Major accounting firms have been placing huge bets on artificial intelligence, having invested billions upon billions of dollars in the past few years alone. This is done with the understanding that AI will ultimately reduce expenses and drive profits. Yet, as always, it takes money to make money: fully realizing the potential of artificial intelligence can come with a hefty price tag, encompassing both short and long term expenses for not just the AI systems themselves but everything else that enables their effective use. 

The AI models themselves, of course, represent a significant R&D expense. Whether for internal efficiency, client engagements or both, building and training these models is no casual affair, requiring skilled specialists operating sophisticated software to create, something with which Doug Schrock, managing AI principal for top 25 firm Crowe, is well familiar. His own firm has spent a great deal of money developing custom AI solutions for things like tax and audit that are now used by staff every day, as well as Crow Mind, a gateway portal for all of the firm’s AI solutions. It has also devoted significant resources towards building bespoke AI solutions for clients, particularly in cases where they need something that simply does not exist in the market today. He compared it to making a custom Excel spreadsheet but far more complex. 

“It’s like you buy Excel. Here’s Excel. But you’ve got to configure it to your business case, so there’s a whole lot of customization to make the actual spreadsheet do what you need it to do. We see that a lot: you buy the suite, but you need a bespoke solution… Configuring the hardware, chaining together multiple agents to do the tasks, automating it, that takes work,” he said. 

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Chris Kouzios, chief information officer for top 50 firm Schellman, added that developing an AI system may appear to be a one-time spend at first, but considering things like maintenance, integrations and upgrades, each model can also represent an ongoing expense. 

“If you think of the initial build, you could call the initial build one time, although like any piece of software it will be continually approved over time, so I look at it from both perspectives,” he said. 

Big data, big costs

But the development costs of AI models are only one part of the overall expense. Just as significant, perhaps even more so, are the fees that come with hosting and accessing these models in the cloud. Running AI, especially generative AI, is very data intensive, which has served to accelerate cloud costs that have already been on the rise. Kouzios, from Schellman, noted that his own firm’s costs will likely rise apace with its AI infrastructure, especially as client services demand more use. 

“Your compute will go up at least exponentially over time and one of the things I think we’re going to see, and this is just future forecasting a little bit, I think clients will in general, not just in my space, be more comfortable when they feel they’ve got a little control over what they’re doing and what is done. In the cloud at the beginning people were terrified of putting their stuff there, we’ll see the same stuff with AI, we’ll probably have additional costs for spinning up instances for clients nervous about what goes where,” said Kouzios. 

Crowe’s Schrock reported similar things, noting that the major cloud hosting companies saw the opportunity for revenue generation via AI hosting and are already capitalizing on the situation, as evidenced in the fees they charge. The reality is that generative AI uses a lot of data, which means higher data costs from cloud providers who run the infrastructure it rests on. He talked about a recent meeting he had with Microsoft, a strategic partner with Crowe. 

“They’ve got 4 million servers across the US. They’re super interested in AI, not just because of Copilot but because we’ll be using Azure, using their server computing power to run the LLMs we write. They want to drive more Azure service dollars. So… we’ll be having more computing power costs for us through Azure,” he said. 

Accounting solutions vendors have noticed this too. Brian Diffin, chief technology officer for business solutions provider Wolters Kluwer, also noted that generative AI has indeed led to higher cloud costs, which has challenged the company to find ways to release AI-functional products in an economically sustainable way. 

“Gen AI is very CPU intensive, so one of the challenges we face—we’re doing a lot of experiments with this— is there’s so many approaches on how you would implement a gen AI based piece of functionality in software. We’re evaluating not just the LLMs in terms of what those capabilities would produce but what is going to be the cost of that feature when we go to production,” he said. 

Data shows that this is happening not just in the accounting space but across the economy as a whole. Recent reports from expense management solutions provider Tangoe has found that 92% of IT leaders report cloud spending on the rise, and that they mostly attribute AI (50%) and generative AI (49%) for this increase. Further, 72% of IT leaders feel these rising costs are becoming unmanageable. 

“GenAI is creating a cloud boom that will take IT expenditures to new heights,” said Chris Ortbals, chief product officer at Tangoe. “With year-over-year cloud spending up 30%, we’re seeing the financial fallout of AI demands. Left unmanaged, GenAI has the potential to make innovation financially unsustainable.”

The report noted that cloud software now costs businesses an average of $2,559 per employee annually. Large organizations spend an average of $40 million on cloud fees annually, with very large organizations worth more than $10 billion spending $132 million annually.

However, while cloud costs are rising due to AI, leaders are also confident that they can be managed. Schrock said his own firm has controls in place specifically to monitor data usage to avoid outsized costs. For instance, recently they tried a new LLM tool from Microsoft that caused a short 3,000% spike in usage, but firm leaders received an alert and quickly stepped in. 

“It’s not like when you get surprised by the electric bill. You put controls in place to do things smart,” he said. 

Further, while the costs have increased, he said they have still gained more than they lost in terms of increased efficiency and productivity. The extra fees are still lower than the cost of hiring an entirely new human, and the quality of work is better than what humans would accomplish alone. So while their Microsoft Azure bill is higher, they’re also able to deliver more for less cost overall, so it has been a net positive. 

“What we’ve been talking about are the costs to run AI. I’ve got the cost to run a car but it also gets me places more easily. The cost will be a thing but used appropriately it will be great,” he said, adding that it’s important to use the right tool for the right situation; maybe you don’t need to access the high-data AI model to solve a problem, maybe Copilot would work fine. 

Diffin raised a similar point. While he conceded overall costs have gone up, the money has been well-spent in terms of product development. 

“Certainly gen AI capabilities are increasing in cost, and overall costs have gone up because we’re using more and more of what [Microsoft] offers, and so what translates into for us is developing and releasing products faster than if we were to develop everything ourselves,” said Diffin. 

On top of cloud fees, subscriptions and licenses were also mentioned as a significant ongoing expense. This includes subscriptions not only for the tools used to create and maintain AI systems but also for AI solutions that the firm chooses to buy rather than build.  While the individual subscriptions may not be much, when considering the size of certain firms, like Crowe, they can quickly add up, especially considering there are multiple products the firm subscribes to. 

“Everything is a subscription. So you have all the different types of subscriptions. Crowe is making significant investments in ongoing software licensing for the leading enterprise AI solutions, things like Microsoft Copilot for example. We expect everyone in the firm to be using that in 2025. It’s over half right now … We’re also buying specialty AI based applications to fit particular needs and things like copy AI for marketing and search, and there’s a whole suite of specialty apps that we sign up for with specialty use cases, so that becomes the ongoing expense,” he said. 

Labor costs, training costs

And then there are the people who create and maintain these models, often software engineers and data specialists. While often touted as a labor saving device, AI can come with surprisingly large labor costs, according to Schellman’s Kouzios. 

“I would say in general, probably as close to 15-20% of my IT budget will be spent on AI, closer to 25% for the first year [of deployment]. Of that, if you take that number and break it out, 85-90% is labor,” he said. 

The firm, which already hosts a large number of technical specialists, recently hired more to support the firm’s AI ambitions, seeking to shore up its machine learning, data analytics and product management expertise, which allows its staff to focus on “building what it is we want to do.”  While this does represent a spending increase, he is confident that the efficiencies they uncover will increase firm-wide capacities over time. 

“I think we’ll get to a point where, [though] we know the costs will go up, ROI on this should be deferral of cost or deterrence of cost, not having to spend money in the future we’d otherwise have to spend. For example, peak season comes up and you need to either hire employees or temp employees,maybe we can avoid that in the future,” he said. 

Another component of labor costs is training the non-technical staff in using the AI systems the technical staff develops and maintains. Schrock, from Crowe, said that, in addition to hiring more experts, the firm has dropped cash on in-depth training and development in things like how to use Microsoft Copilot and other generative AI tools and incorporate them into a workflow. With this training has also come changes in business processes and job descriptions that needed time to properly digest. While there is some learning curve involved, he felt education like this was essential to fully implement the firm’s AI vision. 

“These tools don’t inherently have value, they derive it only through their application to solve problems. So there is one time cost of upskilling and process redesign to incorporate that into the business,” he said. 

And it is not just the humans who need training. Kouzios said one idea he has been exploring lately is assigning those trainers who’ve been educating the human staff to the AI models themselves, which often begin in an almost child-like state and require data input to be effective. 

“I’ve been exploring talking to them about training the models because, this is my experience in IT, nerds are very good at the tech, but here are some things we lack and teaching—when I brought it up to them, I meant teaching the models—the tech people hated the idea, so I might tap into some of [the trainers’] time too,” he said. 

Heat vs light

Yet, while big money is being spent on AI at accounting firms, they should not necessarily take too much stock in the marquee headlines of this firm spending that many billions on AI or that firm spending many more billions still. 

“The billions of dollars here, is more bragging about an investment level. Well, investment level can be measured in a number of different ways. It can be measured by some ginned up cost where you reallocate peoples time and come up with some marketing number on costs, but I don’t put a lot of confidence in those as an expert in the field,” said Crowe’s Schrock. 

Kouzios, from Schellman, raised a similar point, noting that there are a lot of people making big dramatic announcements that, upon closer inspection, are not that significant. 

“You’ve seen those press releases, saying we bought chatGPT for our 85,000 employees, we’re AI enabled. Yippee, well done. For 20 bucks a month I could do that too,” he said. 

When looking at what firms are spending on AI, Schrock said to look not at the jaw-dropping number they announce but in actual deliverables they produce. 

“What I wanna understand is how many people are utilizing it, what unique IP they have created, how aggressively is it being incorporated into service lines, how aggressively do they take this into market—that is a measure of your investment level in AI more so than some number,” he said.

But what about smaller firms? Turns out, their experiences with AI costs are much different than large scale firms with international footprints. We intend to explore this issue more deeply in another story soon.

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Many accountants were doubtful of Donald Trump’s chances for a successful reelection on Nov. 5, despite the fact that many also thought he would be a better candidate for the profession. With his return to the White House now confirmed, the waiting game begins to see which promises of wide-sweeping change to the tax landscape come to life.

The Republican majorities in the Senate and House of Representatives will grant President-elect Trump an easier time in refreshing many of the expiring provisions in his 2017 Tax Cuts and Jobs Act, including priorities such as the Qualified Business Income Deduction and 100% bonus depreciation.

“These changes reshaped tax planning for both individuals and businesses, creating new opportunities for savings,” said Arron Bennett, CEO of the Oak Ridge, Tennessee-based tax planning firm Bennett Financials.

It’s increasingly likely that Trump will seek to make certain provisions of the TCJA like the QBID permanent, as was put forward in the Republican party platform earlier this year. Further goals included eliminating taxes on tips for restaurant and hospitality workers and other additional tax cuts.

Mark Luscombe, principal analyst in Wolters Kluwer Tax and Accounting, said cementing the sunsetting provisions of the TCJA “would be very expensive” and that a more beneficial compromise for addressing deficit concerns would be “to just extend them for a few more years.”

“An extension would benefit almost all taxpayers; however, the bulk of the tax benefit would go to higher-income taxpayers,” Luscombe said.

Read more: Republican election sweep emboldens Trump’s tax cut dreams

Regulatory uncertainty is just one question looming across the profession, however. With control of both houses of Congress, Republican efforts to cut the Internal Revenue Service’s funding that once saw limited success might now gain more ground.

Much of the funding granted to the IRS under the Inflation Reduction Act of 2022 has gone towards strengthening the agency’s enforcement capabilities, which in turn generate revenue. Other funds have been used to bolster taxpayer services and to support regular operations.Andrea Harrington, a CPA and partner at the Glastonbury, Connecticut-based accounting firm Fiondella Milone & Lasaracina, said she hopes funding for the IRS is maintained, specifically directing resources towards “processing amended returns related to COVID relief provisions.””The uncertainty over what exactly will happen makes planning a bit more challenging. … We’ll be watching legislative proposals even more closely so we can pivot in our recommendations as needed,” Harrington said.

Read more: IRS reforms bring relief, but Trump win clouds future plans

Below is a compilation of expert insight and predictions into what the tax landscape could look like in 2025 and what professionals need to start considering during planning discussions.

IRS funding in limbo following Trump win

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In the wake of Trump’s successful bid for reelection, many accountants predict the new administration will seek to cut the IRS’s funding more so than in recent years.

Republican legislators have already seen success in efforts to claw back some of the $80 billion in extra funding from the IRA, and have continued to push for further reductions in the IRS’s enforcement budget. Increased funding brought in from expanded enforcement goes towards easing the cost of the IRA, while other IRA funding is earmarked for strengthening the enforcement capabilities of the IRS among other improvements.

“I think IRS funding is at significant risk right now, both the annual appropriation funding as well as the remaining IRA funding,” Rochelle Hodes, Washington National Tax Office principal at the Top 25 Firm Crowe, said in an interview with AT’s Michael Cohn. “The only question for me on funding is, will any portion of the funding remain available for taxpayer service-related improvements at the IRS?” 

Read more: Trump win may threaten IRS funding

A look at Trump promises for the 2025 tax landscape

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Trump’s campaign promises on taxes were numerous and sweeping, ranging from lowering the corporate tax rate and tax credits for caregivers and those purchasing domestically made automobiles, to the return of 100% bonus depreciation. 

As the countdown to his second term continues, along with the approaching deadline for many parts of the Tax Cuts and Jobs Act of 2017, much is up in the air.

“No one has a crystal ball on what’s going to happen here, but certainly it’s a little bit clearer based on a Trump victory than it would have been based on a Harris victory,” Brian Newman, a tax partner at Top 25 Firm CohnReznick in Hartford, Connecticut, said in an interview with AT’s Michael Cohn. “Obviously the big point is going to be either to extend or to make permanent TCJA provisions.”

Read more: Big tax changes promised in Trump administration

What are preparers worried about in the coming administration?

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Accounting professionals and preparers say that a new but not wholly unfamiliar Trump administration, will bring new approaches to taxes and the surrounding regulatory environment with it.

Kelly Myers, an advisor with Myers Consulting Group, and formerly a career IRS officer with 30-plus years of experience, told AT’s Roger Russell in an interview that he’s “curious to see how much the balance shifts” as the lack of a Republican super-majority means, “There will still be a give and take in their congressional negotiations.”

“People will be watching as they move forward on the Tax Cuts and Jobs Act; the biggest thing is the SALT limitation with its $10,000 cap,” Myers said.

The provisions of the TCJA are top of mind for Trump, as issues like the qualified business income deduction and a renewed R&D credit operating on a dollar-for-dollar basis are up for change.

Read more: From the campaign trail to the Tax Code: Taxes under Trump

What is Trump focused on when it comes to taxes?

Eva Marie Uzcategui/Bloomberg

President-elect Trump had an eventful first term when it came to tax policies, implementing the likes of the 2017 Tax Cuts and Jobs Act and more. Amid expiring provisions, and a host of new tax proposals, the question now is which promises he can deliver on.

The estimated price tag for extending all the provisions of the TCJA amounts to roughly $4.6 trillion, according to Rochelle Hodes, Washington National Tax Office principal at the Top 25 Firm Crowe.

“If they are allowed to expire, that would raise the tax for many individuals, which is an unattractive proposition for any president or for Congress,” Hodes said in an interview with AT. “The decision will have to be made about which will be allowed to expire, whether or not some of the provisions will be changed in order to accommodate whatever budget goals are agreed upon, then the decision and consensus will have to be made concerning offsets to pay for the resolution of expiring provisions.”

Read more: Trump’s victory: What it means for taxes

Approaching the impending tax quagmire in 2025

Yuri Gripas/Photographer: Yuri Gripas/Bloomb

Industry professionals achieved a small measure of TCJA relief following Trump’s successful bid for reelection, as many expiring provisions are now much more likely to be renewed.

But where other legislative efforts are concerned, a recent report on policy implications under a Trump administration published by Deloitte Tax’s Tax Policy Group highlighted the regulatory hurdles and other holdups that could hamper future campaigns.

Jonathan Traub, the leader of the group, said on a panel this month that discussions in the House surrounding the current limit on the deduction for state and local taxes is an important barometer for measuring how talks could go over the coming years.

“You will need almost perfect unity — more so in the House than the Senate,” Traub said. “This really gives a lot of power, I think, to any small group of House members who decide that they will lie down on the train tracks to block a bill they don’t like or to enforce the inclusion of a provision that they really want.”

Read more: Trump and the GOP won a huge election for taxes. Now for the tricky part