Accounting

How accountants can stay ahead of AI

Published

4 weeks ago

March 20, 2025

For years, advisory services stood as a bulwark against the relentless march of automation, a place where accountants could seek refuge as software took over more and more of the routine, compliance-based processes that, until recently, defined much of their jobs. Sure, the conventional wisdom holds that computers can now easily crunch the numbers — but it still takes humans to interpret what those numbers mean and to communicate that meaning to the client. However, as artificial intelligence continues to evolve, this conventional wisdom is increasingly challenged.

The truth is that while advisory services still stand as that bulwark, AI has begun nibbling at their foundations as it moves past updating journal entries and into generating the same kinds of data-driven insights and analyses that, before, had only been offered by human advisors. For better or worse, advisory is no longer the safe haven it once was. In the face of these changes, it is no longer enough to simply shift to advisory, as certain areas are already being transformed by AI. Instead, accountants must be smart about which areas of advisory they choose.

A great example of an area where this transformation is nearly complete is financial planning and analysis, according to Joe Woodard, head of accounting and business coaching firm Woodard. While there may once have been a time when a firm could sustain itself on analytics alone, those days are long past, as even public AI models are now capable of analyzing mountains of data in mere minutes, and writing reports on their findings in mere seconds.

“AI can do FP&A, and it does it well. A lot of people were initially disillusioned with ChatGPT because it couldn’t manage attachments and would guess when it didn’t know an answer. But now, it no longer plays the guessing game — it can absorb documents and do so securely, especially in enterprise or team editions,” said Woodard.

As an example, Woodard asked ChatGPT-4o, “If I have a gross profit margin of 60% and annual revenue of $15 million, what’s the ideal headcount for accounting associates, partners and reviewers?” He said the AI broke the problem down in real time — assessing firm dynamics, considering average pay rates, benchmarking professional service models, and calculating a typical partner-to-staff ratio. It even separated associates from other billable staff, factored in administrative and support personnel (“which I didn’t even ask for,” Woodard noted), and ultimately estimated a headcount of 85 to 95. And after doing all that, it provided firm strategy recommendations — niche practice areas, geographic market considerations, outsourcing, automation, and technology investments — all in about 45 seconds.

“So yes, AI is extremely deep and powerful,” Woodard said.

Randy Johnston, executive vice president of accounting training and education firm K2 Enterprises, said that he has seen this as well. For a long time, the kind of work that FP&A advisors did required a great deal of effort and time, but technological advancements mean it’s become much easier and faster to analyze a financial situation.

“The amount of time it takes to get high-value advice for clients in an advisory capacity has been dramatically reduced. If you’re doing pure advisory work that involves strategic analysis, historically, a lot of that was done by manually researching and Googling around. Now, you can use AI to get far better summary results and reference materials. I actually think Microsoft’s Copilot 365 does a great job — it will write the summary and provide the links. Does it find everything? No. But does it generate quick insights? Yes,” he said.

(Read more: “AI in advisory: What work is at risk?”)

Overall, the advisory services that are most at risk of disruption are — like compliance services — those that rely on relatively mechanical, step-by-step processes, which AI excels at. This also includes those that rely primarily on financial modeling, as Johnston says professionals no longer need to spend hours building custom models in Excel when they can now run those same figures through AI “and it does a much better job.”

“You still have to check the results, but it’s far faster than starting from scratch,” he said.

In contrast, Woodard said that operational finance roles, such as controllership, are relatively safe for now. He noted that many areas of corporate finance have been effectively automated away, but actual financial leadership positions, he believes, “will endure for the foreseeable future.”

While AI agents have made stunning advances in just a short time, even these semiautonomous bots are still unable to handle the vast number of responsibilities of a competent finance leader. A controller at a $2 million company, for example, needs to juggle financial oversight, operational problem-solving, team management, compliance enforcement and more, all of which requires dynamic, big-picture thinking that AI, for now, lacks.

“Bookkeepers who report to controllers will see their roles largely automated. Reviewers who check books for controllers will also be replaced by AI-driven analytics. FP&A professionals — who primarily compile financial reports — are at high risk. But controllers and CFOs will remain essential. The controller must operate within the company’s day-to-day reality, and the CFO must engage in high-level strategy, investment negotiations, and executive decision-making. These are operational, relationship-based roles that AI cannot replicate,” said Woodard.

Staying relevant

Woodard cautioned, though, that it’s not so much about the advisory areas themselves but, rather, how accounting firms perform them.

He said the biggest mistake he sees firms make is equating advisory with analytics, saying that if their definition of advisory is just building dashboards and explaining financial reports, then they are ripe for AI disruption. On the other hand, if their definition of advisory remains human-driven and client-centric in a way that allows the professional to understand the full context of their client’s situation, ideally based on a years-long relationship, to guide actionable financial decisions, then even FP&A can be fruitful.

“Financial analytics itself — the science of it — is easily and already being displaced by AI. For a human advisor to stay relevant, they must contextualize knowledge within a relationship with the client, understand operational complexities, and inject wisdom. AI cannot be wise; it can only be analytical … If you’re building a practice around delivering financial insights — essentially just interpreting numbers — AI will disrupt that,” he said.

Establishing such relationships and demonstrating credibility is a process that can take a long time, but Johnston said it can be helped through specializing in particular industries. For example, if a firm specializes in utilities and has its own internal data (perhaps indexed by AI) to give meaning and context to events within that sector, “that’s a real game-changer” as many models rely on public data that is not easily accessible to AIs.

“If you have expertise in any industry — utilities, for example — and you have legacy documents that can be indexed, that data is far more valuable than almost any public data available. Public data is useful, but having private data that has already undergone expert analysis is far more powerful,” said Johnston.

However, there is also the matter of educating clients as to why a human professional is still valuable. While accountants know that AI cannot do their entire job, media hype and technology misconceptions can sometimes lead people to believe that it can.

Even among those who already have an accountant, Woodard said that he has seen clients using AI as their first point of contact and only contacting their human professional for a second opinion. (See sidebar, page 8.)

“This is how AI is undercutting the value proposition of accountants. CPAs are increasingly becoming a second opinion rather than the first source of expertise,” said Woodard.

Relationships are the key to avoiding this. Accountants not only should be working on establishing and maintaining longstanding client relationships, they should be acting proactively to keep them informed of new developments that might affect them — so, rather than waiting for the client to call them, whether as the first or second opinion, the accountant should call the client.

Johnston, though, said that another somewhat unintuitive response might be to lean even further into these routine transactional services by leveraging AI to automate these tasks at a large scale, while still offering high-value advisory. However, one way or another, he said it ultimately comes down to keeping the client at the center.

“The key is staying client-centric. The accountants who remain first points of contact for clients — rather than second opinions after AI — will thrive. AI will become embedded in tools accountants already use, making it more invisible over time. But the accountants who don’t leverage AI will be replaced by those who do — especially offshore professionals using AI more aggressively,” he said.

Accounting

Millionaire tax-hike talks gain steam as Trump signals openness

Published

51 minutes ago

April 15, 2025

Business Finance News

Republicans in the White House, Senate and House are drafting analyses on how best to craft a new tax bracket for the wealthiest Americans, work that signals the GOP under President Donald Trump is seriously considering ideas to raise taxes on the rich.

The House proposal would set the new rate at 40% for taxpayers earning $1 million or more a year, according to people familiar with the proposal. Economic policy aides in the Senate and the Trump administration have been studying the idea as well, according to people briefed on the work.

A White House official, speaking on the condition of anonymity to discuss private conversations, said Trump is open to the idea of a new top tax bracket. However, the person emphasized that the higher rate should kick in at a threshold far greater than $1 million.

“We are investigating and having discussions with Congress about a variety of potential offsets,” Deputy Treasury Secretary Michael Faulkender said Tuesday at an event in Washington, noting that there are “many, many ideas” being studied to minimize the total cost of the tax bill though no decisions have been made.

Treasury Secretary Scott Bessent said in an interview Monday with Bloomberg News that “everything is on the table” with regards to the tax bill.

A Senate Finance Committee spokesperson declined to comment. Representatives for the White House and the House Ways and Means Committee did not immediately provide comment.

The discussions about a new tax bracket for millionaires come as Republicans are looking for ways to pay for a sweeping tax bill by the end of 2025 when several of Trump’s first-term cuts expire. The current top tax rate is 37% for individuals earning more than $626,350 a year.

The higher rates on top earners could be a way to offset the cost of an expanded state and local tax deduction, a popular and politically important tax break for swing district Republicans in New York, New Jersey and California, one person said.

The SALT deduction benefits skew toward higher-earners, so offsetting the cost with a millionaires bracket would serve a way to minimize the tax savings flowing to wealthy Americans in the bill. Republicans are considering expanding the SALT cap from $10,000 to as high as $25,000 per person.

Trump, in addition to renewing his 2017 cuts for households and privately held businesses, wants to pass campaign proposals, including eliminating taxes on tips and overtime pay, and creating new deductions for seniors.

Republicans on Capitol Hill are trying to make his wish list come true, while putting some limits on the boost to budget deficits.not supported.

Pass-through problem

Raising the top tax rate is likely to spark some backlash from business owners of partnerships, LLCs and other pass-through entities who pay their company tax bills based on the individual rates in the tax code. Senator Thom Tillis, a North Carolina Republican, has said Congress should put in limits on a top tax bracket to reduce levies of those privately held companies.

A new millionaire rate would also be an extraordinary break from Republican orthodoxy which has long espoused the idea of no-new-taxes.

Groups including Club for Growth and Americans for Tax Reform have spent years from powerful perches in Washington making sure Republicans did not raise taxes. But the party has changed under Trump and has taken on a more populist bent embracing ideas that were once taboo.

Still, there are swaths of the Republican Party opposed to the idea.

“It’s not going to happen,” Americans for Tax Reform’s Grover Norquist said on Tuesday, speaking at an event before Faulkender. House leaders, including Speaker Mike Johnson, have also downplayed the idea, saying they are looking for ways to cut — not raise — taxes.

“We’ll have to see,” Johnson said last week when pressed by a reporter.

Accounting

IRS gives Tennessee and Arkansas weather victims tax relief

Published

1 hour ago

April 15, 2025

Business Finance News

The damaged remains of the Walnut Ridge neighborhood in Little Rock, Arkansas on March 31. Photographer: Benjamin Krain/Getty Images — Storm damage in Little Rock, Arkansas

Individuals and businesses in all of Tennessee and Arkansas who were affected by severe storms, tornadoes, flooding and, in Tennessee, by straight-line winds that began on April 2, now have until Nov. 3 to file various federal individual and business returns and make tax payments.

The IRS is offering relief to any area designated by the Federal Emergency Management Agency; individuals and households that reside or have a business in Tennessee’s 95 counties or the 75 counties of Arkansas qualify for it. The current list of eligible localities is on the IRS Tax Relief in Disaster Situations page.

The relief postpones various tax filing and payment deadlines that occurred from April 2, 2025, through Nov. 3, 2025. Affected individuals and businesses will have until Nov. 3, 2025, to file returns and pay any taxes that were originally due during this period, including:

Individual income tax returns and payments normally due on April 15, 2025.
2024 contributions to IRAs and health savings accounts for eligible taxpayers.
Quarterly estimated tax payments normally due on April 15, June 16 and Sept. 15, 2025.
Quarterly payroll and excise tax returns normally due on April 30, July 31 and Oct. 31, 2025.
Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2025.
Calendar-year tax-exempt organization returns normally due on May 15, 2025.

Penalties for failing to make payroll and excise tax deposits due on or after April 2 and before April 17, 2025, will also be abated if the deposits are made by April 17, 2025.
The Disaster Assistance and Emergency Relief for Individuals and Businesses page has details on other returns, payments and tax-related actions qualifying for relief during the postponement period.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record in the disaster area. These taxpayers do not need to contact the agency to get this relief.

An affected taxpayer may not have an address of record in the area because, for example, they moved to the area after filing their return. If an affected taxpayer in those circumstances receives a late filing or late payment penalty notice from the agency for the postponement period, the taxpayer should call the IRS Special Services at (866) 562-5227 to update their address and request disaster tax relief.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS Special Services toll-free number above. This also includes workers providing relief activities and who are affiliated with a recognized government or philanthropic organization.

Disaster area tax preparers with clients outside the disaster area can choose to use the Bulk Requests from Practitioners for Disaster Relief option, which is described on IRS.gov.

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year when the loss occurred (in this instance, the 2025 return normally filed next year), or the return for the prior year (2024). Taxpayers have up to six months after the due date of their federal income tax return for the disaster year (without regard to any extension of time to file) to make the election. For individual taxpayers, this means Oct. 15, 2026. (Read more on personal casualty loss deductions.)

Write the FEMA declaration number — 3625-EM for Tennessee, 3627-EM for Arkansas — on any return claiming a loss.

Accounting

Tax Day arrives with Trump-era IRS still taking shape

Published

4 hours ago

April 15, 2025

Business Finance News

The conclusion of the tax filing season Tuesday is about to provide early clues toward resolving a nagging question hanging over the U.S. Treasury: How honest will Americans be about their income when there are suddenly fewer auditors to check them?

The answer has ramifications extending from Treasury debt markets already embroiled in tariff-related turmoil to legislative struggles in Washington over the debt ceiling and a proposed new round of tax cuts.

A drop in tax collections would likely move forward a debt ceiling deadline from the August to September timeline forecast by the non-partisan Congressional Budget Office. A sharp falloff also could ratchet up concerns about the fiscal burden of a proposed Republican tax package that matches giant tax cuts with much smaller spending reductions.

President Donald Trump’s administration this year terminated more than 7,000 Internal Revenue Service employees, mostly involved in tax enforcement, and ultimately may cut the agency’s workforce by 25%.

Analysts have warned that will drive up tax avoidance as well-off taxpayers’ fear of audits eases, though it’s not clear how quickly or how much.

There are early signs tax collections are holding up this year anyway. Through March, gross U.S. budget receipts for the fiscal year were up 3% to $2.26 trillion, according to the Treasury Department.

“That seems to suggest we may have a robust tax filing season in terms of revenue,” Deputy Treasury Secretary Michael Faulkender said on Bloomberg Television Friday.

There are lingering doubts raised by IRS filing statistics. As of April 4, the IRS saw a 0.4% reduction in the number of returns received compared to the 2024 season. The dollar value of refunds was up 5%, higher than the inflation rate.

“A major area of concern is wealthy taxpayers who don’t file when it’s clear that the IRS audit rate is low,” said John Koskinen, a former IRS commissioner. “The non-filers tend to be concentrated in wealthier individuals so they represent more significant revenue loss on an individual basis.”

Jessica Riedl, a senior fellow at the Manhattan Institute, said it will probably take longer for receipts to drop because the tax season was already underway when the IRS layoffs began.

“The short-term effects will likely be muted because the tax filing season is nearing an end,” she said. “However, the revenue loss may begin spiking this summer when corporations file their next quarterly taxes, and then rise further by next year’s tax season.”

Even so, voluntary tax compliance was a high 85% in 2022, according to the IRS.

“I’m not immediately convinced that there’s going to be some dramatic falloff in compliance right now,” said Pete Sepp, president of the National Taxpayers Union.

Future years could be very different. The Yale Budget Lab forecast that laying off about 18,000 IRS employees would result in a net revenue loss of roughly $159 billion over ten years. That could rise to as much as $1.6 trillion over 10 years if noncompliance is high, the group said.

Vanessa Williamson, a senior fellow at the Brookings Institution, said the Trump administration cuts are largely undoing efforts by former President Joe Biden to audit those making more than $1 million per year. She said the IRS could return to its footing in the 2010s when enforcement was lax and audits of those individuals dropped by 70%.

“It could easily become a $100-billion-a-year problem,” she said, noting the IRS high-wealth unit lost 38% of its employees.

A recent change allowing the agency to share taxpayer data with immigration officials could also result in a further loss of $313 billion in the coming decade if that discourages migrants from paying taxes out of fear of deportation, according to the Yale Budget Lab.

Treasury market

Wall Street investors and strategists are closely monitoring the magnitude of this week’s tax collections amid the sharp swings in the bond market driven by the Trump administration’s trade war.

In the near-term, the amount of cash flowing out of the money markets to pay Uncle Sam will impact funding costs. Higher tax receipts for the federal government means more liquidity is drained from the overall financial system, likely pushing up the cost of borrowing in the overnight repurchase market — which was already strained by last week’s market chaos.

Wells Fargo strategists, who estimate that this April’s tax receipts will boost the Treasury’s General Account by as much as $300 billion, last week flagged the risk of higher repo rates amid the tax payments.

Looking further out, the market is focused on what the April tax receipts mean for the Treasury’s cash balance in light of the debt ceiling. Wrightson ICAP, for one, forecast last month with low conviction an 11% increase in non-withheld income tax collections in the April to May period, compared to last year.

The amount coming into the Treasury’s coffers also carries implications for the Federal Reserve’s balance sheet unwind, which on April 1 slowed to a cap of $5 billion in Treasuries per month. Officials are closely watching the level of reserves in the banking system and gauging broader financial liquidity to determine how much longer the quantitative tightening process can continue.

Customer service

Businesses have other reasons for concern about the IRS layoffs, including greater difficulty getting advice from the agency on complex tax questions.

“The old adage ‘if you break it, you’ve bought it’ applies here,” Sepp said. “They’re doing the breaking right now, so they own the problem.”

Sepp said the NTU is very concerned about deep coming cuts to the office of the Taxpayer Advocate — an internal means for taxpayers to challenge IRS decisions — and the risk of further delays in efforts to modernize the agency’s creaky data systems.

It’s unclear, he said, if Elon Musk’s Department of Government Efficiency is going to scrap the modernization effort and start over.

For businesses with complex tax problems, proposals to employ artificial chatbots instead of humans could be especially problematic, said Daniel Reck, a University of Maryland economics professor who researches tax policy.

“That could turn into a pretty Kafkaesque experience, and it’s already not a lot of fun,” said Reck.