Firms are seeking to make major technology investments this year, especially when it comes to automating tax return workflows, which was cited as a major priority by accounting leaders. 

A recent survey from Wolters Kluwer found that tax return automation tools were the No. 1 solution firms planned to invest in this coming year, with 19% of respondents announcing their intention to do so. This aligns with other data in the survey, which found that 41% of firms cited “automatically populating tax returns, reporting and financial statements” as a benefit they expect from their technology purchases. It also speaks to the 27% of firms who named “increase automation to improve workflows and processes” as a strategy they intend to pursue in order to meet their goals for this year. 

Automation tools, though, are not the only tax-related item firms are eyeing in 2025. The survey also found 15% are planning to buy tax compliance solutions, and another 15% are planning to buy tax law monitoring and research solutions. 

Firms are also eager to buy client portal solutions (17%), client data ingestion tools (16%), document scanning and extraction solutions (16%), AI search and/or productivity solutions (14%), client accounting solutions such as write-up and bookkeeping (14%), and data analytics/visualization tools (14%). The survey also found 18% are seeking beneficial ownership information reporting solutions for the Corporate Transparency Act, the status of which will be determined soon by the Supreme Court. 

Not that they’ve necessarily been sleeping on tech upgrades this past year. The survey found that firms made extensive technology investments over the past year, especially compared to 2023. A full 44% of firms surveyed said they implemented a client accounting solution last year, compared to 25% the previous year. Similarly, 39% of firms invested in client portal solutions (up from 28% the previous year), 35% implemented AI search and productivity tools (up from 1%), 28% invested in document scanning and extraction solutions (up from 3%), 27% implemented bank reconciliation and validation solutions (up from 9%), 27% implemented financial report prep software last year (up from 11%), 25% implemented document management solutions (up from 17%), 19% implemented fixed asset solutions (up from 12%), 14% implemented audit methodology solutions (up from 4%), 14% invested in project management solutions (up from 6%) and 11% bought workpaper management and trial balance solutions (up from 10%). 

Despite these investments, though, firms want more from their tech stacks. Chiefly, 48% of firms are looking for solutions that enable anytime, anywhere access; 41% want both automation as well as tools that facilitate requesting and collecting documents from clients; 37% want solutions that assist with data input and ingestion; 27% want software that reduces or eliminates manual repetitive tasks; 26% want  support efficiencies by implementing advanced technologies such as RPA or AI; 25% are especially concerned with protecting sensitive information and data; and 24% want electronic delivery and payment of invoices. 

Cloud and integration

The survey also found that years of investment in cloud infrastructure and software integrations are also paying dividends. 

In terms of cloud computing, the survey found that 25% of firms have tech stacks that are fully in the cloud, and 42% of those not entirely in the cloud plan to move at least partially to the cloud in the next one to three years, while 19% of them plan to be fully cloud-based in that time frame. In contrast, only 17% of firms keep their tech stacks full on premise, and only 14% plan to remain that way. 

These tech stacks are increasingly integrated as well. More than a quarter of respondents, 26%, said their tech stack was between three quarters fully integrated, and 31% said their tech stack was between half to three quarters integrated. Meanwhile, 34% had less than half their tech stack integrated (19% had zero to a quarter integrated). 

The Wolters Kluwer survey found, in both cases, that cloud infrastructure and tech stack integration correlated with higher firm revenues. Cloud-based firms were more likely than traditional firms to report increased revenue (76% to 79%), increased profit (71% to 80%) and client engagements (67% to 76%). Meanwhile, among firms using fully integrated solutions, 55% reported revenue increases of 10% or more. On the flip side, of those firms that were less than 49% integrated, only about a quarter reported a similar revenue increase. 

The survey did not assert a direct causal relationship between these things, so it might be that more profitable firms have more resources to invest in cloud infrastructure and tech stack integration, but regardless the survey still found a relationship. 

Accountants as innovators

This prioritization of technology speaks to changes in how the accounting profession perceives itself, as the proportion of firms identifying as innovators is the highest it’s been in three years. 

The Wolters Kluwer survey found that 44% of firms self-identify as either innovators or early adopters, the highest level in three years. In this survey, an innovator is defined as someone who actively seeks and adopts the newest available technology and works with software partners to develop and test it, while an early adopter is someone who adopts technology, once it’s proven, generally ahead of peers. Notably, the number of firms that identify specifically as innovators jumped by 14 points year over year, from 5% to 19%. Wolters Kluwer believes this speaks to a changing self-perception within the accounting profession as being increasingly tech-driven. 

“There’s a noticeable shift in the industry as accountants and auditors increasingly embrace technology as a key driver of success,” said the report. “Whether enhancing client service and engagement or digitizing client document collection, software is proving to be a valuable ally.”

The Internal Revenue Service and the Treasury Department issued proposed regulations for corporate separations and reorganizations, along with reporting requirements for multi-year corporate separations, and a draft form.

In conjunction with the proposed guidance, the IRS posted a draft version of a new Form 7216, Multi-Year Transaction Reporting. The proposed regulations offer authoritative guidance on the provisions of the Internal Revenue Code addressing corporate mergers and acquisitions transactions, and the new form will give the IRS the necessary information with respect to corporate separations.

The Treasury and the IRS said Monday they proposed the guidance to improve the IRS’s ability to administer the rules in the tax law governing the distribution of stock and securities of a controlled corporation, and to ensure that corporate separations satisfy the requirements to qualify for tax-free treatment. The proposed reporting regulations require certain filers to attach the new Form 7216 to their federal income tax return to provide data to the IRS about their multi-year corporation separation. Generally, filers would include the distributing corporation, the controlled corporation and certain significant shareholders or security holders of the distributing corporation.

The increased reporting requirements under the proposed reporting guidance would allow the Treasury and the IRS to provide increased transactional flexibility through the proposed regulations. Some examples of this increased transactional flexibility include addressing retention of controlled corporation stock, monetization transactions and other significant issues arising from multi-year transactions.

The IRS said it intends to follow these proposed regulations when it issues private letter rulings about certain corporate separations. The IRS plans to issue an update to Rev. Proc. 2024-24 to incorporate these proposed regulations into the procedures for requesting such private letter rulings.

The Treasury and the IRS are asking for comments on both the proposed regulations and the new form. They’re encouraging commenters to use the Federal e-Rulemaking portal to submit comments on both the proposed substantive regulations (indicate “IRS” and “REG-112261-24”) and the proposed reporting regulations and related form (users should indicate “IRS” and “REG-116085-23”). Comments can also be mailed to: CC:PA:01:PR, Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.  Comments are due March 17, 2025. Interested parties can also use the portal and the address above to provide comments on the draft version of Form 7216.

The International Ethics Standards Board for Accountants plans to tackle a standard-setting project on accounting firm culture and governance in response to the findings in a new report.

The goal is to develop a culture and governance framework that promotes, supports and reinforces a high standard of ethical behavior by a firm’s leadership, other partners, and staff across all of the firm’s services. That way it will develop a reputation as a highly ethical firm, avoiding the risks of unethical behavior and strengthening public trust and confidence in all its services.

The report highlights the critical role of ethical culture and governance in addressing issues of unethical behavior within accounting firms. An IESBA working group on firm culture and governance did outreach and research last year and found some of the main drivers of an ethical firm culture include ethical leadership, transparent accountability mechanisms and governance frameworks that embed ethical values across all service lines. The report stresses the importance of transparent and ethical leadership, firm-wide accountability mechanisms and independent input. Performance incentives should align with ethical behavior, continuous ethics education, and a culture of open discussion and challenge.  

Based on the working group’s conclusions and recommendations, the standard-setting project plans to develop a principles-based culture and governance framework for accounting firms that promotes, supports and reinforces a high standard of ethical behavior across all their professional services.

As part of this initiative, the IESBA intends to develop non-authoritative materials to raise awareness about the importance of ethical behavior in accounting firms and support firms with guidance on embedding ethics into their strategies and operations. These will also help involve other stakeholders who might contribute to developing an ecosystem for highly ethical accounting firms.

The IESBA plans to host a series of in-person and virtual global roundtables in March and April to gather input from a wide array of stakeholders. The in-person roundtables will be held in New York City; Melbourne, Australia; Brussels, Belgium; and Kuala Lumpur, Malaysia. Further details will be announced in the future.

Victor Machado/Bluepeach

“Ethics is foundational to the work of all accounting firms and all the professionals therein,” said IESBA chair Gabriela Figueiredo Dias in a statement Tuesday. “It is their gateway to public trust in their professional services. I commend the working group on tabling a comprehensive report, identifying the key areas of focus we will be probing carefully and systematically, in collaboration with stakeholders, as we seek to develop a global framework for culture and governance for firms. It is our strong conviction that this framework will enable firms to be highly ethical firms consistently, strengthening their resilience against risks of unethical behavior, maintaining a good reputation, and ensuring their long-term sustainability to serve clients, investors, other stakeholders and the public interest.”

The issue of accounting firm culture and governance is a strategic priority for the IESBA after a series of high-profile cases of unethical behavior in accounting firms in several parts of the world in recent years. The cases have led to negative consequences for individual accountants and their firms in multiple jurisdictions.