[00:00:00] Thank you to our sponsor, OnPay
David Leary: Many times, when choosing a payroll service, you have to choose between a new startup with a great app, or an established company whose tech may feel behind the times. With OnPay, you get the best of both worlds - a great app from an established company that's been providing payroll services for over 30 years in all 50 states. Stay tuned to hear more from our sponsor, OnPay, later in the episode.
[00:00:18] Episode Preview
Blake Oliver: Underfunding the IRS, what's the purpose of that? That's been happening because it helps people avoid taxes or evade taxes. If the IRS is underfunded, you can take super aggressive positions as a business owner. It's pretty clear that is what the strategy has been, “Let's underfund the IRS, let's make the auditors weak, and then we can do whatever we want. And they're not going to question it. Or if they do, we'll beat them in tax court.” This is all created. This didn't just happen. It didn't happen on purpose, but it happened because of bad actors.
David Leary: Yeah. Maybe, we could have put the death of the IRS as one of our predictions for this year; we blew it. This might be the most obvious thing in our face right now.
Coming to you weekly from the OnPay recording studio, this is The Cloud Accounting Podcast.
Blake Oliver: Today is Monday, January 17th, I'm Blake Oliver.
David Leary: I’m David Leary.
Blake Oliver: Well, David, we're recording on MLK day. I have to admit, I haven't done my usual homework. So, it might just be me reading headlines, and then trying to guess what's in the article.
David Leary: That could be fun. Or we could- I have another article. This is the same author, back-to-back weeks in Parade Magazine. Now, it's tax jokes. So, 58 accounting and tax jokes.
Blake Oliver: So, you could just tell 58 accounting tax jokes and that would fill up the whole episode?
David Leary: We could do that. And I apologize, my voice is a little raspy. I've been at a volleyball tournament, cheering all weekend, and then had to cheer for the Buffalo Bills on Saturday night.
Blake Oliver: How did they do? I didn’t watch.
David Leary: The greatest offensive performance of all time. It was very impressive. As in a perfect game, no punts, no turnovers, no force downs.
Blake Oliver: So, when you say greatest offensive performance, you mean in the game of football?
David Leary: Yes.
Blake Oliver: Or for the Bills?
David Leary: Well, probably not college, because college is ridiculous, but pro football, yes. Probably the greatest performance in 50 or 60 years.
Blake Oliver: That's amazing. I'd have to- I'll have to go back and check it out.
David Leary: You can watch the highlights. We'll get you on the highlight train for that.
Blake Oliver: You have to teach me this; I need to understand better.
[00:02:23] IRS Free File Opening Up
David Leary: But because of that, it ties into watching all this NFL, guess who's big sponsors of the NFL? TurboTax.
Blake Oliver: TurboTax.
David Leary: Intuit and TurboTax are huge sponsors of all the NFL games, and then you see some H&R Block ads on the TV too. Earlier this week, I marked the article because there was an article in Accounting Today about how the IRS is opening up the free file program.
Blake Oliver: And they’ve opened up- they're gonna open up filing for our returns pretty soon.
David Leary: So, the free file program, so it was, every year, it changes a little bit. So, this year, it's any taxpayers that earn less than $73,000 can file their returns for free. And if you remember, Intuit and HR Block got bad press and they wound up dropping out this year. So, the remaining companies you have, 1040Now.net, eztaxreturn.com, Free Tax Return.com Inc, FileYourTaxes.com, FreeTaxUSA, OnLine Taxes at OLT.COM, Tax Act, and Taxslayer. So, remember, H&R Block and Intuit dropped out. So, I’m watching commercials all weekend, and all the commercial for TurboTax and H&R Block are about filing your taxes for free. I thought they weren’t doing this anymore. I'm so confused.
Blake Oliver: The cost of the actual federal return, even on the paid products, is zero, or close to zero. And where they get you is with all the upsells, the states. If you had business income, or you need to do some form that's not included in the free edition, then they get you up to a $100 or something like that with all those.
David Leary: And so, what's interesting is, with the TurboTax ads, they're advertising how you can do TurboTax Live for free; have somebody else do your taxes for free.
Blake Oliver: Really?
David Leary: Yes.
Blake Oliver: Wow.
David Leary: ‘Cause there's two levels of TurboTax Live. There's somebody helping you on the way, and then there's flat out full service. You just punt it over the wall, and they do everything for you.
Blake Oliver: Well, so, the full-service thing, there's gotta be upsells in there. There's no way you could offer that for free.
[00:04:06] H&R Block Gets Simple
David Leary: This is what's interesting. Both websites, to be honest, are- H&R Block just duplicates the QuickBooks one with the same words and everything, like deluxe, premium, self-employed. They're both this similar verbiage here called simple returns. Intuit has something called simple tax returns only soon. So, I'm on their website; if I click this, it's a help file. It's defining what that is, a simple return is a 1040 only. So, since you have a secondary form, obviously, you can't do this. W2 income, limited interest, 1099-INT, or 1099-DIV, claiming the standard deduction, earned income tax credit, child tax credit, student loan deduction. And then it'll list all the things that aren't covered, but they have a paragraph in here about, how does TurboTax make money? And I'm surprised they just put this in there, ‘cause it's not like this is an FAQ. This is just trying to find out what is simple tax returns.
And it says, “Customers with more complex tax situations will file our paid TurboTax products that provide all the additional forms guidance they need. We also offer additional benefits that go beyond filing your taxes, but they're optional, and not required to file simple taxes for free We hope that over time, as our customers with simple returns need more capabilities, as their financial situations change, for example, owning a home, having a child, they'll have loved our products and services so much they'll choose our paid TurboTax offerings to prepare to file returns Now, it's funny. That's very marketing, but it's also true. If people get used to using TurboTax two, three years in a row for free, they're probably gonna be willing to pay for it. But we'll see how this goes. I was really trying to digest simple return a little bit. As a tax preparer, your office, when you're marketing, how do you market against this word simple tax return? Because you don't want to bring those into your office. A lot of preparers don't want those.
Blake Oliver: Well, yeah. Most CPAs don't even want to do 1040s anymore, I know that. That's the chatter. Everyone just wants the business returns because that's where the money's at. And you do the 1040s if you have to, for the business owners, and their relatives. The thing is, most individual tax for most people is really, really simple. And they could use the free file program, and it's just a matter of putting in a few forms, and- like Elon Musk said.
David Leary: That's it. When I saw the simple tax return, I was like, “Elon could use the free one.”
Blake Oliver: If all you've got is W2, and maybe, a few sales of investments, it's not complicated. A little bit of capital gains or something, but-
[00:06:26] Feel the Surge (Pricing)
David Leary: Now, it does also look like Intuit is doing surge pricing on TurboTax this year, in a way. And this is extreme surge pricing, but we've talked about this on the show. Those people that come in in April, you charge them more than the people that come in in January.
Blake Oliver: Well, you should. I don’t think most firms do.
David Leary: So, they're offering the full-service TurboTax for free, but you have to do it- your return has to be filed by February 15th. That’s the full service for free, to do this the free, where you do it yourself with assistance.
Blake Oliver: With assistance.
David Leary: That’s March 31st. So now, they're doing free for a point, but now, they can, in a way- it's very black and white, the deadline, if it’s deadline-based.
Blake Oliver: So, here's what’s brilliant about this. You said that the full service is free for some filers, up till- when do they have to do it?
David Leary: February 15th.
Blake Oliver: So, that makes a lot of sense, because what happens most of the time, people wait until the last minute. Now, with a full-service offering, that doesn't work for you because you have capacity limitations. You only have so many people you've hired that can help. What do you have a lot of? You have a lot of those people's time in January and in February. If you don't look at it from an hourly basis, like an accounting firm would, and you just look at it as a capacity planning issue, it doesn't hurt you to give away that stuff for free in February when you wouldn't be busy anyway.
David Leary: Or do it for a little bit cheaper, or whatever it is; try to shift your weight or the load.
Blake Oliver: Consider it a marketing expense if you have to. This is what accounting firms miss out, when you think on an hourly basis, and you think, “I have to get this utilization realization per hour on all the work I do.” What you're forgetting is that you have all these fixed costs, which are all these full-time people you hired. And if they're not busy, you might as well give a discount, or you might as well do work that has a lower hourly rate, or you might as well just give it away for free, in order to loyalty and get more customers later. And a company like Intuit understands this. And so, that's why they're doing this. I think most accounting firms should do this too, at least have surge pricing, like you said, so earlier in the season, the rate is lower. And then as you get closer to the deadline, it goes up dramatically, and it'll help you iron out your capacity problem.
David Leary: From an Intuit perspective. It's much easier to have a conversation with somebody that's like, “Oh, I thought TurboTax was free,” “Well, that was only until March 31st.”
Blake Oliver: Exactly. Exactly.
David Leary: It’s very black and white, and the average person doesn't know simple return, or why they have the secondary form They just know that’s their taxes.
[00:08:51] Jackson Hewitt Wooing the DIY Filers
Blake Oliver: Somebody else is getting into the tax prep game, the online, do-it-yourself game, Jackson Hewitt Tax Services. And they are trying to offer something very competitive. It's a $25 flat fee for online tax filing for do-it-yourself filers. I think everybody has seen Jackson Hewitt offices somewhere; it's like H&R Block.
They haven't had- I haven't heard of them having an online option, but now, they do. For $25, you can get the do-it-yourself. You can lock it in for the next three years. There's live chat customer support, auto-import of W2 information along with a fully guided option. That's probably actually, going to be cheaper in the end for most people, I imagine. ‘Cause I think most people, once they actually realize they have to not use the free version of TurboTax or whatever, they end up paying more than $25.
David Leary: So, they're trying to get people to commit for three years.
Blake Oliver: Yeah.
David Leary: That's actually smart, because in the way, with TurboTax, it just sucks your data from the previous year's return. It's in your best interest to get people to return every year. So, if you can get them committed for four years, you can scale this even better. So much data is repeat data.
Blake Oliver: Now, something that's interesting is, there's going to be a lot of people this year who think that they're going to get the free edition of TurboTax or whatever, but they end up not, because they've got additional forms they have to file. And that's going to be because their side gig is finally getting taxed. The IRS is targeting transactions over $600 on sites such as Venmo, Etsy, and Airbnb. We talked about this a few episodes ago.
David Leary: It’s very headline-grabbing. It scares everybody to death. I just saw somebody pose a question about this, which is very confusing. So, college student pays his parents $1,000 for auto insurance or vice versa. Is that going to show up on somebody’s Venmo somewhere? How is this being decided when it’s a business or not?
Blake Oliver: I know on PayPal, when you send money to somebody, you choose whether it's personal, or for goods and services. And that is, I assume, what determines whether or not the recipient will get the 1099.
David Leary: But everybody's smart. Everybody chooses goods and services to avoid the fees.
Blake Oliver: They choose personal to avoid the fees.
David Leary: Personal, yes, to avoid all the fees.
Blake Oliver: But if they don't, or if somebody owns a business, if you register as a business, they're going to send you the firm, no matter what. So, it's going to be tricky, I think. This will actually be a big issue for these 1040 returns preparers, is, “Oh, no. Now, I finally got a 1099 for this money on the side hustle I have.” It's not going over well.
David Leary: Well, that’s right. ‘Cause 1099, as soon as you have a 1099-MISC, you are not part of a simple tax return anymore; you're right.
Blake Oliver: Exactly. You’ve got to schedule C.
David Leary: That's gonna push everybody out of this.
Blake Oliver: So, it's gonna be a huge moneymaker for TurboTax. It's not going over well, because I saw one tweet out there that was excellent and said, “Democrats wanted to tax the rich, and instead, they’re taxing all of our side hustle. This is what came out of the legislation, the infrastructure. I think this [CROSSTALK].
David Leary: This is the only thing that's passed, basically.
Blake Oliver: Yeah, exactly. It’s like, “We wanted them to tax the rich, instead they taxed us.” What else we got about tax season?
David Leary: I have crazy numbers about the IRS.
[00:12:06] Ready, Set, Lose Your Mind.
Blake Oliver: I'll let you get to that, but first, just want to say, the start of tax season is officially on the calendar. The IRS will start accepting tax returns on January 24th, 2022. What were you going to say, David?
[00:12:18] Congratulations, Amanda Aguilard
David Leary: The IRS added new members to their advisory council.
Blake Oliver: Oh, yeah, I saw that.
David Leary: A good, close, personal friend and fan of the show, Amanda Aguilard.
Blake Oliver: Amanda Aguilard. How many people are on this advisory council? I've never heard of this.
David Leary: It's a three-year term. Now, I don't know if this is the entire thing or just the nine new people. It's not really clear. Hey, we'll take it. She should spread the word of The Cloud Accounting Podcast while she's there.
Blake Oliver: Well, now, if you know Amanda Aguilard, or you follow her on Twitter, you can complain personally to her about the IRS backlog.
David Leary: As soon as she announced it, I asked her where my 2020 return was. Could she check on the status?
[00:12:53] The Mess of the IRS
Blake Oliver: And that’s a big problem. There have been stories all this week how the AICPA is concerned about the IRS bottleneck ahead of tax season. It’s not good. There was a report from the auditor of the IRS, the inspector general- sorry, not the inspector general. It was the taxpayer advocate at the IRS.
David Leary: So, it’s a similar article I have with some crazy numbers in there we can go through.
Blake Oliver: Do you have the numbers handy?
David Leary: Yeah. The numbers are just really crazy you start reading them. So, the IRS started 2021 with more than 11.7 million tax returns from 2020.
Blake Oliver: 11.7 from the previous year, still unprocessed.
David Leary: From [CROSSTALK] this year. It took until June of 2021 to get through the 2019 returns. And then as of mid-December, the IRS had millions of items to address, including 6 million unprocessed individual returns, 2.8 million unprocessed business returns, the combined more than 2.8 million unprocessed, amended individual and business returns, and approximately 4.75 million pieces of correspondence.
Blake Oliver: So, they're running what, six months to a year behind?
David Leary: Eight to 12 months, yeah.
Blake Oliver: Or longer, because you said it took them until June of 2020 to finish processing all 2019 returns.
David Leary: No, 2021.
Blake Oliver: Wow.
David Leary: So, it should make sense, ‘cause 2019 returns would be sent in 2020?
Blake Oliver: Yeah
David Leary: They’re just way behind. The numbers aren't going to get any better because, I don't know if you knew this, the number of taxpayers they're servicing now has increased 19% since 2010.
Blake Oliver: Everything has gone up; the number of returns, number of taxpayers. And what has gone down, the number of people working at the IRS, and the IRS budget.
[00:14:31] COVID Hits the IRS
David Leary: And then on top of that, obviously, the cash-credit payments and stimulus, all this other stuff they got on their plate. And then I thought I saw an article that they're getting hit with COVID right now, which actually might be good, ‘cause it's a little early in the tax season. If you're going to get hit, IRS, get hit it now.
Blake Oliver: Well, I guess, and- well, so what? The current COVID wave, at least here in Arizona, it looks like it's going to be over and done with, mid-February, and then really done, mid-March. But that doesn't give them a lot of time to get back in action, and ready to go. It’s just terrible. IRS got hit really hard, because so much of their stuff is on paper. They still process a ton of paper returns, they opened a ton of paper mail, they have to be physically in the office to get a lot of stuff done.
What’s interesting about all this, is that the e-filed returns that don't have exceptions, where everything lines up, they don't get pulled out of the queue for having to deal with manually. Those have all been fine. So, as long as you're e-filing and you don't have any issues that crop up on the return with a difference of information reporting or whatever, you’ve been getting your refunds. It’s all the people where they filed paper, or they had a discrepancy; something didn't match up with the IRS systems, and it got pulled out to be handled manually. Those are all in purgatory forever.
[00:15:42] The Taxpayer Advocate Weighs In
Blake Oliver: It’s bad, the taxpayer advocate says, quote, “The IRS is in crisis.” That's a quote. “I am deeply concerned about the upcoming filing season.” That's Erin Collins, National Taxpayer Advocate, “Paper is the IRS’s kryptonite, and the agency is still buried in it.”
David Leary: And this is what doesn't make any sense because they obviously, I think there are [INAUDIBLE], it's like 340 million refunds have been issued from electronic filing, blah blah blah. The returns that are filed electronically are being dealt with. So, why is the IRS, when you go to irs.gov, where's the link to the free fact tax file? Where's the encouraging you to- it's on there, but it's not the headline.
Blake Oliver: No, no. I'm sure that updating website isn't exactly their top priority.
David Leary: Well, they have a better ad for things like helping people understand and meet their tax responsibilities, with two smiling people, some generic clip art. They should be pushing people to use all the free files, and actually, the people that are charging. It's more efficient for them.
[00:16:40] Thanks to our sponsor, FreshBooks
Blake: This episode of The Cloud Accounting podcast is sponsored by FreshBooks. Recently, I chatted with Twyla Verhelst, director of the accountant channel over at FreshBooks, because I wanted to see what they've been up to. For those who don't know, FreshBooks was the first accounting software I used as a freelance bookkeeper back in 2011.
So, I've been really curious to see what's new. Turns, out a few years ago, FreshBooks launched a new platform that is now more than just invoicing. FreshBooks is now a full general ledger with financial reports, bank feeds and journal entries.
FreshBooks also has your favorite app integrations, even some embedded ones, like Gusto for payroll. And with the launch of their new accounting partner program, Twyla and the FreshBooks team are creating a platform and a partner experience that’s showcasing that they're really listening to our feedback.
If you want to learn about the benefits of working better together with FreshBooks, head over to cloudaccountingpodcast.promo/freshbooks. That is cloudaccountingpodcast.promo forward slash F-R-E-S-H-B-O-O-K-S.
[00:17:48] The AICPA Writes Another Letter
Blake Oliver: The AICPA got together with some other accounting groups, a bunch of them, and they wrote a letter.
David Leary: Oh boy, the letters always work.
Blake Oliver: And so, what they're asking for, if I could summarize it, is basically, AICPA and this group are asking for the IRS to issuing the automatic penalty notices. All these automated notices that they turn out, they're asking them to stop, and stop the automatic penalties, because there's too much of a lag between when they issue those, and what's happened, and they haven't processed returns they've gotten, they're issuing penalties for things where they haven’t processed the payment, and all this stuff. It just creates this giant fiasco. And I think that's good.
David Leary: It creates more churn, more inquiries that'll get answered.
Blake Oliver: But that's just a temporary fix; that's just a band-aid on the problem. Where's the leadership saying, “Here is the solution. Here is how we actually get the IRS out of this mess. What do we need to do?” I don't see anybody with a plan for how this doesn't keep happening year, after year, after year.
[00:18:51] Taxpayer Headcount Rises; IRS Budget Falls
Blake Oliver: I guess COVID goes away and that'll help a little bit, but you can see in the numbers. CPA Trendlines put up a really nice chart showing, “Here's the IRS budget and head count going down, and here's the number of returns, the number of taxpayers going up every year.” And we know that the tech is bad. And the thing that annoys me about this is, here's headline AICPA CEO, Melancon, concerned IRS bottleneck ahead of tax season, this is a problem that didn't just happen because of COVID. COVID was the straw that broke the camel's back. This is a problem that has developed over years. Decades.
David Leary: If experts, AICPA, the tax advocate, are saying the IRS is in crisis, we're probably leading indicators, I think, of this. When's it going to really break, to where the average American is realizing they're impacted by this? It’s gonna get worse, but there’s no sign that's going to get better. So, which means it's just going to get worse, but at what point does it really break?
Blake Oliver: Well, this tax season could be it. So many people are not going get their refund because there's some discrepancy between the advanced childcare tax credit, the money we've been getting in our accounts every month. If you don't report that number exactly on your return to calculate what you are owed or what you have to pay back, that's going to be an exception. And that return is not going to get processed, and that refund is not going to get processed. And you're going to have millions of people who screw that up.
David Leary: All those letters they've been sending you during the year about the child tax credit, and how much they're going to give you. Apparently, you should have been saving all of those, ‘cause you need all the dates. But nobody's saving those. Nobody knew to save those. They didn't say, “Keep this for your records.”
Blake Oliver: I think I've got five those letters in different drawers in my house. I'm an accountant; I don't know where they are.
David Leary: They’re like Bed Bath & Beyond coupons, just everywhere.
Blake Oliver: Average Taxpayer is not going to be able to do this. Maybe that'll be the disaster, I don't know, that it gets political will to fix this problem.
David Leary: Somebody’s going to get fired.
Blake Oliver: Well, what they need to do is, it's not just punish, it's invest. We say this over and over again, David, but I feel like we have to keep saying it because I don't feel like enough people are saying this. The IRS is the revenue-generating arm of the U.S. federal government. It is like in a private company, it's your sales team; you invest in that. You want those people to be driving nice cars. You want those people to be happy They bring in the revenue. And right now, they're driving a Pinto, Ford Pinto. So, where do we go from here?
David Leary: Are we gonna see some crazy privatization of this? Is there going to be a push for that?
Blake Oliver: Privatize the IRS?
David Leary: Like the prison systems and all this other stuff, where there's things that actually make sense to be ran by the government get privatized. All tax return processing is going to be outsourced.
Blake Oliver: So, here in Arizona, something that I really liked when I moved from California is the DMV is semi-privatized here. You can go to an official DMV to get your license and your registration, all that, but then there's also private companies that run offices that plug into the Arizona DMV systems, and you can go and pay there to get service, and it's great. I'm happy to pay for that. So, if there were a way where the IRS could let everyone just- where you just build a system for all the stuff, and just everyone could plug into it. That's what really, you need, is you need a centralized database that we can all just plug into to do these tax returns. We don't need the IRS processing paper returns; that's their weakness. Just a thought.
David Leary: But maybe there's a set of the population that likes this because the IRS is too busy, they’re never going to get to your return, they don't know if what you put on is real or not. By the time they get to it, it's too late.
Blake Oliver: Underfunding the IRS, what's the purpose of that? That's been because it helps people avoid taxes or evade taxes. If the IRS is underfunded, you can take super aggressive positions as a business owner. It's pretty clear that is what the strategy has been, “Let's underfund the IRS, let's make the auditors weak, and then we can do whatever we want. And they're not going to question it, or if they do, we'll beat them in tax court.” This is all created; this didn't just happen. It didn't happen on purpose, but it happened because of bad actors.
David Leary: Maybe we could have put the death of the IRS as one of our predictions for this year. We blew it. This might be the most obvious thing in our face right now.
Blake Oliver: Where do we go from here?
David Leary: I only have app news, and then another Metaverse-related accounting firm story, I guess.
Blake Oliver: I think we had some listener mail and I want to get to that.
David Leary: Perfect.
[00:23:18] Illinois is Breaking the 150-Hour Rule?
Blake Oliver: We got an email from David. This was-
David Leary: You’re welcome. I sent this to the show.
Blake Oliver: -back at the very- not David Leary, different David. This was back at the very end of the year, December 31st. “Hello, Blake and David. I started listening to your Cloud Accounting Podcast shortly after starting DePaul's Master of Accountancy program in June. I live in Southeastern Illinois, equidistant from Evansville, Indiana, and Marion, Illinois. I appreciate your show, especially the app news. Are you aware that an Illinois law becomes effective January 1st, 2023, that reduces educational hours required from 150 to 120? In the latest episode, the situation of a non-CPA partner having to have 150 hours was discussed. I wonder how this new Illinois law might impact that situation.” So, that's really cool.
David Leary: I was not aware of this. Were you aware?
Blake Oliver: No, I was not. So, Illinois, which has been leading the way in terms of talking about the issue with recruitment into the profession, the society there has been doing a lot on that and did a great survey. They're leading the way here with this, reducing the educational hours. I think this is a good step. This is great.
David Leary: They didn't communicate this very well because they always had their Midwest Accounting Show, which they go do. I think I'm on their mailing list for the Illinois CPAs. This is quietly shoved under the carpet here.
[00:24:38] Listener Feedback: The IT Department Does Matter
Blake Oliver: Here's his second comment. “There was an article in the last six months that mentioned CPA liability premium rates are rising because of cybersecurity risks. I understand smaller firms may not need a dedicated IT department, but the functions performed to mitigate risk and ensure data security and availability still have to be done. I was disappointed by comments in a recent podcast that seemed to imply the IT department was unnecessary. Information protection is a 24/7 job that requires everyone's participation. No software service or data center is secure, including SaaS. defense in-depth practices, data backups, encryption, and continuity of operations plans are necessary tools in the data protection war for any size business.” So, David, on that point, so this is regarding this article in the Wall Street Journal. It was an opinion piece by a guy who's spent a career in IT, saying, “It's time to kill the IT department. The IT department is what's holding back a lot of companies in corporate America.” When I said I agree with that, I didn't mean that I think that we shouldn't have cyber security. And actually, I think that's the perfect role for the IT department, is to focus on cybersecurity And I would even change the IT department to being the cybersecurity department. What I don't like is when technology decisions are made in a centralized-
David Leary: When the IT department picks the RP and the time sheet app you use, and the expense application you use.
Blake Oliver: That was actually my main frustration, working at a large firm, was I couldn't make my own technology decisions. I didn't even get, really, input and it was IT department in a different office that got to crush my dreams when it came to technology. I think basically, IT departments are just not well-positioned to handle operational technology. Those decisions should be made elsewhere. And so, it'd be better to embed IT people inside of operational teams, put them with the people delivering the service. So, in an accounting firm, Instead of having all your IT people centralized, you would actually have a tech person who you embed in a particular office, or a particular team. And then that person helps you set up the tech, manage the tech, and yes, there's gotta be some coordination between all the different teams in the business, as to, we gotta use common systems and stuff, but I think distributing it that way would be better.
[00:26:58] No Code For the Win
David Leary: I think I saw an article around the same time, as a little bit about the- make an argument against IT and the argument of no code. In this world where people need data, they need to solve a problem, nobody has time to wait for their central IT department to either A, get approved for an app, get a report generated, some data pulled. They’re just going to build the apps and connect the data pipes themselves. In this no-code world then, is another argument against having a centralized IT department. Right now, yes, you could argue for the actual hardware. They should be making sure the network works, and doesn't crash, not what software employee uses on their computer.
Blake Oliver: Exactly.
[00:27:34] Finding a Hidden Accounting Education Gem
Blake Oliver: We got another email. This one's from Dan Luthi. This is quite a lengthy message, so I'm going to condense it a bit, Dan, I hope you don't mind. Dan said, “I wanted to let you both know that I have enjoyed taking the past week off after finishing up my Masters of Accounting program and catching up on the last two months of episodes, along with a thousand other things while the world winds down.” This also, was toward the end of last year. “At this time, I don't require a master’s degree or a CPA accreditation. They don't apply to the core role and focus on training to further my career. But alas, clients appreciate the accreditation and respect the education and expertise.
Often, I find that some clients will even take the words of a less knowledgeable CPA due to their accreditation, versus myself, or others who have superior experience and knowledge. All that being said, I believe it still carries weight and value, even in the evolving industry. The marker has not evolved outside of the accolade yet, nor should we. Most classes and professors were exactly as you described in your podcast, focused on their reputation and their percent of CPA exam completion, and not much more. I did, however, have two professors that push the envelope. That being said, I chose an entirely virtual slash online program through a state school, Southern Utah University.
Jeff Orton and Jonathan Lee took a different approach. Orton taught audit and forensic accounting courses, and Lee taught tax courses. They both taught the core items needed for exam prep, utilizing exam prep software such as Gleim, and Becker to help aid with the familiarity of the exams themselves. In addition, they added layers of coursework that gave real-world experience, and pushed the envelope what a student really would want to do if they were just there for example prep.
After completing my final course in audit, Orton and I passed a few emails back and forth, and I felt his email summed up so much of what is missing from our educational system and preparation phases. Orton, quote, “There's a lot in this course, but you hit the nail on the head. My entire goal in this class is to close the gap between school and the profession. I remember starting my job as a staff auditor after graduation, wondering why I went to school since everything seemed brand new. Regardless of what university they attended, my entire start group felt the same way. A few years into working at the firm, I started helping our training and development team with new hires and senior training. Our discussion slash goals were always about getting our new hires up to speed as quickly and effectively as possible.
Firms spend so much time and money onboarding staff, which shouldn't be needed as much as it is. It was a tough challenge to face, but we did our best. I tried to pattern the Audit I course in the undergrad after what we developed there at the firm for new hire training for interns and first-year staff, then have Audit II review some of that, and expand to some of what they'll do as a second or third year, slash senior staff. We don't have enough time in a semester to get into everything a new hire will need, and those needs will vary a lot, depending on firm size, et cetera. Still, the goal was to close that gap at least a little, as much as I could, by giving you as much experience as I could in the actual hands-on work papers, and visual programs, then some of the theory starts to make more sense and falls into place.
We'll keep tweaking and modifying as tech and procedures change. Many people tell me all they want is CPA prep in their education, and nothing else. But you and I know that approach doesn't help prepare students to be influential professionals. I’d instead prepare you to be promoted, then let Becker and the other study materials help you pass the CPA exam, since students will need to do those anyway. Hopefully, we'll close the gaps so firms can spend less on basic training, and more on specialized training, and their core purpose of serving client needs.”
And Dan continues and he says he got firsthand experience with idea, data, analytics software, with MindBridge, working through complete tax preparation with Workpapers, and parts of an audit. It's really amazing. So, this program that basically, Dan is writing this amazing review of, is Southern Utah University’s virtual slash online program. So, there's an option out there that gives you real-world experience. So, thank you, Dan, for writing in and telling us so much about that. I'm really excited to hear about it.
David Leary: Well, that's going to save people time and money.
Blake Oliver: This is so great because I'm sure there's people listening and maybe your local college or university doesn't have a great accounting program. And it's hard to find the good online one, because you don't really know what to expect. This is a review from one of our listeners. So, if you're looking for a program, go check it out.
[00:32:02] Thank you to our Sponsor, OnPay
David Leary: This episode of The Cloud Accounting Podcast is sponsored by OnPay. If you're wondering why OnPay is great, it's because it was built by payroll experts with over 30 years of payroll experience. They handle all the complicated stuff that other payroll providers don't, like agricultural payrolls, including Form 943, multi-state payrolls, and employees with H-2A visas.
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The program also offers a dedicated support team to offer white-glove service to both you and your clients. To learn more about offering your clients the award-winning OnPay Payroll and HR, head over to cloudaccountingpodcast.promo/onpay. That is cloudaccountingpodcast.promo forward slash O-N-P-A-Y. OnPay - nobody takes better care of your clients.
Blake Oliver: So, David, you have app news.
David Leary: We have app news.
Blake Oliver: Let's get to it.
[00:33:21] Checkout.com Turns its Focus to Enterprise
David Leary: So, you just said that you told people to check out that accounting program?
Blake Oliver: Mm-hmm.
David Leary: Well, checkout.com, they just announced that they raised $1 billion dollars.
Blake Oliver: Checkout.com.
David Leary: So, checkout.com is basically, like Stripe. It's online website, you buy something online, and you pay online. The difference is they're 100 percent enterprise-focused, so they're really carving out a niche with just the measly 1800 customers that are all- so, Stripe has millions and millions and millions of customers. They only have 1800, but they are way up market. They've covered a niche they're really specialized in. They can do international payments really well, multiple countries, geos, but their customers are Netflix, Grab, FinTech unicorns like Klarna, Revolut, WorldRemit. And then they're even working in the Coinbase Crypto.com, FTX and MoonPay. So, if you're doing any type of checkout- I keep wanting to say point of sale, but online checkout- you could be using any of these big, big players.
Blake Oliver: Wow, $1 billion. That's crazy. Shows you just how much money there is in enterprise software. I got blockchain news; that counts as tech, right?
David Leary: Yeah.
[00:34:34] Coinbase Futures
Blake Oliver: Coinbase has bought Crypto Futures’ platform, FairX. FairX lists Futures’ contracts that track markets, including stock indices and oil. This comes four months after Coinbase applied for membership in the National Futures Association, a top derivatives, self-regulatory organization in the United States. Coinbase is the second largest in spot trading volume in cryptocurrencies now, behind Binance. Is it Binance? Binance? I've never actually said it out loud, so I don't know. Their 24-hour trading volume is 3.8 billion; that's Coinbase, according to CoinMarketCap. But the trading volume of crypto derivatives now exceeds spot trading, reaching 2.9 trillion in December. This is according to CFO magazine, or cfo.com, I should say.
Whenever I hear the word derivatives, the first thing I think of, of course, given my age, is mortgage-backed securities. This, to me, is a sign that Coinbase is going to release derivatives and allow us to gamble on cryptocurrencies, sort of like Robin hood. Made it easy to gamble on the stock market, with its leveraged- what do you call it, when you lever up and you buy stock?
David Leary: Options?
Blake Oliver: Options. If you thought that cryptocurrency markets are crazy now, just wait until this comes, and people can make 10X bets and YOLO on crypto with Coinbase.
David Leary: If you check-marked that box, yes, I've done crypto, does that now mean you do not have a simple return?
Blake Oliver: I don't know. Probably. I feel like simple returns have to be extremely in the box.
David Leary: Like a high school kid with just a W2, and that's it.
Blake Oliver: It's like if you do anything outside W2 then, if you have anything outside of a regular employment job, you're going to end up paying something most of the time.
[00:36:25] GoFundMe Acquires Classy
David Leary: So, GoFundMe, you’re familiar with GoFundMe?
Blake Oliver: Yeah, it's what everybody uses to raise money for- they get sued, they raise money, somebody dies, they raise money, their house burns down, they didn't have insurance, they raise money.
David Leary: And some of that, sometimes, it's legit, nonprofit-type stuff. And not saying that's not legit, I'm just like, it's a platform for raising money. They purchased another company called Classy. And Classy is the spaces or donor management for nonprofits, but they also help on the marketing side a little bit. Feels like a little CRM-ish as well, but it's really, that step of, “Here's GoFundMe now stepping into-” they're not in the full-blown bookkeeping, but donor management software is that next step. If it pumps out reports, it's taking that next step towards-. You could argue donor management software is a little bit like accounting software. What's interesting, the two of these companies together, took in $5 billion in donations in 2021. Lots of money's moving through this platform. They do intend to operate this as two separate entities, but there'll be obviously, rolled into- one will be a subsidiary of GoFundMe; Classy will.
[00:37:32] Tax Leaders Looking for Better Tech Skills
Blake Oliver: Tax looking for better tech skills, that's the headline in Accounting Today. Ernst & Young did a survey. They polled 1,650 tax and finance leaders in over 40 countries and found that 84 percent of the respondents planned to adapt their tax and finance functions over next two years, thanks to challenges related- talent regulation and technology. Most of the respondents, 95 percent, see a need for improved data and technology skills among their people.
David Leary: Who are these 5 percent?
Blake Oliver: The 5 percent are like, “We're fine using the paper ledgers. We're just gonna keep doing that until we die.” That's my guess
David Leary: We have some Canadian app news; we have two Canadian stories.
Blake Oliver: Let’s hear it.
[00:38:14] Snow Job?
David Leary: So, Jobber is 1 million businesses, snowballing driveway, these terms that we don't understand in Arizona. They bulldoze the snow off your driveway in the winter. Home services-type things, pool cleaners, those types of field services type things.
Blake Oliver: Wait, what are you talking about, David? So, you're telling me that in some parts of the country-
David Leary: Somebody comes and scrapes the snow off your driveway, so you can pull out.
Blake Oliver: Oh, boy. Wow, I can't even imagine what that must be like.
David Leary: It's like a bulldozer, but it's not. It's like a truck with a thing in the front.
Blake Oliver: I saw a really-.
David Leary: [CROSSTALK] snowblowers? What is this called? Oh man, we’re stupid.
Blake Oliver: There was a whole Simpsons episode where he becomes one of those guys who ride-drives the truck that has the plow. The plow.
David Leary: Plow, plow, plow, driver plow, there we go. Thank you.
Blake Oliver: It's one of the best Simpsons episodes, The Snowplow, Mr Plow, I think, was it? Simpsons Mr Plow?
David Leary: Noted. Anyway, so, Jobber just raised $76 million, 60 million U.S., to continue their growth and scale. They currently have 100,000 home service professionals across 47 countries. I didn't know they were outside of North America. But yeah, apparently, they have people in 47 countries now, and they plan to use the money to grow, and they want to hire- they currently have 250 employees, they want to hire 200 over the next year. Congratulations to Jobber.
[00:39:27] Wagepoint Acquires Timesheet Mobile
David Leary: And then the other big Canadian news is Wagepoint- are you familiar with Wagepoint?
Blake Oliver: HR?
David Leary: I think it's mostly payroll, payroll; strictly, payroll. What's interesting about Wagepoint, is they're one of the only apps, one of the first apps that could do Canada and the U.S., both. 'Cause there's a lot of times you're like, “Okay, great, I can use Gusto here in the states, but if I have a client in Canada, I got to find some other app.” And so now, Wagepoint can do both. Wagepoint’s just been slowly- they're almost a decade old- they've been just slowly chugging along. A lot of people that use them really like them.
For Canadian payroll, I think Wagepoint’s part of the thing for Intuit's thing. I think Wagepoint’s part of KPMG's- it's not called Spark in Canada; it's called Financial One or something like that. But I think Wagepoint’s part of that tech stack with QuickBooks and Xero. Wagepoint has some trash in there, but they just bought now, a time sheet app called Timesheet Mobile, TSM, who apparently, is a geofence-enabled workforce management. They're in over 30 countries. It kinda makes sense, payroll sheet, or a time sheet app.
[00:40:24] IMA Offers Remote Testing
Blake Oliver: The IMA is going to start offering remote testing for certified management accountant and CSCA exams. When I saw this, I thought, “What does this mean?”
David Leary: Well, I was just saying, in my brain, I’m like, “Well, what about the last 24 months? What's happened?”
Blake Oliver: Well, so, you've had to go to Prometric. And Prometric has had major issues, obviously, because of the pandemic, depending on where they are, and they were shut down completely. This is exacerbating the talent pipeline problem, which is, people can't even get their exams done. So, a lot of it's been on hold. So, I looked into this and you're gonna actually be able to sit for your CMA exam at home, in your own house. Which, I love innovation, but I'm having a hard time imagining how you can possibly ensure that people aren't cheating. Anyone who's taken a test at a Prometric center knows- at least the ones I went to- they’re pretty strict. They check your pockets; you have to lift up different articles of clothing. They've got cameras everywhere. The computers are all locked down.
David Leary: So, it's extremely different than your home environment. I see where you're coming from.
Blake Oliver: Now, you're going to have the choice; you can do either in-person at a Prometric test center, or you can do it remotely using Prometric’s ProProctor service. So, this is a new service offered by Prometric. The exam fee is going to be the same for both in-person and remote testing. It’s like way it works apparently, is how- have you ever done one of those online notary services? You basically do it through-
David Leary: You signed on my mortgage, and somebody comes to your house?
Blake Oliver: Well, no, but so now, you can do a notary where it's just a Zoom call.
David Leary: Oh, it’s like a virtual notary-type thing?
Blake Oliver: Yeah. And you hold up your ID, and they do all that stuff virtually. There’s some states that allow this. So, this is reminds me of that. The Proctor is on your webcam. Supposedly, you have to leave your webcam on, your microphone on, but I'm wondering, wouldn't it be still really easy to cheat because you just have something slightly out of view? Right?
David Leary: And at this point though, anybody taking this test has probably done online exams like this for the last two years in school. And everybody's pretty good at it, and the ones that are gonna cheat, are gonna cheat. So, maybe they've just, “It's a pointless argument,” I don't know.
Blake Oliver: Maybe there's a way to do this. You could use AI. If you've got the webcam on you, you're taking this on your laptop, the webcam’s on. So, it's looking at your face, and if somebody is side eyeing something on their desk, you could identify that behavior and flag them. And then the Proctor could get on and say, “Show me your work area.”
David Leary: But you just put a big, huge monitor behind the monitor you're looking at, and then nobody even knows.
Blake Oliver: Obviously, there's a lot of stuff they have to figure out, but it's kinda neat. And I would hope the CPA exam would eventually do this if it ends up being actually secure. I don't know, maybe another solution is, the exams are just so time-constrained anyway, that it's hard to cheat. You don't have time to look anything up. You have to know it. So, that's another way that you can- or another reason why you shouldn't have to go to a Prometric testing center. Anyway, I thought it was cool. So, it's called Prometric ProProctor. You can check it out at prometric.com/ProProctor. And they say they use AI-powered anomaly detection. Do we have anything else?
David Leary: This is not app news, this is just more of, every week’s another ridiculous Metaverse-y story.
Blake Oliver: Oh, yes, please. I love the Metaverse now; it's my favorite thing.
[00:43:50] The Deloitte-iverse?
David Leary: Well, this time, it's Deloitte. So, Deloitte is launching Unlimited Reality, an experience and impact offering for virtual worlds.
Blake Oliver: Tell me more!
David Leary: Part of this is they have a studio, and the studio is called Dimension10 Studio to provide both the physical and virtual destination, and innovation space, where Deloitte professionals and clients can develop and test breakthrough capabilities that leverage virtual worlds, powered by enabling technologies, AI, Blockchain, IoT, AR, VR, 5G, that requires the most advanced computational infrastructure and skills.
The studio's name is in reference to the 10th dimension. In theoretical physics, the 10th and final dimension captures the unlimited possibility of the universe in a single point, much like the promise of virtual worlds do for clients.
And then it just goes on and on and on. This is a crazy press release. It just goes on. It has all the keywords. They're doing a partnership with Nvidia, and how that's going to have- this is actually the best sentence. The Dimension10 Studio will be built on technology foundation of Nvidia-certified systems with Nvidia RTX GPUs to power omniverse enterprise completed-
Blake Oliver: You can't even finish it.
David Leary: Complimented- I can't take the breath. There's no space to breathe in this. It’s just all bananas, I don't know.
Blake Oliver: I guess this makes FloQast launching its own TV studio seem small.
David Leary: I watched about half the first episode.
Blake Oliver: What'd you think? I haven't finished it yet.
David Leary: Yeah, exactly. That's where I'm at.
Blake Oliver: So, we're talking about the new FloQast- what is it called? It's an online web series called PBC. My former employer decided to take a piece of their $110 million raise. Recently, they raised $110 million. They're probably spending millions on this show.
David Leary: I'm a little confused even on the premises. She was at a big firm, and now, she works for a startup? Is that the storyline? So, it’s not even a show about an accounting firm?
Blake Oliver: It's a show about an accounting department in a startup. The main character, I forget her name, she's working in public-
David Leary: Oh, so this is going for two things at once. It’s going for startup jokes, and the accounting department jokes.
Blake Oliver: Yeah. Well, ‘cause I think it would have to be an accounting department in a startup to make for interesting TV at all, potentially. That's my main criticism of this, is there's a reason that we don't have TV shows about accounting. It doesn't make for great drama. Not like cop shows, or doctor shows, or nurse shows, or whatever, hospital shows. The joke now with the pandemic is that we now have more shows about doctors than actual doctors.
So, I watched it and it's not bad. The production value is really great. I didn't laugh out loud though. It's very clearly a knockoff of The Office, and they have, of course, two actors from The Office on it. But I also didn't like The Office when I first saw it. The first episode or two of The Office that I watched, I was like, “What is this? This is not funny.” And then it grows on you. If it becomes that kind of show where the inside jokes get really hilarious, then I could see it. But it wasn't bad; I'm going to keep watching. I'm going to watch the rest of-
David Leary: The production quality is excellent. It's not David and Blake with their webcams, messin' around. It's real deal stuff.
Blake Oliver: It's real stuff. And I'm excited that there's a show about accountants, and that we have a web series, and it makes all the inside accounting jokes. And Peter Elinto, Olinto, Elinto, I didn't take Becker, so I don't know how to say his name. But he does a cameo in it; he's the top instructor for them.
David Leary: I'll let my son watch it. My son probably has watched The Office seven times, so I'll have him-
Blake Oliver: Have him watch it tell us, does he get any of the jokes? That's what I want to know.
David Leary: Because that's where it has to cross the line, right?
Blake Oliver: So, if you want to check this out, go to YouTube and type in FloQast, F-L-O-Q-A-S-T. The show is called PBC. And if you don't know what that means, you're not an accountant. And I'll report back to you next week. But David, I think we have to go, because you said you have a hard stop.
David Leary: This is it for this week.
Blake Oliver: Before you do, where can people get in touch with you, online?
David Leary: I'm on all the socials, at David Leary.
Blake Oliver: I am at Blake Oliver. As always, David, it's a pleasure chatting with you about the latest in accounting and technology, and whatever else we want to talk about every week.
[00:48:01] Ears Forward
David Leary: Well, before you go, don't forget to plug-
Blake Oliver: Earmark?
David Leary: Earmark CPE. You could get CPE credit for this.
Blake Oliver: Listener, if you haven't heard it, you can now get continuing professional education credits for listening to this podcast episode. Go to earmarkcpe.com, download the mobile app, find The Cloud Accounting Podcast, and in a couple of minutes, you can take a quick quiz and get an hour of CPE for the episodes you've already listened to.
David Leary: And is it true- I think I saw you tweet- now, 600 people are now getting CPE credit using your app, listen to podcasts?
Blake Oliver: So, as of mid-January, we have 600 people signed up on the app. I don't know exactly how many of them have earned CPE, but it looks like-
David Leary: Oh, they intend to. It's always intentions. They intend to.
Blake Oliver: Well, I think we've had definitely, more CPE hours issued than users so far. So, that indicates on average, everybody has taken at least one course, which is really cool. And we're adding more. We've got 12 channels on the app. I'm adding four more channels this week, I think. Channels, meaning shows, podcasts, and YouTube channels. 12 authors and 24 hours of CPE, that's going up rapidly. By the time you hear that, that will be obsolete. So, this is going to be the new way to earn CPE, conveniently, on the go, in the palm of your hand. It’s really exciting.
David Leary: That's exciting to keep watching the progress on this.
Blake Oliver: It’s just so cool, ‘cause the feedback has been amazing. Thank you, everyone. And did I mention it’s completely free? We're going to have a subscription option eventually, but there will always be free CPE available. You'll always be able to get CPE for free, for listening to The Cloud Accounting Podcast.
David Leary: Except for the week when deadlines hit, and then you can read it up.
Blake Oliver: Surge pricing, right?
David Leary: Here to surge price the CPE.
Blake Oliver: Well, we'll have end of the year specials, for sure. That'll be the deal. Alright, David.
David Leary: Wonderful. Take care.
Blake Oliver: Bye.
David Leary: Bye. Time for the classifieds.
[00:49:52] Oh My Fraud: A True Crime Podcast for Accountants
Blake Oliver: Hey, podcast listeners, it's Blake, and I wanted to let you know about a new show I'm working on with CPA/comedian, Greg Kyte, and blogger/former CPA, Caleb Newquist. It's called Oh My Fraud, and it's a podcast all about financial crimes. That's right, a true crime podcast for accountants, by accountants.
Caleb and Greg are going to come together every couple of weeks to unpack their favorite frauds, and explore the circumstances, psychology, and interpersonal dynamics involved. They also fully indulge in victim-blaming the defrauded widows, orphans, infirm, and feebleminded, because who can resist?
If you fancy yourself a trusted advisor or prefer your true crime with spreadsheets instead of corpses, listen to this show to learn what to watch out for, and to keep your clients, your firm, and even yourself, safe. To subscribe, go to ohmyfraud.com, or search "oh my fraud" on Apple Podcasts, Spotify, or wherever you get your podcasts.
[00:50:52] How to advertise in these classifieds
David Leary: Want to get the word out about your newsletter, webinar, party, Facebook group, podcast, e-book, job posting, or that fancy Excel macro you just created? Why not let the listeners of The Cloud Accounting Podcast know by running a classified ad? Hit the show notes for the link to get more info.
