For my entire 20-year career, the CPA profession has warned of the coming technological disruption. The need for digital transformation has been a topic at every conference I have attended and regularly finds its way to the cover of accounting publications. While we’ve come a long way from the paperless initiatives of the early 2000s, many of the core systems supporting firms today look very similar to what they did when I entered the workforce. 

While other industries rapidly adopt data-driven solutions like artificial intelligence, many CPA firms still rely on spreadsheets and processes that merely digitize the traditional paper-based approach. These legacy systems haven’t prevented success and avoid the risks of retooling and reskilling employees, but staying in the past fails to capitalize on the incredible software available today.

That’s not to say firms haven’t tried or don’t understand the opportunities available to them. The historical reality is that the current systems work, change is hard, and many of the traditional approaches to digital transformation require a complete system overhaul all at once. However, those realities have changed dramatically in the last couple of years with new tools that simplify adoption, allow for small iterative enhancements, and create real threats to leave you behind if you ignore them. 

It starts with culture

The technology available to support digital work today is nothing short of breathtaking as many of the promises of cloud technology are being realized. We’ve experienced a true renaissance with tools that are inexpensive, easy to adopt, and sometimes make you feel like a wizard. 

However, the tools aren’t actual magic. We are still waiting for the technological discovery that overcomes poorly designed processes, and we continue to be grounded in the traditional rules and logic that require new skills and organizational alignment. Success requires changes to be embraced and celebrated across the firm, from support staff to partners in corner offices.

The shift in mindset is the most significant hill to climb, but it doesn’t have to be painful or even hard. When you show people a better way to work and an opportunity to be more effective, it’s easier to rally support. The conversation needs to be about more than higher margins and fear of being left behind — the real magic of a digitally driven professional services firm is that it empowers people to help clients and reduce stress. 

Take inventory and find small opportunities

The initial challenge is recognizing the opportunity to expand technology use for everyday tasks and understanding where to begin. Numerous small, seemingly insignificant gains can collectively lead to a substantial shift in how we serve clients, enabling easier monitoring, asynchronous work and more accurate deliverables, among many other benefits. 

These sorts of iterative and continuous changes can be hard, but being intentional about the systems you adopt and the types of experiments you conduct becomes your biggest asset. 

Here are a few vital steps to help you get started as you adopt new technology in your firm:

• Address fears and challenges: Examine why your firm hasn’t embraced the innovations we’ve seen in the compliance space. Common barriers include fear of change, adoption costs and required knowledge, all of which can be overcome with the right approach and mindset.
• Start small: Begin by integrating the tools you’re already using, so they communicate with each other, and you can ensure data security at every transfer point. As you gain confidence, identify your firm’s biggest pain points and brainstorm the best ways to tackle them.
• Thoughtfully consider budget: While the cost of implementing new tools can be a deterrent, many modern solutions are more affordable than expected. With the tremendous software available and marketplaces offering consultants to help you get started, the barriers to entry are lower than ever.

Analyze the best tools for your compliance firm

Think holistically about your tech stack and how tools work together, from your email to the systems you use for research, documentation, and client collaboration. The number of tools available is vast, and while many do similar things, each typically has some nuance. It’s essential to know what you need and thoroughly research to find the right fit. 

The best part is that most of these tools offer free trials and live demos, so you can see the product and ask questions, learn more, and try them out before investing time and money. For those who don’t feel comfortable implementing tools themselves, many great IT consultants can lead you through the selection process and potentially help you onboard and integrate new tools. 

If you want to build the tools and knowledge internally and fully tailor your firm’s digital programs from scratch, AI can help significantly as you learn to write and debug code. If you have zero coding experience, that is no longer an issue with low-code and no-code platforms that do the tough programming part for you, allowing you to personalize and design tools specifically for your firm’s needs.

Implement technology smoothly

Adopting new tools and changing processes can be challenging, particularly for employees. 

Here are some tips for smooth implementation:

• Introduce tools gradually: Avoid overwhelming your team with too many new tools at once. Be intentional and roll them out at a comfortable pace with clear instructions, expectations and documentation. 
• Provide comprehensive training: Offer high-level group training followed by individual sessions with subject matter experts to address specific questions. 
• Foster a supportive culture: Some team members may initially resist new tools, preferring traditional methods. Be patient because, over time, they will recognize the benefits and time savings, allowing them to focus on more interesting and valuable tasks. 
• Document and iterate: Create clear documentation for new processes and be open to feedback and adjustments as your team adapts and finds new ways of working.

The journey to a truly digitally driven firm requires curiosity, patience and a willingness to embrace change. Be open to continuous learning opportunities, and as technology evolves, so should your firm. This transformation won’t happen overnight. It’s a gradual process that involves overcoming initial fears, making informed decisions, and fostering a strong culture that supports innovation.

By taking these steps, you’ll position your firm for gains in efficiency and long-term success. Embrace the journey, trust the process, and watch as your firm becomes more dynamic, innovative, and client-focused. The future of compliance is digital, and the time to start is now.

Tax cuts and Mickey’s slice; avoiding FBARs; COLA wars; and other highlights from our favorite tax bloggers.

Through the roof

• Tax Vox (https://www.taxpolicycenter.org/taxvox): Kamala Harris has released an ambitious economic agenda that includes expanding family credits, an exemption for tip income and a commitment not to raise taxes on those earning less than $400,000. Can she pay for all that?
• MeyersBrothersKalicka (https://www.mbkcpa.com/insights): Insurance is generally headed through the roof (in no small part because so many roofs are blowing off), so your biz clients might find the coverage they need too expensive. What to consider in a captive insurance company, including the tax benefits.
• HBK (https://hbkcpa.com/insights/): Businesses can and should be appraised regularly. “Qualified appraisals” (as defined under the Internal Revenue Code) are commonly sought by higher-income taxpayers and estates. And it might not come as a surprise that some of the IRS’s favorite items to audit are private business and valuations of closely held entities. A recent U.S. Tax Court case highlights the importance of keeping these facts top-of-mind. 
• Institute on Taxation and Economic Policy (https://itep.org/category/blog/): Several states are getting an early start at writing new tax policy. West Virginia has agreed on an additional tax cut; Louisiana may soon follow suit. Meanwhile, one Florida county may be on the hook for millions in refunds to Disney for taxes that a court says were improperly collected.

It couldn’t hurt

• Tax Notes (https://www.taxnotes.com/procedurally-taxing): In prior posts regarding attorney’s fees and the federal tax lien, attorneys won; that streak continues in the recent Jason A. Imes v. Fox Rothschild LLP et al. Not mentioned in the caption of the case, the taxpayer — a non-party in the lien priority case — nevertheless deserves some attention.
• TaxProf Blog (http://taxprof.typepad.com/taxprof_blog/): The state corporate income tax may be a flawed instrument, but here’s why calls to eliminate it should be reconsidered.
• Virginia – U.S. Tax Talk (https://us-tax.org/about-this-us-tax-blog/): One possible method to avoid FBAR filings.
• Don’t Mess with Taxes (http://dontmesswithtaxes.typepad.com/): The Un-Cola Dept.: A deeper look into the latest (and grumble-igniting) Social Security cost-of-living-adjustment bump.
• Tax Foundation (https://taxfoundation.org/blog): Though energy prices have declined from their recent peak, Spain is one of the few European countries  continuing to rely on windfall profits taxes to fund relief measures for consumers. Will that become permanent?

Independent thinking

The Internal Revenue Service is offering filing and payment relief in the wake of Hurricane Milton to individuals and businesses in 51 counties in Florida. Individuals and businesses in six counties that previously did not qualify for relief under either Hurricane Debby or Hurricane Helene will receive disaster tax relief beginning Oct. 5 and concluding next May 1.

They are Broward, Indian River, Martin, Miami-Dade, Palm Beach and St. Lucie Counties.

In addition, individuals and businesses in 20 counties previously receiving relief under Debby, but not Helene, will receive disaster tax relief under Hurricane Milton from Aug. 1, 2024, through May 1, 2025. They are Baker, Brevard, Clay, DeSoto, Duval, Flagler, Glades, Hardee, Hendry, Highlands, Lake, Nassau, Okeechobee, Orange, Osceola, Polk, Putnam, Seminole, St. Johns and Volusia Counties.

Tristan Wheelock/Bloomberg

Affected taxpayers in all of Florida now have until May 1, 2025, to file various federal individual and business tax returns and make tax payments, including 2024 individual and business returns normally due during March and April 2025 and 2023 individual and corporate returns with valid extensions and quarterly estimated 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 any one of the localities listed above qualify for tax relief. The current list of eligible localities is on the Tax relief in disaster situations page on IRS.gov. 

The Milton-related tax relief postpones various tax filing and payment deadlines that occurred between Oct. 5, 2024, and May 1, 2025. Affected individuals and businesses have until May 1, 2025, to file returns and pay any taxes that were originally due during this period. The May deadline now applies to: 

• Any individual or business that has a 2024 return normally due during March or April 2025.
• Any individual, C corporation or tax-exempt organization that has a valid extension to file their calendar-year 2023 federal return. (Payments on these returns are ineligible for the extra time because they were due last spring, before the hurricane.)
• 2024 quarterly estimated tax payments normally due on Jan. 15, 2025, and 2025 estimated tax payments normally due on April 15, 2025.
• Quarterly payroll and excise tax returns normally due on Oct. 31, 2024, Jan. 31, 2025, and April 30, 2025. 

For localities affected by Milton, penalties for failing to make payroll and excise tax deposits due on or after Oct. 5, 2024, and before Oct. 21, 2024, will be abated, as long as the deposits are made by Oct. 21, 2024. Localities eligible for this relief are: Alachua, Baker, Bradford, Brevard, Broward, Charlotte, Citrus, Clay, Collier, Columbia, DeSoto, Dixie, Duval, Flagler, Gilchrist, Glades, Hamilton, Hardee, Hendry, Hernando, Highlands, Hillsborough, Indian River, Lafayette, Lake, Lee, Levy, Madison, Manatee, Marion, Martin, Miami-Dade, Monroe, Nassau, Okeechobee, Orange, Osceola, Palm Beach, Pasco, Pinellas, Polk, Putman, Sarasota, Seminole, St. Johns, St. Lucie, Sumter, Suwannee, Taylor, Union and Volusia Counties. 
Deposit penalty relief and other relief was previously provided to taxpayers affected by Debby and Helene. For details, see the Florida page on IRS.gov. The Disaster assistance and emergency relief for individuals and businesses page also has details, as well as information on other returns, payments and tax-related actions qualifying for relief during the postponement period. 

The IRS 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 service automatically provides filing and penalty relief to any taxpayer with an address of record in the disaster area. If an affected taxpayer does not have an address in the area (because, for example, they moved to the disaster area after filing their return), and they receive a late-filing or late-payment penalty notice from the IRS for the postponement period, they should call the number on the notice to have the penalty abated.

The IRS will work with any taxpayer who lives outside the disaster area but has records necessary to meet a deadline occurring during the postponement period in the affected area. Qualifying taxpayers who live outside the disaster area should call the IRS at (866) 562-5227, including workers assisting the relief activities who are with a recognized government or philanthropic organization. Tax preparers in the disaster area with clients who are outside the disaster area can use the Bulk Requests From Practitioners for Disaster Relief option described on IRS.gov.

After a disaster, people who temporarily relocate should notify the IRS of their new address by submitting Form 8822, Change of Address.

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 the loss occurred (in this instance, the 2024 return normally filed next year), or the return for the prior year (2023, filed this year). Taxpayers have extra time — up to six months after the due date of the taxpayer’s 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, 2025.

Taxpayers and tax professionals should write the FEMA declaration number — 3622-EM — on any return claiming a loss.

Extension relief

In the wake of the recent hurricanes in Florida and the Southeast, the IRS says taxpayers in the entire states of Alabama, Florida, Georgia, North Carolina and South Carolina and parts of Tennessee and Virginia who received extensions to file their 2023 returns now have until May 1, 2025, to file. 

Tax-year 2023 tax payments are not eligible for this extension. May 1 is also the deadline for filing 2024 returns and paying any tax due.

Dyed diesel fuel

In response to Hurricane Milton, the IRS will also not impose a penalty when dyed diesel fuel with a sulfur content that does not exceed 15 parts-per-million is sold for use or used on the highway throughout Florida. This is in addition to the limited relief provided in response to Hurricane Helene.

The relief began on Oct. 9 and will remain in effect through Oct. 30.

This penalty relief is available to any person who sells or uses dyed diesel fuel in vehicles suitable for highway use. In the case of the operator of the highway vehicle in which the dyed diesel fuel is used, the relief is available only if the operator or the person selling such fuel pays the tax of 24.4 cents per gallon that is normally applied to undyed diesel fuel for highway use.

The IRS will not impose penalties for failure to make semi-monthly deposits of tax for dyed diesel fuel sold for use or used in diesel powered vehicles on the highway in Florida during the relief period.