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Stop being so faithful to your old ideas

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I was listening to a podcast the other day, and the guest and host kept using the term “promiscuity.” At first I was taken aback until I realized they were talking about being intellectually promiscuous — not falling so in love with an idea that you’re unwilling to change for the better.

The mindset is that great managers and leaders are always willing to change the way they think and run their businesses. Instead of staying married to the same old ideas and processes, maybe it’s time for us in this profession to become more intellectually promiscuous. 

Before we go any further, let’s clear the air: I’ve been happily married for almost 20 years. With a happy marriage, you are 100% committed, and you’ve “burned the boats” on self-doubt. Businesses are different. Technology changes, client expectations change, and your ideas should be changing too.

As accountants, we’re constantly feeling time pressure. Too often we don’t give ourselves enough time to work on our businesses because we’re so busy working in our businesses. Steven Covey would say, “We’re so busy sawing that we don’t have time to sharpen the saw.”

When getting work out the door is the top (and only) priority for your firm every day, you don’t have the luxury of looking for ways to get the work done faster, more efficiently and less stressfully. As a result, you get married to the same few ideas about how to run a firm, what it means to be a CPA and how to treat clients. It’s hard to get better and grow when you have such a narrow mindset. Ultimately it leads to declining revenue and staff turnover.

Fortunately (or unfortunately, depending on your perspective), change is here to stay. You can’t keep saying: “We’re going to ‘white knuckle’ our way through this thing until all this change is done.” That’s not going to work. Being “anti-fragile is what works — becoming stronger by leaning into change rather than running away from it. 

Al Davis, maverick former owner of the Oakland/Las Vegas Raiders liked to say, “I’d rather be right than be consistent.” Davis never stopped pushing the boundaries of how an NFL owner should behave. Sure, Davis made plenty of enemies, but he never stopped looking for ways to give his team an edge in the cutthroat world of professional football.

As accounting firm leaders, competitive threats are all around us. Those threats used to be limited to rival accounting firms.  Now, every aspect of your business is being encroached on by other industries that want in your clients’ pockets.  

As the old saying goes: “What got you here won’t get you there.” The way you ran your business five or 10 years ago won’t keep working today; it’s certainly not going to work in the future. You need to keep evolving if you want to stay in the game.

Client expectations. Client communications. Client response time. All those things have changed dramatically and will continue to change dramatically in the years ahead. Clients now expect it to be as easy to do business with their CPA as it is to do business with Amazon, Netflix and Uber. Take client portals, which weren’t even a term 10 years ago.

Even five years ago, having a client portal meant that you sent clients a link to a shared file where they could upload documents. That may have seemed cutting-edge then, but today you can’t say you have a client portal unless it offers real-time communication, CRM, data gathering and workflow tools. That’s how quickly things have changed. Clients want more real-time access to their information and their accountant with less friction and more efficiency. That’s never going to change.

When portals first emerged, many firm leaders downplayed them. They told themselves clients would never use them or trust them. That’s just being foolishly faithful to the idea that clients really enjoyed gathering up their documents and receipts, making photocopies and schlepping down to your office, paying for parking and dropping off their bundle so they could sit around for weeks waiting for you to call them with the results of their return. Why? Because that’s the way it has always been done. Ouch!

Great ideas from outside the industry (and from those in the trenches)

Part of being intellectually promiscuous is recognizing that many good ideas impacting our profession are coming from outside the accounting industry. Take private equity and other sources of capital coming into our world. These players are aggressive. They’re bringing ideas that work successfully outside of professional services and implementing them in the accounting world. 

The more attached you get to certain notions about how things should be done, the harder it gets to keep up, much less evolve. That’s because you’ve associated yourself and your personal brand with those legacy ideas. But if you can stay emotionally detached from your firm’s processes and ideas and simply tell your team, “I don’t care who’s right. I only care that we get it right,” then you’re on the right track. But not every firm leader has the courage to make that leap. Also, the best ideas about how to interface with clients, how to get them onboarded and how to run more efficiently, are going to come from your client service associates — the folks in the trenches — not from the partners. If you’re still defending ideas because they’re yours, or because they weren’t invented by your firm or by top management, then you may not be on the right path for the future. 

When it comes to a lifelong relationship, marriage is a great thing. When it comes to ideas, be more promiscuous. Try new things, get comfortable being uncomfortable. Your firm will be better for it. How are you upgrading your processes and ideas? I’d love to hear from you. 

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Accounting

Trump’s tariffs raise tax-cut stakes with recession fears rising

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President Donald Trump’s much bigger-than-expected tariff hikes increase the urgency of the Republican tax-cut package now in negotiation, while threatening to undermine its boost to business and consumer confidence.

With the biggest selloff on Wall Street since the COVID crisis showcasing investor concerns about Trump’s plans to jack up U.S. tariffs against all trading partners, the stakes are now higher for the GOP tax package. A simple extension of the 2017 income-tax cuts that are set to expire at the end of this year would offer no new fiscal stimulus.

“The main question is what do they do that goes beyond extending the 2017 cuts?” said Alec Phillips, chief U.S. political economist at Goldman Sachs Group Inc. “The tariffs that are being discussed look like they are on a larger scale than the net tax cut that seems to be under consideration in Congress.”

Republicans appear aware of the potential trade-off. Senate GOP members this week unveiled a budget blueprint that provided for $1.5 trillion of extra tax reductions, on top of a $4 trillion extension of the 2017 measures. Treasury Secretary Scott Bessent, one of Trump’s main negotiators, said the administration wants to incorporate Trump’s campaign pledges of ending taxes on tips and overtime pay, added relief for seniors and deductions for purchases of U.S.-made cars. Lawmakers are also aiming to include business-tax breaks viewed among the most pro-growth of the proposals.

The White House chief economist, Stephen Miran, also argued on Friday that the administration’s planned wave of deregulation will have a “powerful, and arguably much more powerful,” effect than tariffs.

But the danger is the ramp-up in import levies tips the economy into a downward spiral that makes it tough for tax cuts, a reduced regulatory burden and even lower interest rates to quickly reverse. Bloomberg Economics estimated that, with the panoply of measures Trump has announced, the average U.S. tariff rate is poised to climb to almost 22%, or the highest in roughly a century.

The tariffs aren’t yet fully in place, and may be subject to negotiation. If they do proceed, most economists see a sizable boost to inflation. Federal Reserve Chair Jerome Powell Friday said the price effects could be temporary, or prove “more persistent.” With wage growth slowing, that implies a hit to household incomes. A consumption hit could in turn spur employers to lay off staff and curb investment — even in an environment of cheaper borrowing costs.

“Large shocks are usually associated with nonlinear effects and unintended consequences,” JPMorgan Chase & Co. economists led by Bruce Kasman wrote in a note to clients Thursday. The bank on Friday changed its call on the economic outlook and now sees the U.S. sliding into a recession this year — an outcome Bessent has rejected.

Then there’s the timing issue. The most powerful wave of tariff hikes yet is set to take effect April 9. But the tax-cut legislation is likely months away from passage. Bessent highlighted in a Bloomberg TV interview Wednesday that the Republicans have never been more united. Even so, the so-called reconciliation bill that Republicans are using to bypass Democrats involves a complicated process, requiring many steps before it’s enacted.

And even then, the tax relief is for next year’s income, while the tariff-related risks are surging in the here-and-now. 

“Whatever fiscal oomph that we may get is probably a 2026 reality, whereas the trade policy uncertainty is a headwind to growth is a 2025 reality,” said Richard Clarida, managing director and global economic adviser at Pacific Investment Management Co. and a former Treasury official in the George W. Bush administration. “In the narrow, limiting case, where you don’t do anything on tax on tips or this or that, then there’s essentially no real net stimulus.”

Bessent has repeatedly emphasized that the Trump administration’s priority is Main Street, not Wall Street, and he and the president have embraced the idea of a transition period to where the economy is propelled by the private-sector — rather than the government-led growth pattern they say prevailed under Joe Biden. High import levies could also offer a path toward better trade deals.

“Is this ugly right now? Is this distasteful? Absolutely,” said Phil Orlando, chief market strategist at the asset manager Federated Hermes. “But it was exactly the sort of thing they needed to do in order to get everyone’s attention and start to have a series of negotiations to try to level that playing field and boost economic growth through more normalized trade.”

The tariffs in the meantime will be bringing in fresh revenue to the government, which — while it cannot count toward paying for the tax cuts according to reconciliation-bill rules — may help reduce the outsize federal budget deficit. Bessent has estimated the tariff income at $300 billion to $600 billion a year.

A political risk for the Republicans, beyond any potential recession, is that import duties are regressive — disproportionately affecting lower-income buyers of overseas goods. That risks the working-class voters that helped the GOP secure both the White House and both chambers of Congress in November.

The Tax Foundation, a policy think tank, has estimated the announced tariffs will impose an average tax hike of over $1,900 per household for 2025. By comparison, Senate Majority Leader John Thune said a four-person household with $80,000 in earnings would avoid sending an additional $1,700 to the government next year thanks to the tax package.

The tariffs are “highly damaging and primarily burden low and middle income families,” said Samantha Jacoby, deputy director of federal tax policy at the Center on Budget and Policy Priorities. “Small targeted tax cuts for low income or middle income families doesn’t change that.”

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Accounting

IRS employee union requests emergency relief

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The National Treasury Employees Union, which represents workers at the Internal Revenue Service among 37 federal agencies and offices, has asked a federal judge for emergency relief to preserve the union rights of federal employees while NTEU’s legal challenge to President Trump’s executive order stripping unions of collective bargaining rights can be heard in court.

Trump signed an executive order last Thursday removing the requirements from employees at agencies including the Treasury Department that he deemed to have national security missions. On Monday, the NTEU filed a lawsuit to stop the move arguing that Trump’s rationale for protecting national security was just a way to end union protections for federal workers. The administration also wants to prevent the unions from collecting dues automatically withheld from employee paychecks.

NTEU’s request for a preliminary injunction was filed Friday with U.S. District Judge Paul Friedman.

 “NTEU seeks emergency relief to protect itself and the workers it represents from this unlawful attempt to eliminate collective bargaining for some two-thirds of the federal workforce,” the request stated.

The NTEU contended that the Trump administration’s executive order claims that allowing workers to join a union was a threat to national security were absurd.

“We all know this has nothing to do with national security and that the true goal here is to make it easier to fire federal employees across government,” said NTEU national president Doreen Greenwald in a statement Friday. “Just five days after declaring the administration would no longer honor our contract with Health and Human Services, thousands of brilliant civil servants who work tirelessly to improve public health were let go for spurious reasons and little recourse to fight back.”

The union pointed out that Congress declared 47 years ago that collective bargaining in the federal sector was in the public’s interest by giving employees a voice in the workplace and allowing labor and management to work together. It acknowledged there is a narrow exemption in the law for groups of employees whose work directly impacts national security, but argued that Trump’s executive order is blatant retaliation against federal sector unions and ignores the laws passed by Congress creating the agencies.

In agencies where a reduction-in-force has been announced, NTEU’s contracts provide time for employees to respond to a RIF notice and explore alternatives to mitigate the impact of the layoffs.

Earlier this week, after two court rulings in California and Maryland, the IRS’s acting commissioner, Melanie Krause, announced the IRS would be bringing back approximately 7,000 probationary employees who had been fired and then put on paid administrative leave.

A bipartisan bill has been introduced in Congress to preserve collective bargaining rights for federal employees. The Protect America’s Workforce Act (H.R. 2550), sponsored by Rep. Jared Golden, D-Maine, and Brian Fitzpatrick, R-Pennsylvania, would overturn Trump’s executive order stripping collective bargaining rights from hundreds of thousands of federal workers at multiple agencies.  Separately, eight House Republicans and every House and Senate Democrat have sent letters to the White House condemning the executive order.

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Accounting

Estate planning for the Tax Cuts and Jobs Act expiration

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The political calculus involved with the details of estate planning next year and beyond may be distracting financial advisors and clients from a larger, simpler conversation, one expert says.

On the off chance that the federal estate-tax exemption levels of $13.99 million for individuals (and double for couples) revert to half those amounts when Tax Cuts and Jobs Act provisions expire in 2026, only 0.2% of households would face potential duties upon transfer of assets, according to Ben Rizzuto, a wealth strategist with Janus Henderson Investors‘ Specialist Consulting Group. He predicted that most financial advisors and high net worth clients, such as those he works with and others across the industry, will see no changes. 

With few other revenue-raising provisions available to President Donald Trump and Republican lawmakers, they’re not likely to shield all estates from payments to Uncle Sam — as much as they might like to play undertaker to the “Death of the Death Tax,” Rizzuto said, using the label for estate taxes adopted by critics favoring bills like the “Death Tax Repeal Act.” Lawmakers’ decisions on future exemptions from the taxes (and when they make those decisions) remain out of advisors’ control. Meanwhile, they must remind clients that estate planning is much more than having a will and avoiding taxes, Rizzuto said.

“For financial advisors and clients, I would expect for many of them not to have to worry about federal estate taxes next year,” he said in an interview. “Even though they may not have to worry about it, there are still a lot of good conversations to be had.”

READ MORE: Tax Cuts and Jobs Act expiration: A guide for financial advisors

The 1%

Trust tools that reduce the value of the assets that will transfer to spouses or other beneficiaries upon a client’s death, combined with the available statistics about the shrinking share of estates subject to taxes, could bring some peace of mind to clients. The 2017 tax law itself pushed down estate tax liability as a percentage of gross domestic product to a quarter of its 2001 level, according to an analysis by the “Budget Model” of the University of Pennsylvania’s Wharton School. Just two years after the law’s passage, the number of taxable estates had plummeted to 1,275 — or 1% of the number at the beginning of the century.

At the same time, advisors could raise any number of questions with clients about their estates that involve varying degrees of expertise and collaboration with outside professionals. And many surveys have found that clients are expecting them to do so. For example, at least 70% out of a group of 10,000 adults contacted in January by WeAreTalker (formerly OnePoll) on behalf of online legal information service Trust & Will said advisors should offer estate planning. In addition, 40% of the group said they would switch to an advisor who provided that service.

“We’re seeing a fundamental shift in client expectations,” Trust & Will CEO Cody Barbo said in a statement. “The findings are clear. Advisors who fail to integrate estate planning into their practice aren’t just missing an opportunity; they are facing a threat to their client base as wealth transfers to younger generations over the next two decades.”

READ MORE: Ethical wills can be a crucial tool for estate planning

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Get back to the planning basics

In that context, advisors and their clients should steer clear of trying to make sense of a complicated, ever-changing flow of news from Capitol Hill as Trump and the GOP pursue major tax legislation with a year-end deadline, Rizzuto said. If clients truly could be on the hook for estate taxes, a grantor retained annuity trust, a spousal lifetime access trust or gifting strategies may eliminate the possibility. One method involved with the latter could set them up in the future to receive stock that is “highly appreciated with lower basis,” Rizzuto noted, citing the example of equities that have gained a lot of value that a client could give to their parents.

“Why not gift them upstream?” Rizzuto said. “My father holds it. I tell him, ‘Dad, you have to do these things: Live for another 12 months, make sure you don’t sell, make sure that you update your will or your instructions to gift it back to me when you die.’ That’s another idea that we’ve been talking about with advisors.”

From another perspective, these possible paths forward may beckon to clients this year, if they are tuning into Beltway news about the progress of the tax legislation, he said. To bypass the risk of client perceptions that their advisor isn’t doing any tax planning at all, Washington’s complex maneuvering around the future rules is, “if nothing else,” a “great opportunity for advisors to bring this up at a very high level,” Rizzuto said.

“Advisors will really need to go back to basics and have some foundational conversations with clients,” he said, suggesting their goals with taxes as one key point of discussion. “‘What is it that we actually control within your financial and tax plan?’ When it comes right down to it, it’s really just incomes and deductions.”

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