The Accounting Podcast

Blake and David dive into the economic implications of Trump's election victory, including proposed tariffs that could significantly impact businesses and inflation. They explore potential tax changes under a new Trump administration, from corporate rate reductions to the elimination of the SALT cap. They also examines an alarming $47 million IRS fraud scheme targeting tax practitioners and debate the future of Bitcoin as speculation grows about a potential national Bitcoin reserve.


Chapters
  • (00:00) - Welcome to The Accounting Podcast
  • (03:05) - Avalara Crush Conference Insights
  • (07:48) - AI and the Future of Tax Compliance
  • (13:21) - Trump's Economic Impact
  • (17:26) - Tariffs and Global Trade
  • (25:40) - Tax Proposals and Implications
  • (36:53) - Bitcoin's Meteoric Rise and Market Speculations
  • (47:43) - AI Adoption in the Workforce
  • (49:53) - IRS PPS Fraud: A Deep Dive
  • (01:00:49) - PCAOB Drama and Audit Deficiencies
  • (01:06:49) - BOI Reporting and AICPA's Response
  • (01:10:33) - Closing Remarks and CPE Information
 

Show Notes
How Trump Won the Economy-is-Everything Election
https://www.livemint.com/politics/news/how-trump-won-the-economy-is-everything-election-11730973573508.html

How Will Trump’s Universal and China Tariffs Impact the Economy?
https://taxfoundation.org/blog/trump-tariffs-impact-economy/

Which Workers Are Embracing AI?
https://www.chicagobooth.edu/review/which-workers-are-embracing-ai

Actions Were Not Taken to Timely Strengthen Practitioner Priority Service Telephone Line Authentication Controls
https://www.tigta.gov/sites/default/files/reports/2024-10/2025ier001fr.pdf

Fraudsters get $47 million from practitioner priority service line scheme
https://www.journalofaccountancy.com/news/2024/nov/fraudsters-get-47-million-from-practitioner-priority-service-line-scheme

Freddie Freeman on World Series MVP, Ohtani Media Mayhem and His Surprising Backup Career | Ep 109
https://www.youtube.com/watch?v=ZimDH_hW7LU

PCAOB board member complains of persecution by senators
https://www.accountingtoday.com/news/pcaob-board-member-complains-of-persecution-by-senators

AICPA to Congress: Delay needed in BOI reporting deadline
https://www.thetaxadviser.com/news/2024/nov/aicpa-to-congress-delay-needed-in-boi-reporting-deadline

New Development Re: BOI Reporting – 44 Congressmen Seek to Delay FinCEN Beneficial Ownership Reporting
https://gpwcpas.com/new-development-re-boi-reporting-44-congressmen-seek-to-delay-fincen-beneficial-ownership-reporting/

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Transcripts
The full transcript for this episode is available by clicking on the Transcript tab at the top of this page

Creators & Guests

Host
Blake Oliver
Founder and CEO of Earmark CPE
Host
David Leary
President and Founder, Sombrero Apps Company

What is The Accounting Podcast?

The Accounting Podcast (formerly the Cloud Accounting Podcast) is the world's #1 accounting, bookkeeping, and tax podcast! Join us weekly for a roundup of accounting news, analysis, and interviews. Plus, earn free NASBA-approved CPE credits for listening with the Earmark app. Learn more at https://earmarkcpe.com.

There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.

Blake Oliver: Tariffs are taxes. Let's say it again with me everyone. Tariffs. Tariffs are taxes. I want a t shirt that says tariffs are taxes. I want the AICPA doing an education campaign about how tariffs are taxes. I think we can all agree as an accountant community that tariffs will have a significant negative impact. High tariffs will have a significant [00:00:30] negative impact on many of our clients on midsize businesses, on Main Street. Businesses like this could be a very, very bad thing.

David Leary: Coming to you weekly from the OnPay Recording Studio.

Blake Oliver: Hello and welcome back to the Accounting Podcast, your weekly news roundup for accountants and the number one podcast for accountants in the world. I'm Blake Oliver, I'm.

David Leary: David Leary, and it's a whole new world since our last episode.

Blake Oliver: Trump won and [00:01:00] I would like to say I was right. I should have bet on those prediction markets. I need to start putting my money where my mouth is. David.

David Leary: I don't think you're allowed to. I think they're supposed to be banned from U.S. citizens using them. And now. Oh, I know, but people are putting money, the founders money, right. Because he was accepting us people's money. So they locked down his accounts.

Blake Oliver: Well, the founder of one of those popular prediction markets got his house raided by the FBI, I think, and, and his phone was seized. But, I mean, who knows, I guess. Yeah. We're not allowed to do that [00:01:30] here in the US, I guess. And so you have to move money offshore and then bet offshore. But, uh, hey, you know, that's never been an obstacle, right? I should have done it. Yeah. There was that one whale who bet, like, tens of millions of dollars. And I think he got, like, a $90 million payout because he saw it coming, but, you know. Oh, well, um, next time I'll put my money where my mouth is. Not this Trump one. We will talk about what that means for accountants, for tax people, for taxes, for [00:02:00] our clients. I have some thoughts on that. And there are some competing priorities in the administration that may be at odds with each other. Tariffs. Immigration. Inflation. How do you pull the levers on all those if you're Trump, in order to come out on top, might be challenging. We've also got updates from our travels this week. David, you and I were in Austin at the Avalara Crush conference. That was a lot of fun. Love, Austin. I didn't even recognize [00:02:30] it since the last time I was there. Although a lot of.

David Leary: Construction, a lot of glass.

Blake Oliver: Skyscrapers everywhere.

David Leary: The glass.

Blake Oliver: I was a little sad walking down Rainy Street. You know, most of those, at least half of those old bars that were in old houses are gone now, replaced by those skyscrapers. But, you know, there's a price to be paid for progress. And if you just walk around Austin, it feels Energetic. It feels young. It feels like a place I would want to live in my 20s and 30s for [00:03:00] sure. That was fun. And, uh. Yeah. Why don't why don't we start with, uh, with that? David, what do you think about Avalara crush?

David Leary: I think overall we went in not knowing what we were we were going to get. They haven't done that conference since 2019. We're used to going to conferences with accountants that have lots of clients, with the exception sometimes when we go to like Sage Intacct or Oracle's NetSuite, you talk to actual controllers like people, business owners and controllers, right? So this [00:03:30] was a little bit more like that. It wasn't as big, right? It was very heavily employee a lot of Avalara employees there. But you got to meet, you know, uh, customers. Right. And they're the they're the head of the tax department or whatever it might be. The one thing I think from an accountants perspective, it feels like everybody there that's involved in salt kind of got there accidentally. So even if they're new to the Avalara @DavidLeary ecosystem. They've been installed for 25 years. Like, once you're in salt, you're in it for a very, very long time.

Blake Oliver: Stands for [00:04:00] state and Local Tax. And for those who aren't familiar with Avalara, that is their bread and butter powering all of the calculations that go into sales tax. What's interesting about Avalara is they are this massive company. They were public. They're now private again. They haven't yet gone public again. Have they gone back to being private? But they did like $1 billion, over $1 billion in revenue last year. And or maybe it's this year, I don't remember exactly what. And [00:04:30] they've done it all by being essentially a middleware company. They sit between your ordering and invoicing system and your customers and calculate those sales taxes. And and they have the definitive database of like every jurisdiction for sales tax in the country. I think they're global now. Right. So it's like across the world And every single.

David Leary: Image I can bring up that supports your numbers. I would love to see that.

Blake Oliver: Yeah. So what we've got on the screen, why don't you describe this David.

David Leary: So [00:05:00] they basically have two pieces of data they have. One is their own tax content. So they have 9000 tax codes for 20 plus industries, 330,000 or 330 categories, 900,000 rules. So for 30,000 jurisdictions. But they also have a product database now. So they have 500 million UPC codes five 600.

Blake Oliver: Oh yeah, 500 million, 3 billion products in their catalog, 88,000 brands.

David Leary: So they have all this data. And you're right, I like how you described it as they're [00:05:30] playing the middleman. Yes. They're the middleman between the the sales taking place in your clients, but they're also the man with the government. They're, they're they're facilitating you.

Blake Oliver: To calculate and file your taxes. Exactly. And if you're like a NetSuite company, a company that's on NetSuite, you plug in Avalara. It does all the sales tax calculations and and they've got that database. Um, and one thing that also struck me was just the like the vibe of that conference is very consistent [00:06:00] with the CEO's message at the keynote. Um, the CEO and, you know, I actually forgot his name, David Scott MacFarlane. Scott MacFarlane. Um, you know, Avalara started out like, as this, like, little company on Bainbridge Island in Seattle. And, you know, then they took over Hawk Tower, and now they're this massive enterprise. But it doesn't feel that way. When he gets up on stage, it still feels like a family, small startup kind of business. Right. Well, he.

David Leary: Comes off genuine energetic. He comes off gracious. [00:06:30]

Blake Oliver: And his message is making taxes less taxing. And that's all his message is. We're going to make taxes less taxing for you, make this whole compliance thing easier. And they're just very consistent about it. And I think it works. It works really well. And obviously that's why they're so popular. In addition to simply having this incredible, uh, database that lets you actually accurately calculate and file your taxes, um, [00:07:00] your sales taxes. So that was cool. I was on a panel discussion about AI, uh, and I showcased some use cases of AI for the attendees. Um, and I did a little survey. I always do this. I ask who here in the audience has used ChatGPT or Claude, and I got the typical response at this event, which was like 20%, perhaps. Yeah. And and that's accurate. Um, I have a story [00:07:30] about the, uh, which workers are embracing AI, and it's a, it's a survey of like workers, professionals in Denmark and accountants come in at like maybe 20, 25% of actually used AI in their job. So far. So three quarters have not even used AI for a core job function or a related job function yet? Um, so I tried to show I showcased some examples like let's, let's dictate an email using Super Whisper. Um, let's do some sales tax research [00:08:00] using perplexity AI.

David Leary: Let's then practical things they could use it for.

Blake Oliver: Yes. And well, one I did that, you know, I don't know if that this might bother Avalara is I took a product catalog and I uploaded it to ChatGPT, and I asked it to tell me which products are taxable or not in the state of Arizona. And it got it like 80% correct the first time. But then when I had to iterate and and correct its mistakes, it got it up to, I would say 99% [00:08:30] correct. You know, at least I think it was like 20 things and it got 19 of them. Right. So we're getting there with the AI. Um, and it sort of makes me think, I wonder what's going to happen with Avalara and all these companies that do this kind of middleware type of activity when we have AI available because you walk around the avalara. Conference and the show floor and it's featuring a lot of Avalara products.

David Leary: Just like 26 products, 26 products they have.

Blake Oliver: And really, if you think about it, what are those [00:09:00] products? They're really just user interfaces on top of this database of products and sales tax rates and jurisdictions. What if you can just connect an AI chat bot to that database? Do you even need these products anymore? It changes how the customer interacts with them. Potentially you don't need to write deterministic rules to then go get the information from the database and apply the correct sales tax rate. You could just have an AI do it right. The [00:09:30] database becomes the knowledge and actually internally at Avalara. I wonder how this is going to affect the people who work there. Because right now I imagine that they have lots and lots of people whose job is simply to monitor the changes in tax rates, legislation and all of these different levels.

David Leary: Update the rules on the back end.

Blake Oliver: Yeah, well, could an AI do that? Could an AI create this database and it potentially could create a competitor to Avalara. It's been very hard to compete with them because it's so hard to create [00:10:00] this database, this comprehensive database. But could an AI go out and search through all of the tax rates at the state, city, local, district, whatever level, and create it and do it a lot faster than it took the humans to do it over the course of decades?

David Leary: Yeah. And I think one of the products they launch is they have an automated tariff code classification. So it's using AI, machine learning, natural language processing, different methods and other technology to quickly [00:10:30] categorize product catalogs. So kind of what you demoed there, they're building that. But what's interesting is how they they view things. And one of the comments they made is that they're on a march to be a part of every Transaction. And the reason they're on that march, they always you know, he said when they found it, they always thought that would be a good march to be on. But the reason why is the government's going to want it. The government, you know, with E-invoicing in Europe and things like that, the government wants instant calculations, instant reporting and getting paid instantly [00:11:00] off of every transaction. And they feel like that's the march they're on. They're actually, I think, ahead of competitors in Europe like they are, I think might be leading the globe in e-invoicing solving this for those countries.

Blake Oliver: David, I want to talk about the next event I was at. But before that, let's thank our sponsors and read our first message. Sponsor message.

David Leary: Our first sponsor is on pay. If you pull up the banner, I'll read it. Okay. Forbes and CNBC rank unpaid number one for small business payroll [00:11:30] on pay really knows how to get payroll done right for every client you serve, no matter how complex their software is, easy to use and backed by outstanding service levels, they handle new client onboarding for free, and have experts on call to keep you and your clients on track. The system includes multi-state payroll, local tax filings, integrated HR tools, and more with no hidden fees. And when you join on Pays Partner program, you get a custom dashboard to easily manage all clients in one place, plus gain [00:12:00] exclusive perks like revenue sharing on disk or discounts. Free payroll for your firm, co-branding opportunities, premium swag like the shirt I'm wearing, and more. Onpay helps you run your practice efficiently while providing exceptional payroll that your clients can count on. To learn more about using on pay for your firm and clients, that might be farms, start ups, restaurants, bars, doctors, nonprofits, gyms, franchises, or dentists. Head over to The Accounting Podcast dot promo Onpay. That is The Accounting Podcast [00:12:30] dot promo forward slash Onpay.

Blake Oliver: Thank you. Onpay. All right. I said I was going to talk about the next event, but actually I want to switch back to Trump. I want to talk about the Trump victory and what that means for us from a tax perspective. And then we'll come back to what else we were doing this week. So Trump won. I think it's because of economics. That was my argument a couple of episodes ago. And the Wall Street Journal, of course, immediately after Trump won, published a piece [00:13:00] all about this. I should have written this how Trump Won the Economy is everything election. I don't remember them talking a lot about this before he won, but I guess, I don't know, maybe I just missed it. It wasn't as.

David Leary: Direct. If you go back, like you said, like Clinton versus Bush at that time.

Blake Oliver: It's always the economy.

David Leary: It's always it was never that clear in this election. But essentially it was.

Blake Oliver: Again, it's because the economy, economics is what underlies everything. So what people talk about is not [00:13:30] always what they vote about. And that was my argument, is that people are going to vote with their wallets, but other things will get blamed. It's not always obvious what is really happening when you listen to, like, the political discourse and of course the the media filters everything, right? So they have a certain viewpoint and they don't always get to the core issue of what's really going on anyway. Wall Street Journal pointed out that in this [00:14:00] election, 40% of voters identified the economy as their top issue. And among those voters, Trump was favored over Harris 60% to 38%. That's a big spread. 2022 point spread there. And we all know what's been going on with inflation over the last few years. Even though it has cooled, people are still feeling the pain and especially at the lower income brackets. Groceries, [00:14:30] gasoline, food a lot of stuff is still up 20% and it's not going down. It's just that the price increases have slowed. The consumer price index was nearly 20% higher in September than in January of 2021. That's a lot. That's a big change right now for guys like you and me, David, who do pretty well. A 20% increase in our daily living expenses, like for groceries, is something that doesn't feel great, but it has barely [00:15:00] changed. You still.

David Leary: Notice it. You absolutely notice it and think about it every time, right?

Blake Oliver: But if you were making $40,000 a year, David, it would be a much bigger.

David Leary: Bigger impacting percentage.

Blake Oliver: A much bigger deal. And we should also mention here housing costs are a big factor in this, right? Because the lower your income, the higher percentage of your income, your your rent is. And housing affordability has reached Unaffordability has reached record levels. So it's like impossible now [00:15:30] to buy a home on a middle class income. Um, I mean, you can't. A lot of homes are now, like, in nice neighborhoods are like $1 million or more. And to afford it, your average CPA could not afford one of these homes. Two together. Maybe, but it's pushing it. Is that crazy or what? So we have that, um, even though job growth is good and the economy overall, if you look at the big picture, is doing great, especially compared to the rest of the world. A [00:16:00] lot of those gains are uneven. And so people at the lower end of, you know, the, the, the wage, uh, at the lower end of wages are hurting the most. And, you know, Trump has turned the Republican Party into the Populist Party as a result.

David Leary: Yeah, it was a perfect storm. It was the inflation, the interest rates, low wages, can't afford housing. It's the perfect storm.

Blake Oliver: Now, Trump has promised that inflation will vanish completely under his leadership. [00:16:30] And this is where I'm skeptical, Because there's a lot of proposals, a lot of things that Trump wants to do that could actually drive inflation a lot higher. And as I've said on the show before, tariffs are one of those things. And the Tax Foundation did a fantastic analysis of how the Trump tariffs could affect the economy. And basically what he has proposed, which is a 60% tariff on Chinese imports, a [00:17:00] 10 to 20% tariffs on all imports, a 25 to 100% tariff on Mexican imports would have a terrible impact on the American economy. And, um, the Tax Foundation put together a chart not only of their analysis, but of the analysis of other groups. And there's only like one group in this entire analysis that thinks that tariffs will be helpful. The rest find a negative impact on GDP. [00:17:30] The Tax Foundation found, for instance, that a 10% let's do the 20%, a 20% universal in 60% China tariff would have a 1.3% impact on GDP. And if China retaliates partially, it could be a -1.7% GDP effect. And what was GDP growth over the last year? Something like [00:18:00] two low twos, two point something that's like serious right. Um, so that would that would basically counteract a lot of the economic growth that we've had. And it would increase the prices of goods substantially.

David Leary: So yeah, go, go, go right against the people that just elected him to some extent. Right. Low income earners that are struggling to make ends meet. And now they're going to go to Walmart and everything's Gasoline might be cheaper [00:18:30] because he's going to pump pump, pump. Right. But overall, everything they buy at Walmart might be 20% more.

Blake Oliver: Right. And it's true some of that 20% tariff might be absorbed by the Chinese producers. But all the evidence, everything that we've seen about how tariff works over the last 100 years says that the bulk of it will be absorbed by Americans because the tariffs are paid not by the Chinese producers, but by the American import companies, [00:19:00] who then pass on that cost to consumers in the form of higher prices. Um, and.

David Leary: Nobody's going to eat it for fun. Like, I'm a nice guy. I'm just going to eat the tariff. Just pay it.

Blake Oliver: Now, let's say you then start deporting 10 million people. Now, you can't do that all in one year. J.d. Vance has said that he wants, like the administration would like, to deport a million people a year. Something like that. As what I remember from his podcast appearances. [00:19:30] Well, that's also going to have an inflationary impact. If then it's harder to find workers wages rise. I'm not saying this is a good or a bad thing. I'm simply saying this is what happens when you lower the supply of labor. So you lower the supply of cheap labor, labor becomes more expensive and prices go up. So this is, I think, going to be the big challenge of the administration is somehow delivering on all these promises while keeping [00:20:00] inflation low or lowering it or getting it to that. Whatever Trump's idea of no inflation is, which historically has been 2%, I think is basically equivalent to, you know, not no inflation. It's so small that nobody really notices it.

David Leary: Like, how is he going to keep that promise if his policies are going to contribute to inflation? Yeah.

Blake Oliver: Yeah. Welcome to our live stream viewers! Gator NYC says I is great, but [00:20:30] not mature enough to trust with scraping countrywide tax codes without screwing up something. Well, that's what they were saying about self-driving cars not that long ago. And now we have them driving all over Phoenix. And you look at the data. 22 million miles driven, 30 major accidents, half of those caused by human drivers rear ending the Waymo's. Uh, if you look at the data, the Waymo's are now much better than human drivers. They're much safer. And we should probably all be just riding in Waymo's if we wanted to save thousands of lives a [00:21:00] year. So you say that. But that's because the AI is new. I think in a few years at least, maybe this is a five, ten, 20 year kind of thing. It could take a while. We're going to get to the point where you could have an AI scraping, uh, legislation, scraping changes to statutes and updating a database, and you'd have some sort of human in the loop, But maybe instead of ten people doing that, you could have one person doing that.

David Leary: Well, yeah, because it could just be working 24 hours a [00:21:30] day scraping, looking for differences. Then your team of humans could interpret that it doesn't have to do all the work, but if it can just surface the changes.

Blake Oliver: Exactly. Uh, boring accountant says I'm on the Onpay website, but I can't find the swag. David, we got to sort that out from the ad.

David Leary: Shoot me an email.

Blake Oliver: Shoot, shoot, David an email. David at earmarked me and he'll he'll hook you up.

David Leary: Oh well we'll get the onpay team on that.

Blake Oliver: Awesome. Um, light em up, says the Ben Stein scene in Ferris Bueller's Day Off perfectly predicts [00:22:00] what tariffs will do. Yeah, they're really not good for the global economy. And I know I was somebody on LinkedIn, responded to my tariffs post and said that, you know, well, the point is to bring manufacturing back to the United States. And I understand that. But you got to understand that, like if the other countries reciprocate with higher tariffs, then our exports become more expensive and that reduces our exports. So like tariffs are bad for everybody. And retaliation is almost always [00:22:30] what happens because politically the leaders in China can't just let us raise tariffs. Their people will get upset. So they put more. They put tariffs in place themselves. Right. It becomes a vicious cycle that reduces global economic output and could potentially send us into a global recession or contribute to making it worse, just like the Smoot-Hawley tariff did during the Great Depression. Hunter says, let's get the mass deportation going and get -6% GDP. Yeah.

David Leary: I [00:23:00] think the thing to keep in mind with this, right, I think Trump uses these things as negotiating tactics. He might actually do any tariffs, but he's just doing that to make China to come to the table to get other concessions that he may or may not want.

Blake Oliver: And that's the Trump is playing four dimensional chess argument.

David Leary: It's four dimensional. But it's yeah, right. I mean I get it exaggerates for effect right.

Blake Oliver: So that's why I've just stopped watching the news. And like, I refuse to get baited into getting upset about this stuff because it's it's [00:23:30] like just going for clicks. It's like if you're watching, you know, mass media and you know, like, just don't pay attention to that stuff until it really happens, right? It's just like all these cabinet appointments that have been floated around, you know, the Matt Gaetz Gaetz thing, I feel like that's completely like what you're talking about, David. That's not a serious appointment, but it just makes everything else easier to get through because then you say, okay, fine, we won't do Matt Gaetz. Right. But you'll accept, I don't know whoever else is not like a, uh, been accused of trafficking [00:24:00] in underage girls, you know, like it's crazy. Uh, Giles said, I think I think David is spot on. Negotiation tactic. Yeah.

David Leary: And you're right about the media or trying to make heads and tails of things, because I almost fell for it for this. I mean, if we go back to the summer, we actually titled an episode if Intuit would go red this summer because the GOP was heavily going after direct. They want to get rid of direct file. The GOP does, but like I was brought to the show but it now current articles are trying to tie that to a Trump policy. And I'm like, I [00:24:30] can't find a Trump policy, right? You raise that up and you're right. You can't. Like there's just a lot of noise. Like how do you sort through it all?

Blake Oliver: That's right. Um, so let's get to the actual tax stuff. Uh, you know, how will, uh, where did I put it? Right. What what changes what key tax proposals have been floated and what might happen. So corporate tax rate reduction. Trump has proposed lowering the corporate tax rate [00:25:00] from 21% to 20%, with a further reduction to 15% for companies manufacturing products in the US. That, to me, is a much better option to stimulate domestic manufacturing than tariffs. So a.

David Leary: Little bit more of a.

Blake Oliver: Carrot. That's a great idea right. Although somebody pointed out to me in one of these conferences that now it's going to it actually could create a ton of work for accountants, because with the corporate tax rate going down to 15%, that would make it better [00:25:30] to be like a C corp than to be an S Corp. So all of the all the folks who love to do entity stuff, like all the, you know, everybody who wants to. Everyone's going to want to change entities now, right? And what's that? A ton of work changing entities, doing new tax returns, all this stuff. Maybe maybe that could help. I don't know, it could help your business. Um, there's a push.

David Leary: I suspect that the corporate tax rate reductions, that's probably for sure going to happen, right? I imagine highly likely bonus [00:26:00] depreciation.

Blake Oliver: There's a push to reinstate 100% bonus depreciation, which is currently 40% and scheduled to decrease to 20% next year. This would influence asset placement and investment decisions for businesses because, hey, you can write it off 100% in your first year. That's great. I think generally that's actually quite a good policy, is that if you want businesses to invest in equipment, then make it 100% depreciable. [00:26:30] You know, for tax purposes in the first year, elimination or adjustment of the salt cap, Trump has suggested removing or increasing the $10,000 limit on state and local tax deductions for individuals, and that could alter tax payment strategies dramatically. That would be good for all the folks in blue states. Immediate deductibility of R&D expenses. So reversing the current requirement to capitalize on amortize R&D research and development costs over five years, [00:27:00] allowing businesses to deduct these expenses in the current year. That's also a very stimulative thing because. Right. Businesses are more likely to invest if they can take the deduction and reverting the section 163 J calculation that proposes returning to an EBITDA calculation for business interest limitations, making it less restrictive by adding back depreciation and amortization.

Blake Oliver: What else? Enhancing [00:27:30] the qualified business income deduction. Aiming to expand or make permanent the 20% deduction on certain flow through income, although it currently excludes many professional services like accountants. Why didn't we get that? We should have gotten the qbi. Come on. Our lobbyists failed us. Geez. Uh, elimination of the stock buyback excise tax. There's a 1% excise tax on public companies buying back their own shares. That would, uh, counter the current administration's proposal to increase it. Oh, [00:28:00] those all those tax exemptions for, like, tips, Social Security, overtime, firefighters, police officers and military personnel. I feel like those are the ones that are going to get left behind. You know what I mean? Yeah. It's like because they're very expensive and Trump already won. He doesn't have to run for election again. So like he doesn't he doesn't need to deliver on that. Yeah right. That's like those are like the chocolate milk and the drinking fountain. You know, promises [00:28:30] like I can't believe anyone ever thought that would happen, but hey, we'll see.

David Leary: And those are pretty big I think like over time the impact is almost 4X5X more than what he's promising to invest in modernizing the military. Like, yes, the hit, the hit of doing that action is pretty major.

Blake Oliver: It would be a lot. It would it would really reduce revenue significantly. So, um, there's some other tax credits we don't have to go into, uh, doubling the standard deduction. I feel like that's also [00:29:00] one that just won't probably won't happen. So yeah. Anyway, that's kind of a summary of the changes. If any of our listeners think I missed anything, you know, let me know here in the live stream. Um, and I want to highlight a comment from Baja. Immigrant people seem to want tariffs. There doesn't seem to be much backlash or uproar about this from the electorate. It confounds me. I live abroad, but I see how tariffs work when I import from the US. What will happen to the cross border businesses? [00:29:30] We have hundreds, maybe thousands of US companies with part of their operations across the border. Kenworth. Honeywell. Skyworks. Too many to list. Yeah, I think that what will happen is that these companies are going to start lobbying immediately and aggressively to make sure that these tariffs, if they happen, they happen in a much smaller percentage than what Trump's proposing. Um, because it would just create chaos. You know, all these companies built manufacturing facilities in Mexico, for instance, and [00:30:00] they, you know, manufacture their ship across the border. You're going to you're going to tariff their their own imports 100%, like, what's going to happen to the cost of like, a dryer and a washer dryer? And they did this.

David Leary: 30 years ago and they've just been operating. This is their normal business activity at this point. Yeah. Just how they operate.

Blake Oliver: And like you can't just, you know, overnight relocate everything to the United States even if you wanted to. Right. There's all these supply chains that have been built. It takes decades to do this kind of stuff. So, [00:30:30] um, I Hunter says most Americans are stupid and don't even know how a tariff works. I think the problem is that, yeah, actually, why do we use this word tariff? We should honestly just reeducate everybody. It's a tax. Tariffs are taxes. Let's say it again with me everyone. Tariffs. Tariffs are taxes I want a t shirt that says tariffs are taxes. I want the AICPA doing an education campaign [00:31:00] about how tariffs are taxes. I think we can all agree as an accountant community that tariffs will have a significant negative impact. High tariffs will have a significant negative impact on many of our clients. On mid-size businesses on Main Street, businesses like this could be a very, very bad thing, and we need to figure out how to stop it. And we have to educate people. Tariffs are taxes, people. Maybe I should have titled the episode that tariffs our taxes. Tariffs are taxes.

David Leary: Retroactively [00:31:30] retitled the episode.

Blake Oliver: Maybe. Uh, so there's one more thing I want to show you, David, before we move on. And this is something that my father shared with me. It is really mind blowing. Um, this is a chart. The change in the county level vote margins.

David Leary: You're not sharing, by the way. Oh, here it comes. Well, I'm.

Blake Oliver: Working on it. Give me a minute. Change in the county vote margin since 2020. So it's a little strange at first, right? How do you read this chart? [00:32:00] So it's like a it's one of these. And I apologize to our podcast viewers. You're not going to be able to see it, right? So here I am describing something you can't even see, but it's it's one of those bubble charts. Is that what you call it? Where it's like circles on an x, y.

David Leary: Jackson Pollock. Is that actually what it looks like?

Blake Oliver: Yes, sort of like that, right? So it's all these bubbles of different sizes on this x y axis, and you've got on the y axis, it's the percentage of the county that is white. So from like zero [00:32:30] up to 100% that's the vertical. And then the horizontal axis, the x axis is from you know how much it leaned Democrat versus how much it how much it shifted Democrat versus how much it shifted Republican. And what you see here is that basically in the top half of the chart, where the counties are mostly white, there was a slight shift Republican, just almost evenly, right, slight shift Republican. Um, but [00:33:00] as you move down the chart, you see that in the counties that were less than 50% white. So, you know, minority white or what we say a plurality, right. Majority nonwhite, we should say, um, which also has bigger bubbles because that includes many bigger metros. Right. Large urban areas, large urban.

David Leary: Yeah.

Blake Oliver: They shifted further to the Republican side. So [00:33:30] Trump gained massively in nonwhite populations in major metros. And that goes counter completely to the narrative that we have been hearing. I find that really interesting, really fascinating.

David Leary: And I caved on everything he gained on all fronts. He gained everywhere.

Blake Oliver: But especially in large urban areas and among nonwhite populations. [00:34:00]

David Leary: He even campaigned in California just to make sure he won the popular vote. He essentially he made sure he won on all these fronts. It's kind of an amazing campaign if you want to step back and look at it.

Blake Oliver: And honestly, I'm just glad that it was like definitive and that we aren't having like a we're.

David Leary: Still counting, right?

Blake Oliver: I still have PTSD from last time. Yeah. Um.

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Blake Oliver: Thank [00:36:00] you. Thank you. One more thing on this election news. It is uh we're going to talk about bitcoin David, because the price of bitcoin has skyrocketed.

David Leary: And I've noticed I've mentally noted this I was actually thinking on the dog walk today. Should I sell some of that Bitcoin I have. But the $10 in Bitcoin.

Blake Oliver: That you bought. Yeah. Um maybe maybe you should wait. So right now as we record on Friday afternoon, [00:36:30] the November 15th, it is at 91,267 USD for one Bitcoin. It is on a tear. It is the it is up. This is this is the highest it's ever been since what. Uh 70 K in in March of 2024. And of course, one of our lovely listeners decided to post on Twitter. Adam Turco said, sorry, Blake Oliver, CPA, I had two to BTC hit 90 K and it's my birthday. And [00:37:00] he posted a picture of of us when we had our cloud accounting podcast party at QuickBooks connect. And he's holding crypto CPA. Um, and I know many of our listeners are involved in crypto or hold crypto or believe in Bitcoin. And, you know, I've always been pretty straightforward in saying that I don't get it right. Like, I don't I don't understand like just because it's.

David Leary: Worth more today than it was before doesn't mean it's more legit.

Blake Oliver: Right? I mean, and, [00:37:30] you know, maybe I'm just taking the really long view on this, which is that like, you know, I, I don't think that Bitcoin has any intrinsic value. It's not you know, it's not ideal as a store of value long term. And it's not it's not going to replace currencies. You know it's very expensive and inefficient as an algorithm. I mean so like long term like if I actually like if I actually think about it, Bitcoin should be zero because there's no reason that another cryptocurrency [00:38:00] couldn't take the place of bitcoin, right?

David Leary: Well this goes to another one of those Trump speaking on both sides of his mouth. Because over here he basically you know he got the bitcoiners the crypto community to vote for him. He did. Right. But his real belief is he wants the US dollar to be as strong as possible. Which actually when you're buying Bitcoin you're betting that against the US dollar. So what does what does Trump really want. Does he want digital coin currency. Does he want bitcoin or does he care about the US dollar being [00:38:30] number one. I think he cares about the US dollar being number one.

Blake Oliver: Well I agree with you actually because I buy that. I buy that I think he really believes in that. Like Trump's a nationalist, right. He wants America to be strong. And um, but I have a reason why I think Bitcoin will continue to go up. So even though I'm not going to I should see I should put my money where my mouth is David. Because I actually think it'll keep going up. And here's why. Because the crypto lobby spent a lot of money on this election, and they did really well. And one [00:39:00] of the biggest changes that we could see coming out of the Trump administration when it comes to Bitcoin, is that Trump and his allies are considering establishing a national Bitcoin reserve. So the US government would buy Bitcoin and actually it wouldn't buy bitcoin to start. The government already holds a bunch of bitcoin that it has seized in criminal investigations. It's estimated at over 20,000 or 200,000 [00:39:30] BTC. So 200,000 times 90,000 is how much the US government has right now. And the crypto lobby doesn't want the government to sell that because that would, you know, potentially lower the price. They would rather the government decide to hold it and hold it forever. So They're lobbying to establish a strategic Bitcoin reserve. And then if that happens, what would they like to see? [00:40:00] They'd like to see the government, the federal government buy 200,000 BTC annually. Even more.

David Leary: Buy even more.

Blake Oliver: Buy even more. Accumulating a total of 1 million Bitcoin, which is about 5% of Bitcoin's total supply. So this is how they're going to drive up the price of Bitcoin. They are going to get the US taxpayer to fund fund it because it it can't go up anymore on its own. [00:40:30] Right. Because all the people so far who have wanted to invest and have had the opportunity.

David Leary: But but does this turn it into a this is my conspiracy, a Treasury note, a Treasury note like you're going to you're going to buy some of this because, you know, you can exchange it with the feds for some federal money later on in the future. Is it just. That's what it's now become? It's just a virtual treasury note.

Blake Oliver: Well, but I mean. I [00:41:00] don't I don't know what you mean by that. Tell me what you mean by that.

David Leary: Okay, so I can buy a treasury note, right?

Blake Oliver: Yeah.

David Leary: Right. And give it to my kid when they're born for $100 and they can exchange it one day.

Blake Oliver: Yeah. You get a note from the government with interest, right?

David Leary: Yeah. With interest. And I'm going to take basically, it's actually worthless, right. It's just a piece of paper. I'm going to trade that in and get cash from the government in the future.

Blake Oliver: Or you can sell the note to anyone else who wants it.

David Leary: Exactly. Essentially that's [00:41:30] what Bitcoin is going to be. If that if the only exit is the government buying the value of that, eventually it's essentially the exact same thing. Right.

Blake Oliver: But the thing is Bitcoin's not a productive asset. There's no interest. You don't get interest. So the only reason to buy Bitcoin is if you think it's going to keep going up. This is like any speculative asset. So now the question is not when will it? The question is like it's not going to go up forever. No asset just keeps going up forever. If you believe that I've got a house to sell [00:42:00] you back in 2006, right. So the question is when will it go down? And my guess is that, you know, once, once the government has purchased enough Bitcoin and all of the billionaires who have all this cheap bitcoin that they bought for real cheap have sold most of their bitcoin, at that point it'll collapse and they're all out and it's individual investors and it's the government left holding the bag. [00:42:30]

David Leary: It's the rich guys at the top are going to get kind of an exit kind of right now they're going to be really rich. And you try to flood the market with your bitcoin. The prices go down. Yeah.

Blake Oliver: You can't sell all your Bitcoin. You can't sell it. So so it's it's all on paper right. If you have like $1 trillion of Bitcoin on paper, you can't sell it because that'll drive the price down. So who do you get to buy the Bitcoin? The US government to buy the Bitcoin. You get CalPERS to buy the Bitcoin. You get all the dumb money to buy the [00:43:00] bitcoin. This is just my theory. So and it'll probably be like a you know something that nobody thought of. Oh and here's why I think there could be a problem. You know Bitcoin is based on an algorithm developed how many years ago now by an anonymous guy. We don't even know who Satoshi is. Right. And yeah you can look at the code right. It's it's open source. It's public. But most people don't understand it. Right. You [00:43:30] don't understand it. I don't understand it. Most of the people buying crypto don't understand it. We're just trusting that it works. And what's also been happening over the last few years. Well, we we've been working on artificial intelligence. Right. So let's say that somebody develops a superintelligence and then decides to have it find a weakness in Bitcoin that it can exploit. So far, the whole system continues to work because nobody's figured out how to hack Bitcoin.

Blake Oliver: It's completely [00:44:00] distributed, claims to be unhackable. Nobody can rig it, right? That's that's the value of it, is that there's no central control over it. Right. And that's why the libertarians love it. Well, there's no guarantee that some AI, somebody with an AI won't figure out how to hack it. And as soon as that leaks, as soon as people figure out that Bitcoin is no longer secure and can be manipulated, it's [00:44:30] over. So Bitcoin is not some magical thing that is going to replace the dollar, because it's actually, in many ways way worse for America. If we are dependent on something that we don't control, We control the dollar. Yes, there's lots of inefficiencies in this system. And, you know, like, maybe you don't like the Federal Reserve and you don't like the government, but I would rather have them controlling the store of value. [00:45:00] Then an algorithm that nobody controls. And there's always the possibility. Right. It only takes 51% of the mining nodes to like, change a transaction. That's my understanding, right? It's sort of like majority rules in this case. Like, who's to say that somebody won't gain control over the Bitcoin algorithm somehow, some way? Has there ever been anything that was unhackable.

David Leary: I [00:45:30] mean, there's a lot of hackable bitcoin crime happening. The but it's the argument is, well, we have all these shared ledgers. So we all know there's a traceability to this right? It only works when we all.

Blake Oliver: Agree on the shared ledger. And that only works because we have this algorithm. But if.

David Leary: Somebody breaks the shared ledger.

Blake Oliver: What if somebody breaks that? What if somebody figures out how to hack that? The whole thing comes crashing down. So like I see these two things being at odds. It's like AI superintelligence [00:46:00] is going to basically create ways to hack that we don't know of now and could compromise this code. So, you know, like, why would we do this?

David Leary: I think if you really want to make money, then is go buy energy, because the amount of energy the AI is going to need in the amount of energy Bitcoin is going to need to, you know, have this collision you foresee in the future is just a lot of energy. So owning energy is [00:46:30] probably the best investment.

Blake Oliver: Or you should buy Bitcoin and just get out before it collapses. What will it go. Will it go to a million first? I don't know, but maybe you could ride the wave up.

David Leary: Is not investment advice, not investment advice.

Blake Oliver: Can you put that disclaimer at the bottom of the screen? Okay. Uh, so that's the Trump victory. I got to get to the IRS, PGP or PS fraud, not PGP. Ps but before that here's a chart of [00:47:00] which workers are embracing AI. I teased this, so I have to share it before we go. Uh, getting it up on the screen here. Here it is. So this is from the Chicago Booth review. It is a survey, large scale survey in Denmark. Half of workers in fields exposed to disruption from. I have tried it. The research also found a staggering gender gap. Women were 20 [00:47:30] percentage points less likely than men to try using AI chatbots. And the thing that really interests me was this chart here ChatGPT adoption rate for occupation and task type. So if you look at the top here, you see software developers are like 60% of software developers in Denmark have used it for a core job task or for a peripheral job task. That's still really like low, if you ask me. Like software developers are the, you [00:48:00] know, probably stand the most to benefit, but maybe that's because, you know, you work for a big company. They don't let you use it yet. Marketers use it a lot. It journalists use it a lot. You know, more than half. But then you go down all the way to like accountants and it's only like 23% or something like that that have used it for a core job task or a peripheral job task. And it's only like 9% that have used it for a core job task. [00:48:30] So that's why I'm not surprised when I go to conferences in only 2020, 5% of the people in the audience have actually used it for their job because it's still not many people have used it for their job. Financial advisors are the least likely to have used it.

David Leary: The staggering is that there's these. What percentage is the not aware for accountants?

Blake Oliver: The not aware. Oh like who. Don't know about it. Almost 9%. Almost 9%. Have not even heard of it.

David Leary: How is [00:49:00] that possible?

Blake Oliver: Yeah, I know right? How? Have you not heard of it? Incredible. Um, Matt, I'm going to talk about the IRS fraud. Matt says, can you talk about why the fraud report by Tigta had so much that was redacted in the report? Yes. And actually, I had a really hard time figuring out what happened, because, uh, when I did perplexity searches to try to understand how [00:49:30] the fraud occurred, perplexity kept coming back to me and saying, I can't tell you because I don't want to encourage fraud. And the report was mostly redacted. So the the taxpayer inspector general, um, the auditor of the IRS essentially did this report about this fraud that was occurring on the practitioner priority service line. And, um, like the IRS, of course, didn't move fast. And like millions of dollars were, were stolen [00:50:00] and taxpayers were fraudulent returns were fired. And all this filed and all this stuff and the and the report, though was seriously redacted because they don't want people like using this information to do other frauds. But it like honestly, wasn't that.

David Leary: Pause right here and just make sure I understand the fraud. So previously fraudsters would just go get TurboTax and file fake returns and get e file or e file and get e, uh ach deposits. And that's how you defraud the government. Right now they're utilizing the professional practitioners line.

Blake Oliver: So let me I'll [00:50:30] walk you through it from the beginning. Okay. So the IRS has a phone line for tax professionals called the Practitioner Priority Service Line. Pps and between August 2023 and April 2024, there was a scam that was running on this line. So it resulted in $47 million in losses to the IRS. The criminals filed almost 5000 tax returns, claiming nearly $462 [00:51:00] million in refunds, and the IRS was able to stop the vast majority of those claims. But like 574 made it through and they slipped through their controls. And that's how they lost 72, $47 million. Um, so basically what happened is and I finally got I finally got perplexity to explain it to me. Um, I had to start a new chat and abandoned the one in which it was [00:51:30] telling me, no, don't do fraud. I can't tell you how to do fraud. So what they would do is the fraudsters would steal tax practitioners CAF numbers. I don't know if you say that CAF or CAF or whatever. Right. These are the unique nine digit identifiers that the IRS has to identify you. It's like think of that like your Social Security number. Right. But for the IRS as a tax professional, maybe that's the right way to say it. And by the way, if anyone's watching on YouTube and I have no idea what I'm talking about, please correct me because I have never used the line [00:52:00] because I'm.

David Leary: Not a tax, it's an ID. So when I call that number, they know because they have ID that I'm David Leary and I'm a professional tax preparer.

Blake Oliver: You give them your number, you give them your name that identifies you. And then they also got the practitioner's personal information. It doesn't say exactly what, but I'm guessing that could be an address. Could be a name, could be whatever it is, whatever other pieces of information are used to pass basic verification. And this is all done over the phone, remember? Right. There's no like I'm not looking at your face. I'm just talking to you on the phone. [00:52:30] So they used the stolen calf numbers and personal information to impersonate legitimate tax pros when calling the PS line. And then they requested and received taxpayer transcripts, which are like copies of tax returns. It's what the IRS agent people entered into the system. So it's not the actual tax return, but it's the IRS record of the return. And they got that deposited into the Secure Object [00:53:00] Repository system, which is basically just an inbox, like an email inbox kind of situation. So then that's how they got the taxpayers information. And they used that information to file fraudulent returns, and they filed thousands of fraudulent returns. The IRS detected and stopped a lot of them, but 5 to 600 got through. And what's crazy is that the IRS knew about this as early as August 2021. They knew about this [00:53:30] vulnerability, but they didn't do anything about it until April of 2024, after the money was already leaking out and the delay in implementing.

David Leary: That's like 18 months, you said.

Blake Oliver: They knew about it for like 2 or 3 years.

David Leary: 2 or 3 years.

Blake Oliver: Okay. And they didn't do anything about it until tigta, you know, published this report and made them do something about it. And the delay is what allowed the scheme to continue for so long. So I imagine, just like how awful that would be if [00:54:00] you were the tax pro who's like number was hacked. You know what a disaster. Right. All your clients returns, uh, you know, they request the transcripts. They get your client's information, they file false returns. What a disaster.

David Leary: Yeah, if they do. Numerous times. Yeah. Using yours for multiple of your clients. Oh, and it's just it's just.

Blake Oliver: Like the authentication. Like, this is not even that sophisticated a scheme, right? It's like super [00:54:30] basic. The IRS has obviously like really, really bad ways of authenticating. I mean, I guess we know that as individuals, right? Because it's like all you need is somebody's address, Social security number and name and what, like one number from one box on their 1040. And you can impersonate them, right. It's just bad. So anyway, that's how they that's how that fraud worked. Okay, we got time for pcob drama, but I think we have to do our last ad first.

David Leary: Yeah. We'll do. [00:55:00] It's two ads back to back. Okay. Do you want to read them or do you jump in?

Blake Oliver: I'm losing my voice. So if you could do it, I'll.

David Leary: Jump in if you want to set up the sharing. Okay, so our next status from cloud Accountant Staffing. In case you've missed the last 100 or so episodes, Blake and I have been discussing almost weekly that there's an accountant's labor shortage, regardless of the root cause. The problem is real. My social media feeds are full of firms attempting to fill open positions on their teams, but how can anyone increase their staff size if everyone is attempting [00:55:30] to hire during a labor shortage? That's where cloud account and staffing comes in. They will help you hire full time members for your firm that reside in the Philippines. How much would your firm change? Or for that matter, your life? If you could add 40, 80, 120 hours of capacity to your firm in 2025? Cloud Accountant Staffing was founded by a firm owner who grew his firm using offshore talent, and now he's applying everything he learned to help you to grow your firm. If your firm is in need of expert bookkeepers, [00:56:00] accountants, CPAs or virtual assistants, head over to The Accounting Podcast dot promo slash CAS. That is The Accounting Podcast dot promo forward slash CAS. And I'm going to go right into our next ad. Our next sponsor is artifacts.

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Blake Oliver: All right, so I want to talk about the pcob. But before that I have to play this video for you. Um, Freddie Freeman. Freddie Freeman hit a grand slam walk off home run in the World Series, [00:58:00] and he was on a podcast with the Kelce brothers talking about what he would be if he wasn't a baseball player. And you got to hear this. Uh.

Travis Kelce: Um, and it's exactly what it sounds like. We're going to ask you a rapid fire questions, and you decide whether you want to answer them or not. So, Jason, Jason, jump it off.

Jason Kelce: Yeah. If, uh, if you didn't play baseball, what sport would you have played?

Freddie Freeman: Oh, probably wouldn't have played a sport.

Jason Kelce: Wouldn't have even done it. Did you play any other sports?

Freddie Freeman: Wanted to be. [00:58:30] I wanted to be a CPA.

Jason Kelce: Time out. Nobody wants to be a CPA. What are you talking about? Yeah, that's my my. I wanted to do taxes.

Freddie Freeman: Yeah, my dad owns his own CPA firm with my uncle. His brother? Freeman. Freeman. Cpas.

Travis Kelce: Okay, okay. Shout out. Shout out to freaking free. Let's go.

Freddie Freeman: I made my dad retire, though, so he's not.

Travis Kelce: Doing it anymore.

Freddie Freeman: I wanted to be a CPA. I know it sounds crazy, but I was going to be doing your taxes. You guys.

Jason Kelce: Do you do your own taxes now?

Freddie Freeman: Uh, no, I don't.

Travis Kelce: I [00:59:00] gave up on that dream a long time ago, guys.

Freddie Freeman: Yeah, that ship sailed 20 years ago.

Travis Kelce: Nice. That's so fun.

David Leary: The genius is when, uh, Jason Kelce is like a CPA. Taxes. Like, that's what CPA equals is taxes. He immediately went straight to taxes. Yeah.

Blake Oliver: Cpas are not all taxes. Not all, not all tax. Not all accounting people are tax people. Maybe that should [00:59:30] be the message.

David Leary: That's like that's actually this is great because that's one of the most popular podcasts I think. Right.

Blake Oliver: And they said nobody wants to be a CPA. That's great. Yeah, it's really great for our image.

David Leary: But the Kelce.

Blake Oliver: Brothers nobody wants to be a CPA.

David Leary: But the fact that he said he wanted to be I think is a huge testament.

Blake Oliver: I think it is. Yeah.

David Leary: Freeman and Freeman, baseball player.

Blake Oliver: He was going to be another Freeman in the Freeman. Um, all right. So I have to talk about this, even though we're basically out of time because [01:00:00] it's.

David Leary: Entitled go a little longer because we had four ads so we can go a little bit.

Blake Oliver: Okay. So it's a bit of drama between your favorite senator Elizabeth Warren and a PCAOB board member, Christina Ho, a member of the Public Company Accounting Oversight Board, the auditor of the auditors.

Speaker6: The.

Blake Oliver: Watcher who watches the Watchmen, complained publicly on LinkedIn that a pair of influential senators are singling her out for audit failures at firms. This is as reported in accounting today. In a LinkedIn post on October [01:00:30] 17th, which is highly unusual for a Pcob board member, ho referenced a letter a week earlier from Senator Elizabeth Warren and Sheldon Whitehouse, calling on the Pcob to establish stricter accountability for firms with unacceptable deficiency rates. They noted that the Pcaob's review last year of over 200 accounting firms audits found a 46% deficiency rate so significant that the auditor should not have issued its opinion. [01:01:00] And in the letter, they called out Christina Ho for a speech she made in September at an Institute of Internal Auditors event. And Christina Ho was basically defending the auditors, um, Claiming that the inspection results lump all deficiencies together without a qualitative assessment of their severity. Um, they're basically calling her out for denying that the inspection results are a problem. And [01:01:30] so then, uh, Christina Ho responded and she complained, quote, uh, she complained that the senator's letter accused her of appearing to be, quote, focused on downplaying and misdirecting attention from these atrocious findings and of making false statements in her speech. She also added, the letter contains a thinly veiled threat to me and others by noting how Senator Warren had successfully urged the Securities and Exchange Commission in 2021 to remove and replace [01:02:00] all members of the PCAOB.

Blake Oliver: So basically, she feels like she's being singled out. Um, and there's something in Christina Ho's argument that I find interesting, right? Because we have this 46% audit deficiency rate. Part one. A deficiency rate. Which seems really bad, but Christina says while that's not acceptable, um, that you need to put it into context. She says that the number that also [01:02:30] matters is 5%, which is of the financial statements that had a an opinion. With one of these deficiencies, only 5% of them required a restatement. So she's saying basically the the pcob is not they don't distinguish enough between like how bad these part one deficiencies are and and says that like if they were really that bad we would you [01:03:00] know, we wouldn't have just a 5% restatement rate on these incorrect opinions. And I'm thinking about this, right. And I'm thinking, well, I don't know if that really maps out because. You've got this situation where 46% of these audits, like the opinions, should not have been issued because they were just not done to standard. Only 5% of the incorrect opinions result in misstatements. But like, isn't it possible that you could have [01:03:30] incorrect opinions where the financial statements never get restated because nobody knows and.

David Leary: They're only reviewing a small subset of thousands of audits? Right. Yeah. So that 5% could add up to a very big number of things that should have been restated and never got restated.

Blake Oliver: I know. So like, I just. I don't get it. You know, I just I don't get why she is defending [01:04:00] the audit firm. She actually says, um, she, she says that that more enforcement won't result in higher quality audits and that we need to use like, uh, um, technology essentially to improve audits. Like she basically like she says, regulating through enforcement will not be effective. Fear might extract compliance, but it will not achieve audit quality. I disagree, I think fear would definitely [01:04:30] achieve audit quality if there were actual like real meaningful penalties for doing crappy audits.

David Leary: Which is exactly why I think E walked away from Mike. Uh, um, super micro. Super micro. Yeah. They don't want they don't even want to deal with it. They know they cannot be successful with the audit regardless of technology. They don't want it. They don't want to get fined for the next mess that comes out. My initial reaction when you said she's defending them, I was thinking, oh, she must be one of those people that, you know, they work in private, they go into a government job, they work [01:05:00] private, and they're protecting their buddies. You've talked about this before, but I went and looked at her LinkedIn. She did work for a public accounting firm. She was at Deloitte back in September of 20, 2009. So she's senior.

Blake Oliver: Manager at Deloitte.

David Leary: Yeah, but but she's not dancing back and forth. She's pretty much been government ever since. So it's not I can't you can't accuse her of protecting her buddies. So then what is her motivation like what is she protecting these these firms for?

Blake Oliver: I don't know, I mean maybe she just has a dissenting opinion, but it's like I also would want to know, like, so what are you [01:05:30] actually doing as a PCB board member to, to do anything about this stuff? Like, you know, like she just seems to be defending these giant audit firms in doing crappy audits. Like, I don't get it.

David Leary: And then she should ignore it, because what does Senator Warren always do? She just writes letters. She just writes letters. She never actually follows up on them or do anything.

Blake Oliver: And in this way, she has actually drawn more attention to the to this criticism, I guess.

David Leary: But anyways, I saw the letter, but I didn't know the the LinkedIn drama she created around the letter. Yeah, [01:06:00] we could talk about two other letters that were written. Go for it. So one of them is the AICPA. They wrote a letter they want to. Finally, they're asking Congress to delay boy. The current boy stats only 6.5 million of 32 million have filed.

Blake Oliver: 6.6 million out of 32 million.

David Leary: Yeah, 6.5 million.

Blake Oliver: So we are we are like 45 days away from the end of the year, and we need 26 million businesses to file boy reports, or [01:06:30] they're going to start getting fined hundreds of dollars a day.

David Leary: Yeah. And they actually quote unquote, about the delay. This is from the letter itself, from the icpa. This country will see millions of small business owners become accidentally and unknowingly delinquent in their compliance. Yeah. So and but this is the funny part of this whole thing. The AICPA wrote a letter to Congress asking for a delay in this when it's nice and safe, because seven days before that, Congress, 40 members, 44 members of Congress [01:07:00] wrote a letter to the Treasury and FinCEN asking for the delay of the boy reporting until the complicated reporting requirements could be clarified. The distribution of information, etc.. So I always love how the EPA they did this with the Intuit fiasco, right?

Blake Oliver: They wait until everyone else is already stuck their neck out.

David Leary: Exactly.

Blake Oliver: What I don't understand is why isn't the AICPA saying we should not have BOE? Like we don't just need a delay, we need to kill this program. [01:07:30] This program is a disaster. We can see it coming. Millions and millions of businesses. If we've only got, what, like 20% of them complying right now, we're going to have millions of businesses that are not in compliance that suddenly start getting fines. And like, what is the what is the government going to do? Like they're going to start fining people, put people in jail. Like you could get jail time for.

David Leary: Willful are ridiculous.

Blake Oliver: The fines are absurd, right? It's like this is a disaster for our clients. So if we actually [01:08:00] care about American small businesses as an accounting profession, we should be calling for an end to beneficial owner information reporting. It's not only a federal overreach that will not help to actually do anything about money laundering. It's costly and and it's a giant inconvenience. And I know there's people out there that are saying, oh, it's not so bad to fill out a form. Well, yeah, that's easy for you when your job is filling out forms all day. But when you're in.

David Leary: If you know the form exist and you're supposed to fill it out, right?

Blake Oliver: But [01:08:30] also, you know, it's like when you're an entrepreneur who's like trying to start a business, the last thing you need is another freaking form that you have to fill out. Oh, and you have to remember to fill it out every time some piece of information changes, or you're technically out of compliance and could be fined hundreds of dollars a day like this is I honestly like this would be what I would be really happy if the Trump administration did is like kill crap like this because this is a giant waste of money. It achieves nothing and it's just costly. It's [01:09:00] a waste. It's a it's a bureaucratic waste. And I wish that the AICPA would stand up for that. Like that would be something good they could do. And the state societies write them too. Where are they in all this? Where are the where are the state societies? The groups, like accountants, should be advocating to make business easier, not harder. And like we don't need the work anyway. Most firms don't even want this work. So. And I think. [01:09:30]

David Leary: We covered before, you know, that they they put these resources for accountants to communicate to their clients like they're trying to do outreach. But the accountants should be simply be going the other direction, refusing to do outreach and tell them they need to stop doing this.

Blake Oliver: All right, David, a pleasure as always. Thanks to everyone who joined us on our live stream on a Friday afternoon. I hope you have a great weekend. And if you're listening to the podcast and you want to tune in live, follow us on YouTube, search for The Accounting Podcast on YouTube. [01:10:00] Uh, subscribe and hit that notification button. You'll get notified when we go live and you can comment on anything we talk about and we will see it. You can send us an email at The Accounting Podcast at earmarked me. That's the The Accounting Podcast at earmarked me. And don't forget you can earn free continuing professional education for having listened to this episode. You went through it all. You were here for over an hour. I think you deserve a continuing professional education credit. You can get it for free with the earmark app. Go to Earmark [01:10:30] App in your web browser or download the free app from the App Store. It's completely free to sign up. Did I mention you can get free CPE?

David Leary: And if your deadline is December 31st, you now have six more weeks about to get your CPE done. So if you haven't done it yet, definitely go eat, earmark, and knock out some of your CPE.

Blake Oliver: Fantastic, David, I will see you back here next week. Bye everyone. Bye.