Carl Peterson, vice president of small firm interests at the American Institute of CPAs, will retire on June 30.

Peterson joined the AICPA in 2014 focusing on the organization’s relationship with groups focused on issues impacting small firms. He also liaised with state CPA societies and led small firm roundtables, including two major webcast series, “Small Firm Updates” and “Small Firm Issues,” which helped practitioners and state society staff stay ahead of emerging trends, technical updates and regulatory changes.

“Carl’s ability to connect with small firm practitioners, understand their realities, and elevate their perspectives made him an invaluable advisor to me,” Susan Coffey, the AICPA’s CEO of public accounting, said in a statement. “He made sure our strategies and policies never lost sight of what matters most to our members operating smaller firms. Carl’s personal investment in building relationships — often through Sunday night phone calls or midweek check-ins — demonstrated his unmatched dedication to the profession.”

Peterson also worked for the International Federation of Accountants Small and Medium Practices Advisory Group as a technical advisor. Prior to joining the AICPA, he served as managing partner of a small firm in Minnesota. He also served as the chairman of the board of directors of the Minnesota Society of CPAs, and as chairman of the political action and legislative affairs committees. In 2013, he was honored by the MNCPA with their Distinguished Service Award.

“Carl has always understood that success in public accounting isn’t one-size-fits-all,” Mark Koziel, CEO of the AICPA, said in a statement. “His empathy, candor and deep experience gave small firms a trusted voice and brought tremendous credibility to our advocacy and resources. He made the AICPA feel personal.”

He has been a member of Accounting Today’s Top 100 Most Influential People in Accounting list each year since his appointment in 2014. 

“Carl’s legacy is one of deep connection, commitment, and service,” Lisa Simpson, vice president of firm services at the AICPA, said in a statement. “He didn’t just serve small firms, he brought their experiences into every conversation within the AICPA and raised the bar for how we support and listen to our members. Carl brought his own experiences serving on technical committees and being involved in state societies to give a holistic perspective to serving firms and their interests throughout the years.”

The Internal Revenue Service is expected to lean more heavily on artificial intelligence technology as it carries out widespread layoffs.

A report, released last week by the Treasury Inspector General for Tax Administration, found the IRS could leverage its examination results when using AI to select cases for further scrutiny and improve its processes. TIGTA noted that the IRS’s current tax return selection models have resulted in a high percentage of examinations that were completed with no change to the tax liability. However, that means resources are wasted on unproductive examinations and compliant taxpayers are unnecessarily burdened. AI models can improve the process the IRS uses to select cases for examination. 

TIGTA assessed how effectively the IRS’s Large Business and International Division and the IRS Small Business/Self-Employed Division employ AI models to identify returns and issues for examinations.

The IRS started using AI several years ago and revamped how it selects tax returns and identifies issues for examination by using AI models that have been trained on current tax return data instead of relying on past audit results. 

The report noted that historical examination results are informative and should be used by the IRS to monitor and improve AI models when available. For instance, the IRS could utilize examination results to improve return classification and return selection AI models that could potentially identify new areas of noncompliance. The IRS should also consider evaluating ensemble machine-learning for improving the accuracy of identifying noncompliant taxpayers and narrowing the tax gap.  “Ensemble learning is an approach that combines multiple machine-learning algorithms to potentially improve performance by making more accurate predictions of which tax returns and/or issues to examine,” said the report. 

The IRS has not set up processes to evaluate whether the performance of AI models is better than prior methods or is achieving the intended objectives, according to the report. But not evaluating performance results runs contrary to federal AI key practices to ensure accountability and responsible AI use.

The report recommended that the IRS’s chief tax compliance officer, in partnership with the chief data and analytics officer where appropriate, require division commissioners to  use governance processes to ensure that examination performance results are part of the monitoring and continuing refinement of the return classification and selection AI models. They should also refine the AI models by incorporating ensemble machine-learning when appropriate; and establish a measurement plan with appropriate metrics to monitor AI models to ensure that they are achieving the expected benefits and to correct any model drifts. 

The IRS agreed with all three of TIGTA’s recommendations, subject to staffing constraints and anticipated new guidance from the Treasury Department on AI governance, and stated it has already tested and implemented ensemble methods in these models, where appropriate.

“The IRS is committed to continuously improving the case selection process,” wrote Reza Rashidi, acting chief data and analytics officer. “This includes making use of well-established processes to evaluate model performance.” 

She added that the IRS is currently awaiting guidance from the Treasury regarding new policies and priorities for AI governance. 

IRS layoffs

The IRS is expected to rely further on AI as it continues cuts to its workforce. According to another report released earlier this month by TIGTA on the cutbacks, over 11,400 IRS employees have either received termination notices as probationary employees or voluntarily resigned, representing an 11% reduction to the agency’s workforce. That number is expected to be higher by now, despite ongoing lawsuits and court decisions. The separations disproportionately impacted IRS revenue agents, who often handle audits and examinations, and found that approximately 31% of revenue agents, or 3,623 people, left the IRS under the program.

“About 11,000 employees have been let go since Inauguration Day, and that’s an 11% drop from the numbers in January,” said Anne Gibson, a senior legal analyst at Wolters Kluwer, earlier this month. “And it’s also been reported, more than 20,000 IRS employees have accepted this new second deferred resignation offer. That is really a lot of the workforce that’s already gone at this point, and that we’re potentially going to see leaving, and there have been reports of increased wait times, for instance, on the telephone lines.”

People are also concerned about how quickly tax refunds will be issued this year, she noted. “There’s definitely some concern out there about that,” said Gibson. “It’s also important to note that there have been other reports that the administration’s overall goal is to eventually reduce the IRS workforce down to about 60% or even 50% of the January 2025 levels. That would end up being a total of only 50,000 or 60,000 employees. It’s also important to keep in mind that, generally speaking, people have felt that the IRS has been understaffed and underfunded for the past decade. Although the numbers went up a little bit after the Inflation Reduction Act allowed for some more hiring, most people didn’t think it was yet at the level that they would want to see it at. So this is really a big reduction, which is likely to make things in all areas of the IRS a little more difficult or take longer.”

The cutbacks have led the IRS to drop many of the audits it already had in progress.

“There have been news reports about audits that are in process or that are even close to being wrapped up being canceled because members of that audit team were let go and they just didn’t have the staff to carry them on,” said Gibson. “I imagine we’ll see more of that.  Now, with those reductions, I think we’ll probably see fewer audits going forward than we would have otherwise seen because a large number of the staff that’s been let go, and reports are the targeted cuts going forward, a lot of those are in compliance, so that’s going to directly impact the ability of the IRS to take on audits and cases.”

Illinois approved a bill on Thursday to create additional pathways to CPA licensure, and it awaits the signature of Gov. JB Pritzker.

The legislation, House Bill 2459, amends the Illinois Public Accounting Act to create two additional paths to licensure: a bachelor’s degree with a concentration in accounting plus two years of work experience, or a master’s degree with a concentration in accounting plus one year of work experience. All candidates must still pass the CPA exam.

The bill preserves the legacy pathway requiring 150 credit hours plus one year of experience and passing the exam. It also ensures practice mobility so that out-of-state CPAs can serve clients in Illinois without obtaining an Illinois license.

Dave Newman – Fotolia

“For more than a year, the Illinois CPA Society has focused on eliminating barriers to entry into the profession, most notably, the time and costs required to become a CPA,” Geof Brown, president and CEO of the Illinois CPA Society, said in a statement. “The passage of House Bill 2459 is an important step in keeping Illinois’ CPAs at the forefront of the national business landscape; protecting the needs of our state’s businesses, not-for-profits, and units of government; and ensuring there’s a pipeline of next-generation accounting talent ready to step up to serve. We thank the legislation’s sponsors, co-sponsors, and other supporters who were instrumental in advancing this important initiative for the accounting profession in our state.”

The ICPAS, one of the largest CPA state associations, originally proposed the legislation. The bill was introduced in March by Reps. Natalie Manley (D-Joliet) and Amy Elik (R-Edwardsville), both of whom are CPAs, and it passed unanimously out of the House in early April. In the Senate, it was supported by chief Senate sponsor Sen. Suzy Glowiak Hilton (D-Oakbrook Terrace) and co-sponsor Chris Balkema (R-Pontiac). It passed unanimously on May 22. 

Illinois is one of more than a dozen states that have already passed changes to licensure requirements as an ongoing effort to address the profession’s talent shortage. Most recently, Minnesota passed a similar bill on May 20.