INSIDE LOOK
The AI revolution in tax practices: Preparing for 2024 and beyond
Driven by the rapid advancement of artificial intelligence (AI), the tax and accounting landscape is on the cusp of one of our most significant transformations in years.
By now, firms should not only be adapting to existing AI technologies but also anticipating future innovations that will revolutionize tax return preparation even further. In this column, I’ll explore the path AI tech has taken in tax practices, what we can expect in 2024 and—most crucial—key considerations for retraining a firm’s workforce to effectively harness these advancements.
The evolutionary path of AI in tax practices
The integration of AI in tax and accounting started with digitization. Since then, it’s progressed to sophisticated software capable of handling complex tasks. As AI technology evolves, it’s reshaping traditional tax preparation practices by automating repetitive tasks, enhancing data analysis and providing predictive insights.
And now, the enhanced data accessibility and collaboration made possible by cloud-based technologies have set the stage for a more advanced AI integration. So, what can we look forward to in the coming year? Here are some predictions.
Anticipated AI technologies in 2024
As you emerge from busy season in the spring of 2024, several AI technologies are expected to have a significant impact on tax return preparation as we move through the year:
- Advanced predictive analytics—AI systems will offer more refined predictive models that use historical data to forecast future tax liabilities and provide advice on optimal tax planning strategies—a significant advancement from a tax planning perspective.
- Enhanced natural language processing (NLP)—Improved NLP will enable AI systems to understand and process human language more effectively. This will allow for more intuitive interaction with tax software and easier extraction of relevant information from unstructured data sources. To maximize its effectiveness, it will be important for you and your team to become familiar with how to effectively leverage NLP.
- AI-assisted compliance and error detection—Keeping up with regulatory changes continues to be one of the biggest challenges for small to medium-sized firms. More sophisticated AI algorithms will be able to ensure compliance by keeping up to date with the latest tax laws and regulations. It will also identify potential errors or anomalies in tax returns.
- Automated tax code interpretation—AI tools will be able to interpret and apply complex tax codes and regulations. This will reduce the need for manual interpretation and minimize the risk of errors.
Crucial skills and retraining for an AI-enhanced future
Because AI technology is one of the most important collaborative tools we’ve seen in decades, your team needs to embrace it now. To fully take advantage of emerging AI tech, firms must focus on comprehensive retraining of their workforce, which should include the following areas:
Core AI and machine learning understanding
- Foundation training—Introduce essential AI and machine learning concepts. Focus on their latest developments and the potential impact on tax practices.
- Application-specific training—Highlight the ways emerging AI technology can be applied specifically to tax return preparation.
Data literacy and management skills
- Advanced data analysis—Equip your professionals with the skills to analyze and interpret complex datasets generated by AI systems.
- Data security training—Emphasize the importance of data privacy and security in an AI-driven environment.
Proficiency in new AI tools and software
- Hands-on experience—Provide practical training on upcoming AI-powered tax software and tools.
- Continuous tech education—Foster an environment of ongoing learning to keep pace with the speed of technological advancements.
Adaptation to new professional roles
- Shifting focus—Guide staff in transitioning from traditional roles to those emphasizing analytical, strategic and advisory functions.
- Enhanced client interaction skills—Retrain your team to make use of AI insights in client consultations and when providing customized tax planning advice.
An important note: I recommend that you appoint someone in your practice to own the role of AI retraining coordinator. That’s especially crucial for the core AI/machine learning and new AI tools and software areas of your firm’s retraining program.
Implementing a forward-looking retraining program
So, now that you know what your team needs to learn, how do you accomplish it all? To implement this program effectively will require a strategic approach. This should include:
- Diverse learning—Make use of a combination of online learning, workshops and practical training sessions. Check out popular online learning platforms like LinkedIn Learning, Microsoft and Coursera, which offer a number of AI training resources geared toward every level of knowledge. And don’t wait too long to get started on this; it’s crucial to have an exploratory and training plan for 2024.
- Collaboration with AI experts—Wherever you find them, look to AI technology experts for specialized training and insights. Where would that be? For a start, conferences, your local community, even by listening to some of the many AI podcasts now available. Also, try to engage your accounting peers in regular discussions to understand what more progressive firms are doing.
- Regular updates and courses—If you think AI has advanced rapidly so far, I feel confident in saying, “You ain’t seen nothing yet,” to quote Bachman-Turner Overdrive. That’s why it’s vital to ensure that you keep up the retraining with regular updates and refresher courses on AI advancements and changing tax regulations.
Conclusion
I understand that some of you may think I’m harping unnecessarily on the integration of advanced AI technology in tax practices. But it’s not just an impending change I’m talking about; it’s a future that’s already unfolding.
As we move into 2024, the need for firms to adapt and retrain their workforce is becoming increasingly critical. This retraining goes beyond mere technical skills; it involves cultivating a culture of adaptability, strategic thinking and continuous learning.
By doing so, firms will not only keep pace with AI innovations, but they’ll also significantly enhance the efficiency and effectiveness of their tax practices—ultimately redefining their role in the dynamic world of tax and accounting.
CULTURE CLUB
Trust rules your firm
Let me first start this off by saying, “Hello!” I’m so glad to be here, contributing to the Culture Club portion of the Thought Leader newsletter.
If you’re new here, I’m John Mitchell, the Workforce and Culture Advisor at Rightworks. Helping firms build a healthy culture that supports the lives they want to live is my bread and butter. So, you’ll be seeing me offer advice to firms about a winning firm culture from time to time, along with my friend, Lindsay Malcolm.
The truth about trust
OK, let’s get started with a quote from a favorite book of mine, “The Leadership Challenge.”
“The truth is that trust rules. Trust rules your personal credibility. Trust rules your ability to get things done. Trust rules your team’s cohesiveness. Trust rules your organization’s innovativeness and performance. Trust rules your brand image. Trust rules just about everything you do.”
Since October, I’ve seen a shift in the firms that I’ve talked to…but it’s a shift no one could quite put their finger on, until I came across this Warren Buffett quote:
“Trust is like the air we breathe—when it’s present, nobody really notices; when it’s absent, everyone notices.”
Bingo! That’s it—a lack of trust.
Why trust matters
Humans possess trust as a primal survival instinct. And they survive better when surrounded by a tribe of people they can trust. In any culture, trust starts from the top.
If a firm lacks an intentional business model (i.e., there’s no plan for the firm), then staff members struggle with trust. And we can’t blame them for that. If there is no clear plan about who the firm serves, what products or services they offer, and how those services are delivered, there’s no foundation for trust. That lack of trust triggers that primal survival instinct—and fight-or-flight takes over.
As a leader, you can’t expect your team to care about your business the same way you do. They need a reason they can identify with, one that incentivizes beyond the bottom line of the firm. You have to show them why their work matters. If you can’t do that, it leads to a huge disconnect—and zero trust.
The lack of trust sends staff members into fight-or-flight mode…most of the time. When you don’t have trust, your team is:
- Defensive and on-edge
- Unengaged and just working for a paycheck
- Impatient and unrealistic about friction and work challenges
- Scared of change and unwilling to think differently
You may have seen it in the form of discontent, especially when a new process or technology is introduced. Or when assuring your team that they come first but allowing a non-ideal client to wreak havoc. These things can break trust. If this is something your firm is experiencing, you can turn this around.
How to build trust
Trust is important because it’s who we are as people. But firm leaders don’t have the luxury of saying, “Trust me!” and having staff members mindlessly follow. Trust is built slowly and intentionally, and it begins with addressing that initial fight-or-flight instinct that asks the question, “Am I safe?”
If you’re a firm leader, here are three sets of questions your staff members may be asking themselves to ensure they’re safe, so they can move beyond their fight-or-flight instincts. (And if you’re a staff member, here are the questions you should be asking.)
Do you know what you’re doing?
- Are you worth following?
- Do you know where we’re going?
- Do you have a plan for what’s next?
Are you who you say you are?
- Will you be honest?
- Can I trust that you’ll do what you say you’ll do?
Do you care about me…really?
- Am I more than a tool to get work done?
- Do you understand my work and life from my perspective?
- Do you expect me to give to the business the way you do?
As I said earlier, trust starts from the top. As a firm leader, you must be willing to hear the answers to these questions. And expect that the responses won’t be glowing. Sometimes, the truth hurts. But the good news is that you can build from here.
How?
You can start with these four steps:
- Be clear. Commit to your business model and protect your processes.
- Ask more questions. Find opportunities to get candid input from your team and—most importantly—listen more than you talk.
- Choose people before tasks. Look for opportunities to elevate people, including their families, pets or their own personal interests.
- Give trust. You have to trust your team first. (Yes, I’m serious. You did hire them for a reason, right?) Give them clear expectations and stop micromanaging.
Taking these steps will help you build (or rebuild) trust in your firm. And when you have trust, your team is more engaged, they feel confident, they’re more patient with friction, and they’re more willing to make changes.
Be the light
I get it. Things may feel dark in your firm right now, but as it’s been said many different times (and ways) throughout history, “It is better to light a candle than to curse the darkness.” So, think about ways you can light a candle in your firm. What can you do to build trust? You have to give trust. Light that candle. You—you go first.
TIPS & TRICKS
Ten tips to crush this tax season
As we dive headfirst into the frenzy of tax season, it’s crucial for accounting firms to streamline operations and boost productivity and team morale. Many firms struggle to identify the changes they can implement, so they don’t just weather the tax season whirlwind, but thrive within it.
That’s why we’ve identified our top ten tips to help you and your team make this your most triumphant tax season yet. 🚀
1. Set and communicate deadlines
Establish clear document deadlines with your clients. Leave enough time to prepare client files without the pressure of an extreme time crunch. Feel free to put clients on extension if they don’t provide documents by the deadline. You may also want to consider implementing late fees or extension filing fees to motivate clients to adhere to the schedule. These deadlines are also beneficial for your staff, as they allow for improved capacity planning and play a vital role in having a well-organized, successful tax season.
2. Response policy
This is the time of year when firms can be overwhelmed with client communications and requests. To efficiently manage the high volume of inquiries, responses can be prioritized based on urgency. This ensures that critical issues receive prompt attention, setting realistic expectations for clients while maintaining the quality of service they expect. Inform clients about your response policy during the busy season.
3. Priority policy
Implementing a “first in, first out” policy for returns not only streamlines your workflow but also provides multiple benefits. This policy empowers your team by giving them a clear framework for task prioritization and instilling confidence in their decision-making process. It also promotes fairness in client treatment, assuring those who submit their information on time that their files will be worked on in the order they were received. This transparency enhances client satisfaction and allows your team to manage their workload efficiently, contributing to a smoother and more organized tax season.
4. Team training and career development
Take advantage of this tax season to invest in the growth of your team through training and development. Resist the temptation to quickly fix mistakes on your own—instead, empower preparers to correct their errors. This approach serves as a significant learning opportunity and contributes to the overall efficiency and competence of your team. By fostering a culture of self-correction and continuous improvement, you’re not just navigating tax season; you’re elevating the skill set and expertise of your team for long-term success.
5. Use videos
Enhance your communication efficiency by recording video responses to address client queries. A five-minute video can convey information that might otherwise take up to 30 minutes in a meeting or phone call, saving a substantial amount of time. Extend the use of videos beyond client interactions—put them to use for internal training sessions, facilitating communication between preparers and reviewers. These videos also can be used to build a comprehensive knowledge base for staff members, creating a valuable resource that saves time and enhances the overall effectiveness of your team.
6. Calendar blocking for reviews
Mitigate potential bottlenecks in the review process by incorporating calendar blocking into your workflow. Clearly define dedicated time slots for reviews, ensuring a separation from team availability and client communication windows. By safeguarding specific time for reviews, you’ll optimize the efficiency of the process and protect the valuable time of those responsible for conducting the reviews—plus promote a more streamlined and focused approach to handling client files.
7. Tag the team for client communications
Delegate client communications to the team whenever possible. Encourage the use of templated responses and the drafting of email responses, streamlining the communication process. This facilitates timely communication and ensures that responses aren’t just the responsibility of one or two people in the firm.
8. Level your returns
Boost overall efficiency by strategically leveling returns among experienced non-partner preparers and reviewers. This process involves assigning simpler and easier returns to your team, preventing potential delays in the review process. By capitalizing on the expertise of your team members, you not only expedite the completion of returns but also work to avoid bottlenecks in the review process.
9. Make work fun
Elevate the energy in your workplace by introducing an element of fun through gamification. Consider creating friendly competitions, with fun prizes to motivate and engage your team, to foster a positive and collaborative environment. Gamifying also injects a sense of enthusiasm and camaraderie, making the challenging aspects of tax season more enjoyable for everyone involved. Recognizing and celebrating achievements within the team will contribute to a vibrant workplace culture long after tax season ends.
10. Breaks and breathers
Emphasize the importance of well-being by incorporating breaks and breathers into the demanding tax season schedule. Mitigate the risk of burnout by encouraging regular breaks for the entire team and engaging in team-building activities, like shared meals or virtual events. Breaks may feel counter-productive when things are so busy, but when you prioritize mental and physical rejuvenation, you enhance morale and positively impact productivity.
A well-prepared and motivated team is the linchpin for success in overcoming the challenges posed by tax season. With these strategies in place, your firm will be ready not just to navigate, but to thrive during the fast-paced and demanding tax season. We hope these tips provide you with the tools to make this your best tax season yet!
SECURITY PRO TIP
Cybersecurity confessions of a former slacker
It’s rare in this space that I write in the first person. After all, I’m not a cybersecurity expert myself. I’m merely a chronicler of cybersecurity who takes what experts say and tries to boil it down into something readable, useful and hopefully even entertaining.
Simply put, you probably don’t spend hours every week reading about cybersecurity because there’s no reason why you would. I do it because it’s a big part of my job. So, what I try to bring in this column isn’t so much what I think but what experts want us all to think, know about or do.
This column will be different. Why? Because this is a personal column, not unlike the one I wrote a while back about how my grandfather once kind of sort of tried to stop Bonnie and Clyde from barreling down Fort Worth Avenue in Dallas. This time, though, I’ll tell stories on myself. Stories of cybersecurity sins committed and confessed. Stories of repentance and redemption.
(But not resolutions. It’s February, which means the time for New Year’s resolutions has passed, according to Larry David’s iron-clad ruling on New Year’s activities.)
The repeated password
OK, so it was never as bad as “password1”, “password2” and “password3”…but for a long time, I did have a base password I’d add a number to every time I had to “change” it. This wasn’t just for one account but pretty much every account. And the base password wasn’t exactly sophisticated. In fact, it was shockingly simple. (In case you’re thinking of stealing my data, you should know that I don’t do that anymore.)
That’s such a bad practice. First of all, a password that’s too simple is very easy for a cyberattacker to steal. They have automated tools that can decipher simple passwords in a matter of seconds. More sophisticated passwords—or, preferably, long passphrases—take longer to crack.
There’s some controversy as to how much good changing passwords every few months actually does. On one hand, sometimes a cyberattack can take place for weeks or even months without the victim knowing it’s happening. If the victim changes the password for the account the attacker is hitting, the change could be enough to stop the attack.
Dealing with password pain
Still, other experts say there’s no real reason to change a strong password—or, again, passphrase—unless there’s evidence that a cyberattacker has either stolen it or tried to steal it. In either case, though, when you do change a password, you need to change it to something fairly different from what you’ve been using.
Moving from “password1” to “password2” probably won’t stop many attackers from stealing your credentials. Moving from “password1” to something more like “myF4voriteRe$taurant&mybe$tfriendzmiddlename!” stands a much better chance. And whatever you do, never use the same password across multiple accounts. When you do that, you effectively give a cyberattacker easy access to every account that uses that password.
I know what you’re thinking, though. Remembering passwords is hard! And a pain when you really need to get into something in an emergency! (I was there in November trying to get into a little-used Apple TV account while six anxious kids waited to watch the Charlie Brown Thanksgiving special.) That’s where a password wallet comes in handy. It’s much safer than saving passwords in a browser, and all you need is one set of credentials to get into everything. Just make sure you pick a wallet that hasn’t itself been cracked recently. (In other words, maybe steer clear of LastPass for now.)
Unfollowed security instructions
At a long-past former job, the IT department did indeed ask employees to change passwords every three months. But I noticed that after four months, five, six…my password still worked. The official policy was that we were supposed to change the password every three months. I knew that was the case, but since no one asked me to do it—well, I just didn’t do it.
Now, IT has to take some blame there, right? The company didn’t have a great IT operation at the time—honestly, it would have been better off outsourcing at least cybersecurity—but everyone else changed the password every three months. People talked about it. They complained about it. I said nothing and typed in the same eight characters for—are you ready?—about six years.
It wasn’t that my password was so strong that I thought no one could ever decipher it. In fact, I knew how weak it was and how lazy I was, keeping it the same for all those years. But I flew under the radar and in doing so put the security of the whole company in jeopardy. To my knowledge, the company never suffered a cyberattack. That’s not to say we never did. If we did, I didn’t know about it.
Oh, and one more thing: Again, I used that password for pretty much every account I had. Most accounting firms don’t really have IT operations. But if you do, follow their instructions. And if you outsource security, do what your partner asks you to do, if anything. Don’t take chances the way I did.
Consequences of security sloppiness
Honestly, it’s a wonder I still have an identity at all. Somehow, I managed to avoid major consequences for being a cybersecurity slacker. But I have had a few scares. Some years back, I had my debit card details stolen twice and my bank account cleaned out both times. I found out the hard way by coming up empty at an ATM shortly after payday. Did someone steal my card number in a retail store? Maybe. Did someone steal it online? That’s also possible. I never lost the physical card. I had to go to the police and to the bank, but I got my money back. Eventually.
Back when Twitter was Twitter, I had an account I used mostly for professional purposes. One night, a friend messaged me (on another platform) that the account was “so hacked,” and indeed it was. Fortunately, whoever took my Twitter credentials couldn’t use them anywhere else. But had I reused that password over and over, I might have lost a lot more than just that Twitter presence, which I never recovered.
I know I preach at you a lot in this space about cybersecurity, but the potential for your firm to lose everything to a cyberattacker is very real. You can protect your firm by partnering with a cloud provider that offers managed security and safeguards your data. A cloud partner can help you mitigate damage if an attack occurs.
But habits matter, too. Don’t be like me, kids. Don’t invite disaster. I’ve cleaned up my ways, and I sleep better at night. A tiny bit of hassle is worth so much peace of mind.
MARKETING 411
Is your firm’s elevator speech taking you to the top?
Your firm should have an elevator speech—and any team member who answers the phone should be able to communicate it. If they’re unable to do so, revoke their phone privileges.
I joke a lot, but I’m dead-dog serious about that last sentence. Why? Because the first impression your firm leaves on a prospect may be the determining factor in their decision to become a client.
If they speak to someone on their initial call who cannot clarify your firm’s mission and service offerings, it’s highly likely they’ll hang up after a brief exchange and immediately call the next accountant in line on their Google search.
Don’t have an elevator speech? All right, let’s dig in. Sit up straight, flex your fingers for maximum mobility and get to typing on that keyboard. List what’s most important about your firm that you want the public to know.
- Do you specialize in a business niche?
- Are you a large firm targeting big revenue companies, or are you a boutique accountant with expertise in tax support for small businesses and individuals?
- Do you offer full-service packages for businesses that include bookkeeping, tax, payroll and advice, or are you audit-only?
Think it through as you ask yourself these questions and then develop a bulleted list. From there, work the details down to a 30-45 second explanation that clearly communicates the image of your firm, a summary of your services and a description of your preferred client.
If creating your speech is a struggle, consult with a content writer who specializes in the accounting profession. You could also ask an AI (artificial intelligence) platform for suggestions. (Important: If you do seek help from AI, be sure you edit the speech to accurately communicate your firm’s specific message. While AI can be a big help when we need ideas, it doesn’t know your firm well enough to spit out a customized speech tailored to your service structure and culture.)
Regardless of how you accomplish it, the pressing necessity is to establish it and train your client-facing team to be able to rattle it off in their sleep.
Failure to establish and sustain your speech may result in stalled growth or even a quick plunge to the bottom of the competition list. Keep your elevator speech modern, and do steady maintenance for evolving business climates. If you do this, your firm will continue going up.
BOOKSHELF
On our bookshelf
Dare to Lead: Brave Work. Tough Conversations. Whole Hearts.
by Brené Brown
The Age of AI: And Our Human Future
by Henry A. Kissinger, Eric Schmidt and Daniel Huttenlocher
Making Work Human: How Human-Centered Companies are Changing the Future of Work and the World
by Eric Mosley and Derek Irvine
Obviously Awesome: How to Nail Product Positioning so Customers Get It, Buy It, Love It
by April Dunford
WHAT’S GOING ON
What’s going on at Rightworks Academy?
Events for members
This time of year, you’re busy enough as it is, so we’re easing up on the training sessions during tax season. But don’t worry—during the break, we’re not only transitioning to a new and better webinar platform, but our Education Team is also working very hard to ensure the education, coaching and webinars they bring you in 2024 and beyond are even more engaging and valuable. They truly appreciate your patience and understanding as they focus on bringing you the best in education and training resources.
Upcoming webinars—SAVE THE DATE
Registration isn’t available for these two webinars just yet, but be on the lookout for registration communications coming soon.
- March 13: Managing tax season and extension filings
- April 24: Onboarding new clients
Don’t forget, you can always view the entire webinar schedule and register (when available) at Community > Events in your Academy account.
Events for members and non-members
Not a Rightworks Academy member yet? We have you covered with live and on-demand events where you can learn more about Academy and the latest hot topics in the profession. Visit rightworks.com/resources/live-on-demand-webinars/ for a continually updated schedule of events.
In the spotlight this month:
RightNOW
May 14-16, 2024
Austin, Texas
Early-bird discount ends February 29!
- Primo content
- Learning tracks
- Thought leaders
- Celebrity-caliber influencer
- An established network of your accounting peers
You’ll find it all at RightNOW, the essential event for accounting and tax pros. More than a conference, RightNOW is where, together, we’ll define and shape the future of the profession.
When you register before February 29, 2024, you’ll automatically get $200 off the registration fee with the early-bird discount. And that’s not all: We have a special discount for Thought Leader subscribers! When you register before February 29, you’ll save an additional 15% with the codes below:
- Academy member subscribers: Use code RNOW15
- Non-member subscribers: Use code SAVE15
Save your space at RightNOW—and save big on registration today!
What’s new on the blog?
From the three habits that can help you build a healthier accounting firm to some tried-and-true tips for keeping your sanity during tax season, the Rightworks blog has great information to get Rightworks Academy members through the busiest time of year. Check out our newest posts, and don’t forget to bookmark the blog so you can stay up to date.
Read the latest posts at rightworks.com/blog.
Milestone member anniversaries
It’s time to recognize the Rightworks Academy member firms that have reached their first, fifth and tenth anniversaries! Help us wish the following firms a Happy Anniversary:
1 year
JVS CPA
Paxus CPA
SC Associates Inc
Richard L. Morrow CPA
Krueger Canzoneri Herzog LLP
Accounting & More, Inc.
Craft Entertainment CFO LLC
5 years
Millington & Co. CPAs
Bruno and Tervalon LLP
Welch, Sanders & Associates, LLP
Zabaneh & Company CPAs
Snelgrooes & Company
The Rainey Accounting Firm, LLC
Grupo Recurso
Bland Garvey, PC
Vanderford CPA, PLLC
Five Cities CPAs, Inc.
Castro, Thresher & Oliveira, PC
Douglass and Liebig Inc
MyCue & Brown CPA PC
Complete Business Services
Glenn B Hetzel & Associates, CPA’s, AAC
10 years
Harris Hardy & Johnstone PC
Leppert Group LLC
Bloch & Company PC
KBN Advisors
LBF Group PLLC
Bobst & Briel Certified Public Accountants, Inc.
Safstrom & Company PS
Congratulations on your success, and we look forward to celebrating many more anniversaries with you and your teams!