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Managing the second tax season

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Tuesday, Oct. 15, looms. 

The Internal Revenue Service has estimated that some 19 million taxpayers filed for an automatic extension this year, more than a 30% jump from just five years ago. As savings and income become more dependent on tax forms that get delivered later and later and as public awareness of the ease of filing extensions grows, this trend isn’t going away.

“I remind clients that Oct. 15 is merely the IRS deadline for extended tax returns, but their own target should be ASAP,” said Jean-Luc Bourdon, a CPA at Lucent Wealth Planning in Santa Barbara, California. “The sooner clients file the prior year’s tax return, the sooner it can be used to improve the current year’s tax forecast and planning.”

Tax day concept. The USA tax due date marked on the calendar.

Natasa Adzic/stock.adobe.com

“Developing a [practice’s] strategic plan to manage time and resources effectively during the busy season is key,” said Carl Cesarano, managing shareholder at Cesarano & Khan CPAs, in Floral Park, New York. “Prioritizing tasks, scheduling client meetings and setting realistic deadlines.”

‘Sense of urgency’

Increasingly, firms enter the fall season off a late spring of work that was pushed due to April’s tax season, and off a phony “slow summer” when often they are down staff in any week because of vacations and Fridays off.

Paucity of staff isn’t a complete disadvantage. “There’s a shortage of qualified tax preparers, which allows them to choose their clients,” Bourdon said. “It’s not uncommon for tax preparers who despise a deadline glut to fire their last-minute filers … The tax-preparer shortage is also causing many tax pros to extend tax returns for which they received all information prior to the April deadline: They simply don’t have time to handle them all by April 15.”

Firms also don’t typically prepare for the October season as they do for Tax Day. Staff tend to resent working spring-like long hours in the fall, and cash flow can also be disrupted as some firms bill only after an extended return is completed.

So “increasing communication with clients during [the autumn season] is essential,” Cesarano said. “Regular updates on market conditions, personalized advice and addressing specific concerns clients may have provide reassurance and guidance.”

“Ensuring all necessary documentation is up to date and compliant with regulatory requirements is another key preparation step,” he added. “This includes preparing for any upcoming audits or reviews.”

Make sure clients are responsive in the run-up to the second season, added Jaclyn Connor, a CPA and partner of tax services at Top 100 Firm Cherry Bekaert in Austin, Texas — and make sure they feel free to connect their tax preparer with other professionals serving the client, such as the financial advisor or investment manager — or steer their preparer toward other portals or persons who can provide tax documents on time.

“If their tax return needs to be extended, [clients] should maintain a sense of urgency,” Bourdon said. “If you can’t be a king by filing by the April deadline, be a prince by filing as soon as possible after.”

Never boring

“Few of [my] clients are into digital assets, and only three have foreign accounts that need to be addressed,” said Morris Armstrong, an Enrolled Agent and registered investment advisor at Armstrong Financial Strategies in Cheshire, Connecticut. “My practice is geared to the middle-income market, and retirees can be boring at times, but usually we get a handful of returns that have some challenges. We’re also gearing up on the tax controversy side, as the IRS now has resources allowing them to pursue more cases of potential scofflaws.”

“My process is pretty simple: a robust engagement letter, an organizer and interview,” Armstrong said. “We’ll maintain that protocol although some clients find the organizer an annoyance — it does serve our purposes.” Armstrong’s firm is also busy customizing engagement letters and will be creating hard deadlines for next year.

Perhaps preparation for future Octobers will benefit from technology. “We have been toying with artificial intelligence in terms of productivity, and that is an eye-opener,” Armstrong said. “It can generate some wonderful forms and letters in the slow blink of an eye. We’re cautious using it for interpretative issues, although it can provide [citations that] may be examined further.”

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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