fine

Blake followed the Evolve Bank story for years, and recent Freedom of Information Act requests uncovered stunning details about what the auditors knew and ignored.

Evolve Bank is a chartered bank that worked with Synapse, a “banking as a service” company that wasn’t a bank itself but managed the technology connecting consumer apps like Yotta and Juno to actual banks. When you used these apps, you’d see your balance, but you had no idea which bank actually held your money. Synapse managed all those details.

“Everything worked great until April 2024, when Synapse filed for chapter 11 bankruptcy and shut down operations,” Blake explained. Suddenly, the banks and the apps couldn’t figure out where customer money actually was. Evolve froze withdrawals from thousands of accounts, leaving people unable to access their own money for months.

When banks examined Synapse’s records, they found massive problems. Between $65 and $95 million in customer funds couldn’t be traced to any bank. “Your Juno account might say $10,000, and the bank that’s supposed to have the $10,000 says, ‘We don’t have it,’” Blake explained.

The most damaging revelation came from the 2023 audit. When Crowe, Evolve’s auditor at the time, asked Synapse to confirm cash balances, the response should have triggered immediate action. Evolve listed 113 accounts, but Synapse was missing 29 accounts from daily data feeds. Synapse’s general counsel asked to discuss the discrepancies with Evolve’s leadership.

Evolve never responded to that request, yet Crowe still issued a clean audit opinion.

“Ninety five million is a lot of money,” Blake observed. “It would be 6% to 7% of Evolve’s total assets, likely over 100% of their annual net income, a double digit percentage of equity capital in some years. And typically, materiality would be 1 or 2% of assets.”

Are SOC 2 Reports Worthless?

The Evolve disaster led the hosts to question other compliance frameworks, particularly SOC certifications that companies display as badges of trustworthiness.

“My guess is Synapse had their SOC 2, because it’s not that hard to get a SOC 2,” Blake said. “According to my understanding, it’s really just a lot of documentation of the controls. But there’s not necessarily any confirmation that those controls are being followed.”

“They paid the money and got the badge for their website,” David observed. 

The hosts also discussed how a New Jersey accounting firm, Sax, took 18 months to inform nearly 250,000 people about a data breach. The firm claimed it followed standard procedures and saw no evidence the stolen data was misused, but for 18 months, affected individuals had no idea their personal information might be compromised.

“People could be using your stolen identity fraudulently 18 months before the accounting firm lets you know,” David said.

The problem is that while firms must have Written Information Security Plans (WISPs), they’re not necessarily legally required to execute them properly. “We focus on the wrong thing,” David argued. “We focus on having a WISP, not actually executing the WISP.”

Partners Don’t Know What Partners Make

In a lighter but equally revealing segment, Blake shared his favorite LinkedIn post of the year from Chase Birky, CEO and Co-founder of Dark Horse CPAs. Chase shared that almost a third of partners don’t know how much partners make at their own firms.

“How do CPAs not know how much they make? Isn’t that sort of what we do?” Chase wrote. The problem stems from a lack of transparency at many firms where partner compensation is calculated in a “black box” and communicated well after the fact. This secrecy is at least part of the reason talent leaves public accounting.

“I left because I got offered a job in tech that paid a lot more,” Blake said, sharing his own experience. “I didn’t know how much a partner made, and nobody could tell me what the path looked like.”

Should Companies Report Twice a Year Instead of Four Times?

The hosts also debated President Trump’s suggestion that U.S. companies should move from quarterly to semi-annual reporting, like much of the rest of the world.

Research from the UK showed that changing reporting frequency had “virtually no impact on companies’ internal investment decisions.” Studies also found that quarterly reporting creates “noisier data” that benefits sophisticated investors while hurting everyday investors.

“We’re always talking about how we have too much work to do in accounting and we’re pressed for time,” Blake said. “What better way to give ourselves more time than to make it two times a year instead of four?”

David wondered if less frequent reporting might reduce the pressure to play accounting games. “Monthly reporting probably puts pressure on people to sidestep the rules because it’s so fast and you have to perform.”

Looking Ahead to 2026

The hosts wrapped up with predictions for the coming year. David was skeptical about AI transforming bookkeeping. “I don’t see me doing bookkeeping at the end of 2026 any differently than I did in 2025, 2024, 2023, or 2022.”

Blake disagreed, pointing to new AI browsers that can actually navigate accounting software and complete tasks. “The time is doubling every seven months,” he explained. “Within the next year, we’re going to see AI able to complete tasks that take 15 to 20 minutes with 100% accuracy.”

David also predicted that OpenAI would strike a multi-million dollar deal with the AICPA, that at least two AI companies would fail, and, in his easiest prediction, “Intuit will tick off accountants in 2026.”

The episode covered far more ground than can be captured here, from the technical details of audit failures to the future of AI in accounting. For the complete discussion and all the insights Blake and David shared in their final episode of 2025, listen to the full episode of The Accounting Podcast.

Two-Thirds of Accounting Staff Hate Private Equity—But Partners Love It

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Two-thirds of partners at private equity-backed accounting firms say they’re satisfied with their arrangements. But ask the staff actually doing the work, and you’ll hear a different story. Over half are dissatisfied, with one director calling the situation “a dumpster fire.”

This stark disconnect emerged from an Accounting Today survey discussed on The Accounting Podcast by hosts Blake Oliver and David Leary. The episode also revealed a disconnect in pricing. Tax preparers charge an average of just $280 for a basic 1040 (CPAs) or $228 (enrolled agents). These numbers had David asking incredulously, “Where are these people? I’ve never been quoted this low of a price.”

The Private Equity “Dumpster Fire”

The numbers from Accounting Today’s survey reveal a profession divided. Among partners and owners at PE-backed firms, 67% report satisfaction (40% very satisfied and 27% somewhat satisfied). But look at staff responses and it’s almost a perfect mirror image: 52% are either somewhat dissatisfied or very dissatisfied.

The anonymous comments from survey respondents paint an even bleaker picture. “It is a dumpster fire,” said one director at a large firm. “Low morale, people leaving, bonuses cut, pay raises eliminated or lowered.”

Another director at a very large firm agreed. “It’s horrible and dysfunctional. Losing clients, staff leaving, and partners pay more attention to their bank account than taking care of staff. Most partners are counting the days until they can leave with their money in hand.”

Perhaps most concerning for the profession’s future, 64% of respondents believe private equity will have a negative impact on the integrity and independence of public accounting firms. Another 56% think clients will suffer negative consequences.

“The industry will take a hit and the clients will take a hit,” David noted. “That’s not going to bode well for everybody else.”

It’s worth noting that fewer than 400 of the 44,000 US CPA firms have taken private equity investment, so less than 1%. But these tend to be larger, high-performing practices, and the trend only started accelerating around 2022.

Tax Preparers Leave Money on the Table

While PE-backed firms wrestle with cultural upheaval, smaller practitioners face a different challenge: chronic underpricing. The National Association of Tax Professionals’ 2025 survey reveals CPAs charge an average of just $280 for a basic 1040. Enrolled agents charge even less at $228, while non-credentialed preparers average $185.

These numbers shocked David. “Since I stopped doing my own taxes and pay an accounting firm to do them, it’s $1,200 to $1,300 a return. I’ve never been quoted this low of a price.”

Still, the survey contained some encouraging news. When preparers raise fees, clients rarely leave. Melissa Bowman, an EA in Ohio, increased prices 12-20% across the board twice since 2020, and “not one client left because of pricing.”

“If not one client leaves after you implement a substantial price increase like that, you’re still underpriced,” Blake pointed out.

One particularly surprising finding is that 18% of preparers don’t charge extra for state returns. “TurboTax has trained 45 million taxpayers over the last 30 years that you have to pay extra to get your state return done,” David noted. “The fact that almost 20% don’t charge for doing the state return seems crazy to me.”

Billion-Dollar Audit Relationships Raise Independence Questions

The independence concerns raised by private equity pale next to the decades-long, billion-dollar relationships between the Big Four and their largest clients. Deloitte has audited Microsoft since 1986, collecting $78 million in 2025 alone.

“This is like a $2 billion relationship between Deloitte and Microsoft over the last 40 years,” David calculated. “With that much money involved, the motivations just can’t be aligned with the public.”

The situation gets more complex when you consider that these firms also sell consulting services. “Doesn’t Deloitte sell Microsoft consulting type services and they implement Microsoft Copilot AI type things, but they also audit Microsoft?” David asked.

Blake acknowledged the concern. “These firms are audit firms, but they’re also consulting firms. And consulting teams are some of the biggest resellers now of the technology their clients develop.”

Change may be coming whether firms want it or not. With Microsoft cutting 15,000 jobs in 2025, David predicts inevitable pressure on audit fees. “They’ll go back to their auditor and say, ‘we don’t want to pay this much for our audit. We want you to use AI,’” David predicts.

What’s Next for the Profession?

The AICPA is seeking comments on ethics rules updates for alternative practice structures—the arrangements that enable private equity investment. But there’s a catch. Despite announcing the comment period weeks ago, the actual exposure draft won’t be available until December 29.

“Today is the 23rd,” David pointed out. “If it’s not done today, when are they doing this? Christmas Eve, Christmas Day?”

David predicted the process could drag on. “This could take a decade,” he suggested.

The accounting profession is under pressure from private equity reshaping firm culture, chronic underpricing in tax prep, and billion-dollar audit relationships raising independence questions. For practitioners, there is a clear need to raise prices and watch the PE developments carefully.

For the complete discussion, including a story about a Scottish police officer’s heroic retrieval of evidence from a toilet and concerns about IRS readiness for tax season, listen to the full episode of The Accounting Podcast.

Two Stories That Expose How Accounting Credentials Get Weaponized for Fraud

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What happens when professionals look the other way? In this episode of The Accounting Podcast, Blake Oliver and David Leary dive into two jaw-dropping cases that show what happens when accounting credentials get tangled up with crime and fraud.

First, they discuss a Wall Street Journal investigation into Jeffrey Epstein’s inner circle that somehow flew under the radar until recently. Then there’s the startup founder who allegedly blew through $2.2 million in investor money on her wedding while pretending to be a CPA. Both stories raise serious questions about trust and accountability.

Epstein’s Financial Fixers

“Epstein wasn’t a one man operation,” Blake reads from the Wall Street Journal investigation. The convicted sex offender had help from his CPA, Richard Kahn, and lawyer, Darren Indyke, who kept his financial machine running for years.

The story starts with a letter Kahn wrote in 2016. He described a “very healthy marriage” between two women, saying he’d personally witnessed their passion for each other during meetings. He even had it notarized. But the marriage was fake. Epstein had pressured an American woman he’d abused into marrying an Eastern European woman to help with immigration papers. Kahn’s letter gave the scheme legitimacy.

David was baffled. “Has any other CPA on the planet been asked to write letters like this before for an immigration proceeding?”

Good question. This wasn’t normal accounting work.

Kahn became Epstein’s in-house accountant in 2005 after Epstein tried out three candidates from a recruiting firm. By 2008, Kahn and another accountant had set up HBR Associates, a firm with only one client: Jeffrey Epstein. Their office was a one-bedroom apartment in Epstein’s building, right across the hall from lawyer Indyke’s office.

Both men provided way more than typical professional services. They managed payments to women in Epstein’s orbit, covering doctor’s visits and rent. When banks cut Epstein off, they found new places to open accounts. They withdrew cash in amounts under $10,000 to avoid reporting requirements.

The money tells its own story. Between 2011 and 2019, Epstein paid Indyke over $16 million and Kahn more than $10 million.

“That’s a lot of money,” Blake notes. “That’s more money than you would expect to receive for those kinds of services.”

Both men claim they didn’t know about Epstein’s crimes. They say they never witnessed abuse and no one reported it to them. But neither was questioned by federal authorities during the Epstein-Maxwell investigation.

“That is insane to me,” David says. “How do you not question the CPA and the lawyer? That’s the inner circle.”

“This is the sort of thing that makes me think the conspiracy theorists are right,” Blake responds. “It just doesn’t compute.”

Now, Kahn and Indyke control Epstein’s estate as co-executors, managing assets worth over $100 million. They’re also beneficiaries of a trust that will collect whatever’s left after all claims are settled—potentially tens of millions each.

The Fake CPA’s $13 Million Con

The second story hits closer to home for the accounting profession. Shiloh Luckey founded a startup called ComplYant App, Inc. in 2019, positioning it as a tax compliance app for small businesses. She raised $13 million from venture capitalists, including a firm co-founded by David Sacks, cohost of the All-In podcast.

Luckey told investors the company was earning $250,000 in monthly recurring revenue. The actual number was $250. Not thousands. Just $250. The company averaged fewer than four new subscribers per month despite having about 50 employees.

Luckey allegedly represented herself as a CPA even though she wasn’t one. And according to the FBI and SEC, she spent $2.2 million of investor money on personal stuff, including a Caribbean wedding, a house, Super Bowl tickets, and luxury trips to Aspen, Miami Beach, Turks and Caicos, and Lisbon.

When ComplYant shut down in 2023, those 50 employees lost their jobs. They waited seven weeks for final paychecks and discovered their 401(k) contributions were missing.

The kicker? Luckey is currently on TikTok giving financial advice to nearly 24,000 followers. She’s even launched a new startup called HabitLoop, described as a digital financial assistant.

Other News From the Episode

The hosts also covered several other developments in accounting and finance, including:

  • Cannabis businesses can finally deduct regular business expenses now that marijuana is being reclassified as a Schedule 3 drug. Previously, they faced effective tax rates of 60-80% because they couldn’t deduct basic costs like rent and payroll.
  • Trump announced a new Tech Force that will hire 1,000 people to build AI infrastructure for the federal government, working with companies like Microsoft and Amazon.
  • Intuit partnered with Circle to integrate stablecoin payments into QuickBooks, potentially cutting out traditional banking rails for payments.
  • The IRS Criminal Investigations unit identified over $10 billion in financial crimes this year, including $4.5 billion in tax fraud.
  • A lawyer is suing the IRS to recognize her golden retriever as a tax dependent, arguing the dog meets every requirement except being human.

The Bigger Picture

What’s striking about both main stories is how they expose vulnerabilities in the accounting profession’s trust-based system. In one case, a real CPA operated at the center of a criminal enterprise while claiming ignorance. In the other, someone falsely claimed CPA credentials to defraud investors.

As Blake pointed out about the Epstein investigation: “It just doesn’t compute.”

These stories are reminders that the accounting profession’s credibility can be weaponized, either by those who hold credentials and choose to look the other way, or by those who fake credentials to exploit the trust that comes with them.

Listen to the complete episode of The Accounting Podcast for more, including details about AI-powered invoice fraud and why white-collar workers are getting nervous about their job prospects.

From OnlyFans Audits to AI Cheating Scandals: Inside Accounting’s Strangest Week Ever

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In episode 465 of The Accounting Podcast, hosts Blake Oliver and David Leary tackle one of the most bizarre unintended consequences of recent tax legislation: IRS agents may soon need to review OnlyFans content at work to determine if digital creators qualify for tax deductions. This absurd scenario perfectly captures the chaos unfolding as artificial intelligence and new regulations collide with traditional accounting practices.

The IRS’s Awkward New Job Requirement

The new “no tax on tips” deduction allows digital content creators to deduct up to $25,000 from their taxes. But conservative groups successfully lobbied to exclude “pornographic activity” from this benefit, leaving the IRS to determine what qualifies as pornography—a definition the Supreme Court has never clearly established.

“Are IRS agents going to have to sit in their offices at work and look at OnlyFans accounts and determine whether or not this content qualifies?” Blake asks. “Supreme Court Justice Potter Stewart famously said, ‘I know it when I see it.’ So that’s my question.”

The timing couldn’t be worse. The IRS just closed hardship telework requests, forcing employees back to the office while the agency faces a backlog of over 8,000 accommodation requests and has lost 25% of its workforce through voluntary separations this year.

David raises another complication: “If somebody did one video that got determined to be pornographic, do you lose the whole deduction or can you claim all the other days that you got tips?”

Tax professionals face their own dilemma. “Let’s say you get a client who says they want to claim the tips deduction, and they’re an online creator,” Blake explains. “Are you going to check out the content and decide whether it qualifies?”

When AI Meets Ethics—The KPMG Scandal

While the IRS grapples with content moderation, KPMG Australia is dealing with its own technology-related embarrassment. Multiple auditors were caught using AI and group chats to cheat on mandatory compliance training during 2023-2024. This happened after KPMG had already paid a $50 million fine for exam cheating from 2015-2020.

“AI is really good at taking these kinds of tests,” Blake notes. “Just copy paste all the questions into ChatGPT and you’ll pass in a heartbeat.”

The consequences were light: formal warnings for most, one verbal caution, and one person who left months later. The firm didn’t report the incident to regulators.

“They got fined $50 million for it before and then they just continued to do it,” David points out. “So the fines don’t work, obviously.”

The PCAOB is now warning it will closely scrutinize AI use in accounting firms. They’re particularly concerned about private equity-backed firms, fearing pressure for short-term results will compromise audit quality when combined with AI automation.

The Death of the Billable Hour

Beyond scandals, AI is reshaping how accounting firms operate and charge for their services. The billable hour, introduced in the early 1900s as a management tool and dominant since the 1960s, faces extinction.

“When AI can review thousands of contracts in minutes instead of weeks, charging for time spent becomes economically absurd,” writes Rita McGrath of Columbia Business School in the Wall Street Journal.

Blake experienced this transformation firsthand as a freelance bookkeeper. “I billed hourly for keying transactions into accounting software. I then figured out how to automate 90% of it. I had a choice: bill 80-90% fewer hours and lose all my revenue, or switch my clients to fixed fees and take ownership of the process.”

The efficiency gains are already here. Ramp has AI approvals handling 80-90% of transactions automatically. Xero’s new auto-reconcile feature uses AI to match transactions with high confidence. According to OpenAI’s survey of 9,000 workers, employees save an average of one hour daily using AI, with heavy users saving ten hours weekly.

But not every company succeeds at this transition. Pilot raised $118 million at a $1.2 billion valuation, betting it could automate bookkeeping and achieve software margins. Today, they have just 2,500 clients and recently launched a partner program to offload the labor they couldn’t eliminate.

“The fact that they’ve launched a partner program indicates they’re trying to push labor costs out of the company so they can be a software company,” Blake observes.

The irony isn’t lost on David. “They have this headline, ‘Tired of endless QuickBooks updates breaking your workflow.’ But the very first app they list in their integrations is QuickBooks. It’s built on QuickBooks.”

AI Writing Reports Nobody Trusts

Companies are racing to use AI for financial reporting even while harboring deep doubts about its reliability. Twenty-eight percent of financial executives already use generative AI for external reporting. ON Semiconductor’s AI writes entire sections of management discussion and analysis. Hewlett Packard Enterprise plans to use AI for first drafts of financial statements starting in January.

“Take financial statements, drop them into ChatGPT and ask for the narrative. It does a spectacular job,” Blake says. “Taking numbers and turning them into a story that non-accountants can understand, highlighting what’s important, it’s really good at that.”

Yet Harvard Business Review’s survey of 603 business leaders shows only 6% of companies trust AI for core business processes. Most limit AI to low-risk or supervised tasks.

“The work accountants do requires near 100% accuracy,” Blake explains. “Research shows AI achieves 80% accuracy at 30-minute tasks but 100% only for tasks taking a few minutes.”

Meanwhile, Meta’s creative accounting for its Hyperion data center—using complex structures to keep it off-balance sheet—shows human financial engineering still outpaces AI. As the Wall Street Journal called it, “Artificial intelligence, meet artificial accounting.”

What Comes Next

Interesting research is challenging assumptions about what drives audit quality. Studies show offices with less competition deliver better audits with fewer errors. “Competition pushes down fees, which incentivizes auditors to cut corners,” Blake explains.

Another study found audit teams with more women deliver higher quality at lower fees, but only in supportive environments with good work-life balance and female partners.

President Trump, meanwhile, claims tariff revenue will eliminate income tax entirely. “We’ve taken in literally trillions of dollars,” he stated, though actual tariff revenue was only $258 billion last year versus $2.7 trillion from income taxes.

“Doesn’t anybody prep him?” David wonders. “He just makes up numbers.”

The accounting profession is at a crossroads. Will accountants become the quality control layer ensuring AI meets professional standards? Or will they cling to outdated models until technology makes them irrelevant?

To hear Blake and David’s full discussion, including details about the new Trump IRA accounts for kids and Senator Jim Justice’s $5 million tax settlement, listen to episode 465 of The Accounting Podcast.