Autumn is here and students everywhere are back at school, busy learning the career and life skills that will guide them through the rest of their lives. I remember fondly how excited my friends and I were each fall as we collected our supplies, picked out our new clothes, and counted down to the first day of school.
Not every student sees it that way, of course. I’m sure many of them see backto-school season and learning as a “have-to,” something they’re forced to do either by their parents or the government — or both. It’s another box to be checked in a life full of compliance headaches.
I’d rather think of it this way: Learning is a privilege. That’s one of the things that I love most about this profession. There’s no “have-to” about it. As CPAs, learning is a “get-to.” We get to learn for a living. With each new project, client, or CPE program we encounter, we’re given the gift of learning something new. That commitment to continual, lifelong learning is one of the many things that makes this profession great.
Most people struggle to carve out time to learn anything new, but as CPAs, our designation — our very careers — depends on it. How great is that?
Pretty great, as it turns out, but it’s much more than that. Our commitment to lifelong learning is also how we’ll stay relevant and future-ready in a constantly changing, increasingly chaotic world. To paraphrase former Fast Company Editor Robert Safian, the most important skill any of us will have going forward is the ability to learn new skills. Adopting that mindset has never been more important.
So as autumn rolls along, let’s not bemoan the approaching winter and the busy season that will follow. Instead, let’s dust off our backpacks, gather up our notebooks and pencils, attach our paper-bag book covers, and get ready to learn. The MACPA has a ton of great programs coming up this fall, including a brand–new series designed to teach CPAs the finer points of using artificial intelligence on the job. There’s no better time to brush up on some new skills for a new age.
See you in class!
Rebekah Olson, CPA MACPA CEO
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Change is our path. MACPA is our guide
If your world seems especially chaotic these days, you can blame Gordon Moore.
He’s the Intel co-founder who, in the mid-1960s, speculated that the overall processing power of our computers would double every 18 to 24 months or so. That’s a simplified version of the theory that would become known as Moore’s Law, but it has largely held true ever since. Every two years or so, the world’s computers double in power.
It also has led directly to the advent of artificial intelligence, and if you thought Moore’s Law’s exponential advancement is fast, consider this: Some experts believe the world’s AIs are doubling in power every three and a half months. That means whatever AI you’re using today will be twice as smart by February or so … and then twice as smart again by the end of tax season. And technology isn’t the only driver of change in our world today. Futurist Daniel Burrus has identified three “hard trends,” — or future facts, things that will happen whether we like it or not — that are impacting our profession, and technology is just one of them. The others should sound familiar to anyone in our profession:
One is legislation and regulation. We’re seeing more of it, and it’s having a greater impact than ever on our profession and our clients. The next six months should be particularly insightful, given the upcoming elections and the expected introduction this spring of legislation that would implement a sales tax on professional services in Maryland. The other is demographics. That’s a huge category that touches everything from generational issues to the future of work to diversity, equity and inclusion. The
THOMAS WHITE, CPA, CGMA
Assistant Vice President and Assistant Controller, Prime Therapeutics
biggest demographics-related issue of all, of course, is the ongoing accounting talent shortage and the impact it’s having on our profession and beyond.
It’s little wonder, then, that our world seems so chaotic these days. Change is coming at us from seemingly every direction, and it’s impossible for any of us to stay ahead of it all.
The MACPA, though, is doing its best to help.
Let’s start with legislation. The association’s dedicated team of legislative volunteers and staff is constantly monitoring what’s happening in Annapolis and Washington and how it might impact Maryland CPAs.
You can keep up with changes in the legislative arena by joining us at CPA Day in Annapolis 2025. Scheduled for Jan. 16, this will be one of the most important CPA Days in recent memory. Legislators and lobbyists alike are predicting that all attempts to raise new revenue -- including sales taxes on professional services -- will be on the table. Join us in making the profession’s voice heard by registering to attend.
Next, let’s talk about technology. The MACPA has a long history of keeping members up to date on the latest tech trends. That tradition continues with a broad range of programs that focus on A.I. and its impact on the profession.
Our latest offering is an A.I. pilot program designed exclusively for CPAs and accounting professionals. The cohortstyle program will offer an interactive and hands-on approach to mastering A.I. in the context of accounting. It will feature weekly 90-minute virtual sessions, educational content with thoughtfully
curated learning materials, breakout groups and related assignments, and project work that will translate into knowledge application and tangible benefits for you and your firm or organization. Details are still in process, but you can learn more here
Finally, there’s the elephant in the room — demographics. The talent shortage is top of mind for everyone, and the conversations being held throughout the profession on how to address the issue are wide-ranging and insightful. The most prominent of those conversations is being led by the National Pipeline Advisory Group, a group of 23 leaders from throughout the profession who have been working to create a unified pipeline strategy. Led by former MACPA Chair and current AICPA Vice Chair Lexy Kessler, the group recently released six broad recommendations for tackling our pipeline challenges.
One of those recommendations is to tell a more compelling story about the purpose behind the work CPAs do — to change the CPA narrative so young people can see a truer picture of what we do and why it’s important.
The MACPA is leading the way in this area with its “Purpose of the CPA” initiative. We are collecting stories from MACPA members about the purpose of their work and why it matters in the hopes of changing the way the world views our profession. The stories we’ve heard so far are amazing and inspiring, and we encourage you to add your own story by visiting MACPA.org/Why.
Change is clearly the road we’re walking for the foreseeable future. The MACPA is our guide. Let’s explore!
MACPA CHAIR
Four CPAs selected as Maryland’s ‘Women to Watch’ for 2024
BY BILL SHERIDAN, CAE
Four outstanding business leaders have been chosen by the Maryland Association of CPAs as Maryland’s “Women to Watch” for 2024. The honorees are:
EMERGING LEADER
LEADER
Samantha Fisher, CPA, CVA, MAFF
Paradigm Forensics, LLC
EXPERIENCED LEADER EXPERIENCED LEADER
Dalwadi, CPA, CIA, CFE, MBA
US
Molly McCafferty, CPA
CohnReznick
EMERGING
Monica
Baker Tilly
Aileen Eskildsen, CPA Ellin & Tucker
Launched in 2014, the awards highlight the accomplishments and contributions of women in the CPA profession and demonstrate to emerging female leaders that success is not out of reach.
“We are incredibly proud of this year’s winners — indeed, of all the honorees for this year’s awards,” said MACPA CEO Rebekah Brown, CPA. “They represent the best this profession has to offer, and they serve as role models not only for other women in the profession, but for every accounting and finance professional on the planet.”
“We had 21 nominees for this year’s awards,” said Thomas White, CPA, chair of the MACPA’s 2024-25 Board of Directors. “This symbolizes a commitment on the part of every person in this room and once again sets Maryland CPAs apart in a way that makes me proud.”
Here’s a closer look at the winners and honorees in each of the two “Women to Watch” categories:
Emerging Leader: Molly McCafferty, CPA
Molly McCafferty is a partner at CohnReznick. She has taken an active role in mentoring and developing the firm’s staff, fostering an environment of continuous learning and professional growth. Dedicated to community service, she empowers women and mentors young professionals in the public accounting and affordable housing industries, and serves as treasurer of WAHN DMV. She serves on the accounting advisory board of her alma mater, American University.
Emerging Leader: Samantha Fisher, CPA, CVA, MAFF
Samantha Fisher is a Member at Paradigm Forensics, LLC. She’s a key leader in the accounting space and has held positions such as the Chair of the MACPA’s Forensic and Valuation Services Committee, the Chair of the NACVA’s Valuation Credentialing Board, and as an adjunct professor for Stevenson University. She is always looking to give back and consistently assists with the MACPA’s Leadership Academy.
Other honorees in the Emerging Leader category are:
Ashley Bell, CPA Senior manager at SC&H Group.
Kelli Cobb, CPA Member and director of Accounting Services at SEK CPAs & Advisors.
Oksana Fisher, CPA Assistant professor in the Business Administration Department at Anne Arundel Community College.
Annemarie Heim, CPA Manager at HeimLantz.
Keila Hill-Trawick, CPA, MBA founder and CEO of Little Fish Accounting and Build to Enough.
Monica Kempson, CPA Tax partner at Askey, Askey and Associates.
Samantha Knickerbocker, CPA Audit senior manager for SC&H Group.
Samantha Krall, CPA Senior tax manager at RSM US LLP.
Eleanna Lee (Weissman), CPA Senior auditor at EY.
Kaitlyn Loughner, CPA Partner at Frost Law.
Denise Lumpkins, CPA Director of Accounting at AIRtec, Inc.
Tigress Morris, CPA CAAS chief financial officer at CLA Baltimore.
Stefanie Ottenstein, CPA Chief financial officer of Aerolab LLC.
Dani Schooley, CPA Assurance senior auditor at Clearview Group, LLC.
Allison Shin, CPA Director at Lanigan Ryan, P.C.
Christie Stravino, CPA, MS Tax partner at Cohen & Company.
Jaime Thompson, CPA Founder and CFO of Nicholynn Advisors.
Mia Thompson, CPA Assurance senior manager at CohnReznick.
Chanel Trussell CAAS chief financial officer at CLA Baltimore.
Caroline Weirich, CPA Supervisor at Withum.
Lindsey Welsh, CPA Audit managing director at KPMG.
Lauren Zeigler, CPA, MS Director at Rosen, Sapperstein & Friedlander, LLC
Experienced Leader: Monica Dalwadi, CPA, CIA, CFE, MBA
Monica Dalwadi is a managing principal at Baker Tilly US. She exemplifies transformative leadership through her strategic oversight of a top 10 advisory, tax and assurance firm, her impactful mentorship, and her steadfast dedication to advancing diversity and inclusion within her organization and the broader DMV. Monica serves on the Executive Committee board for Junior Achievement of Greater Washington and on the Kennedy Center Capital Area Executives Committee.
Experienced Leader: Aileen Eskildsen, CPA
Aileen Eskildsen is CEO and managing partner at Ellin & Tucker. She is an integral member of the firm’s executive leadership team, focused on positioning the firm as a leader in the Mid-Atlantic accounting industry, and has been dedicated to advancing women in accounting. She serves on the Board of Trustees for Catholic Charities of Baltimore and the Board of Directors for First Fruits Farm, Inc., where she also chairs the Finance Committee.
Other nominees in the Experienced Leader category are:
Dara Castle, CPA
Market leader of RSM US LLP’s Mid-Atlantic offices and national leader of RSM’s government contracting practice.
Megan Lusby, CPA, MBA, PMP Director of Personal Property Tax for Clearview Group, LLC.
Margaret Michael, CPA Principal, Audit & Assurance at Clearview Group, LLC.
Salome Tinker, CPA Partner at TSC Enterprise LLC.
The 2024 MACPA “Women to Watch” awards were made possible by the MACPA Foundation, which is committed to building a diverse CPA talent pipeline to secure the future of our profession.
The awards also were made possible by the following strategic partners:
Premier Sponsors
SM
Event Sponsors
Bill Sheridan, CAE, is editor of The Statement and chief communications officer of the Maryland Association of CPAs.
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A profession on the rise
TAfter 30 years at the helm, AICPA President and CEO Barry Melancon looks ahead to retirement — and to the future of ‘one of the predominant professions of the world’
wo things have been constant in the accounting profession during the past 30 years — groundbreaking, transformative change and the man leading the profession’s response to that change.
Now, that leadership is changing as well.
Barry Melancon has announced that after nearly 30 years at the helm of the AICPA, he will be retiring on Dec. 31, 2024. It had to happen sometime, and yet news of Melancon’s retirement is still a bit jarring. If there has been a face of the profession over the past three decades, it’s probably Barry Melancon’s. During his tenure as AICPA president and CEO, Melancon has led CPAs through some of the most groundbreaking changes the profession has ever seen, including:
The computerization of the CPA Exam
The creation of the Center for Audit Quality and CPA. com, which is the AICPA’s technology arm
The passage of the Sarbanes-Oxley Act in response to the Enron and WorldCom debacles of the early 2000s
The Great Recession of 2008
The AICPA’s partnership with CIMA and the creation of the Association of International Certified Professional Accountants
The COVID-19 pandemic
Wave after wave of groundbreaking change in the areas of technology, demographics, and legislation and regulation, each of which has left its mark on the profession
Through it all, Melancon has helped guide the profession’s responses at every turn.
Melancon recently sat down with Bill Sheridan, the MACPA’s chief communications officer and host of the association’s “Future-Proof” podcast, to talk about the state of the profession today and how things have
changed over the past 30 years, what the future looks like for the profession, his advice for both CPAs and future CPAs, and what’s next for him.
Here’s what he had to say.
Bill Sheridan: Barry, congratulations. What are you feeling now that there’s a date on the calendar?
Barry Melancon: For a long time Bill, it was a privately known date with our board, obviously, and our leadership. We had this date picked for a long time, but there was a little tension in trying to keep it confidential. Now that it’s out there, to be honest, it’s bittersweet. I mean, it’s been a huge part of my life and a passion I have for the profession, but at the same time I’m looking forward to some different challenges and doing things differently, maybe with a little less intensity and to see things from a different perspective. And I also think it’ll be great for the organization to have a different leader after almost three decades. So it’s a mix of emotions.
Sheridan: What makes this the right time for you to step down?
Melancon: It was the right time from the standpoint of age and things of that nature. By the time that we get to the end of the year, I’ll have been doing this for basically 30 years. That’s a long time. I figured that was a nice number. Also, I’m 67, and that’s a good time. It’s not like I’m leaving real young, but I want to be able to do other things in life, too. Iit all just sort of aligned from that standpoint.
Sheridan: How would you describe the state of the AICPA today?
Melancon: We’re doing an awful lot of things. The world and the challenges of the profession produce more things than we have the capacity to deal with. It’s almost unending, those activities, and it’s a fair question about the association. But I look at it from a profession standpoint. I wake up every morning and think about
I wake up every morning and think about the profession first and how our members fit in there, and then the organization
the profession first and how our members fit in there, and then the organization. I also clearly understand my fiduciary responsibility to the organization, but the reality is that we’re here for the profession as a whole. The truth of the matter is that the AICPA and (the Association for International Certified Professional Accountants) are well positioned. We’re the most influential (accounting) body in the world. We’ve been at the table since we pulled together on issues like international sustainability and broad issues that are going on all around the world.
In creating what we’ve created, our goal was to ensure, not just for today but for decades to come, that we would be the most influential body of accountants in the world, and we are, with more than 600,000 members and the voice we bring, the perspective we bring. That is really important for our profession, and it’s important as the people and the companies we serve continue to evolve. Given the complexity of the global world, the complexity of technologies and things of that nature, the global profession needs an organization like ours. When our members supported bringing together the AICPA and CIMA, we told them that we would deliver on that promise of being the most influential accounting body so that someone would always be at the table thinking about the profession and the public interest that our profession represents. That is something we have a passion for. I think we’ve positioned the organization to achieve that.
Sheridan: How about the profession? How have things changed and where does it stand today?
Melancon: As opposed to more than 30 years ago, our profession is viewed in a much broader sense, a much more sophisticated sense when you look at it from public practice, the diversity of services, the success of our firms, and the importance that their clients see in them to help them navigate the world. One of the things we’ve done — and one of the things the men and women of the profession have stepped up to do — is to be a truly trusted advisor in a broader sense. Accounting and auditing and tax are at the core of our profession, but there’s this broader sense of the complexity of business, of the public interest, and even of the owners of entrepreneurial businesses that is reflected in client relationships in firms of all sizes. From the corporate space, the role of the CFO and the management accountant has expanded the dominion that they have over a broader set of business information. ESG
and A.I. are just two examples of that. You could put cybersecurity and a lot of other things in the recent past in that space as well.
I think the profession has elevated itself. There are a lot of reasons why it has. The vision we’ve had, the men and women in the profession, all of those things have helped created a profession that is at a much higher level of sophistication and importance to the success and prosperity of organizations and individuals around the world. That’s where the profession is, and it’s a really important place. If you’re honest and you evaluated the profession of the 1960s, the ‘70s and the ‘80s, to a large degree it was viewed as a trade. But today, it’s truly one of the predominant professions of the world, and the importance it brings to the marketplace is undeniable.
Sheridan: You recently referred to the profession as the most local, national and international of all professions. What do you mean by that?
Melancon: To change just one word in your sequence — you got it almost 100 percent right, Bill — but it’s the most local, the most national, and the most global of all professions. Let’s start with local. From a U.S. perspective, if you think about Main Street businesses, we’re the most important professional relationship that any of those businesses have. We proved that during COVID, for instance, when (the Paycheck Protection Program) was targeted to about 6 million businesses with fewer than 500 employees. That’s the salt of the American business earth, if you want to call it that. Our profession had a relationship with all 6 million of those businesses. If you were to walk down Main Street in a town of 100,000 people in the 1980s, the movers and shakers there from a business perspective would have been corporate lawyers, civil engineers, and doctors. Today, you’d say civil engineers, plaintiff lawyers, and CPAs. That is a real testament to our profession.
At the national level, if you think about our capital market system, the large companies of the world, and what our profession does from an audit perspective, financial services, all of those things, we’re the glue that keeps the capital market system working. Yes, there’s a lot of regulation and other activities, but that financial reporting system, that protection of the investor is a critical component to keeping capital market systems working smoothly, not only here in the U.S. but around the world.
Finally, we are also a profession that operates on a global basis. We have large firms, we have CFO functions at major multinational companies that are filled by and large by CPAs or professional accountants with other names around the world. They’re the critical cog in how these businesses operate. From an audit perspective and a financial services perspective, firms are global — not just the Big Four, but hundreds of firms in the U.S., for example, that have global components because they serve their clients’ needs. Why is that? Because
I would say this is a purpose-driven profession, and the people coming into our profession are in a generation. Their demographic is such that they want to be purposedriven. They want to see the world differently, they want to make a difference.
businesses of all sizes today are very much global businesses — their supply chains, their customer bases, all of those types of things. You don’t see that in other professions. Medical professionals, for instance, are very physically located. Yes, we have telemedicine today, but for the most part, they’re physically located where sophisticated diagnostics and surgeries can take place. Law firms today are more global than they used to be, but they don’t function in the same way on a global basis, certainly not to the same size as CPA firms do.
That’s why I come to the notion that at all three of those levels, we have a different role and we’re a lot more sophisticated at it than other professionals. If you take all three of those levels into consideration, Bill, I think it’s hard to find anything that replicates what our profession delivers on that scale.
Sheridan: How do you envision all of that evolving? What does the profession of tomorrow look like to you?
Melancon: We could spend hours on that. Look, I think the world is not getting simpler. The challenges of what will the impact on business of generative AI as an example, just today’s issue, but we’ve had hundreds of those in the past. It’s a very complicated world. You got multinational, multi-state taxation that is really prevalent around the world. It’s a huge part of how businesses operate and how individual wealth operates, if you want to call it that. I don’t think any of that sort of three layered notion is going to change. I think we’re going to change as a profession about what we do. And if you and I could go back and do a recording of in 19 94, 19 95, and we talked about what the profession does, and we sort of compared it to this recording talking about what the profession does, it looked totally different
And it’s going to look totally different 10 and 20 years from now as well. I would say the shape of firms are going to look differently. We certainly have different investment things happening with private equity. I think more and more smaller firms are going to become greater global footprints because of their clients. I think regulation, we live in an era, and you probably heard me talk about hard trends. The hard trends of the world today are demographics, technology and regulation.
They aren’t gone anywhere and regulation gets more and more complicated and it’s multinational. So how we help comply businesses comply with that regulation is going to be a big part. And we’re going to use different technology tools, and we’re going to be at different tables as sort of the discussion tables as to how that will happen. And by the way, we’re going to change too.
Our services are going to continue to evolve in, I would say even our shape and leverage of people is going to change because technology is going to drive that.
And so I make the point that the pyramid model in a public practice and also in a finance function, which has been with essentially since the 1940s, so more than 80 years is evolving as we sit here. It is evolving and it’s evolving to where those entry level positions are much more technology dependent and provided technology provided, I like to say, and where the talent and the value of our profession’s going to move is into that middle part of the organization, whether it’s a finance function or a CPA firm. And that middle function is going to require us to get people through their learning curve as entrance into the profession, much quicker occur. And where we create value, this business acumen and understanding of risk and understanding of opportunities and communication skills, we call ‘em power skills.
Those skills sit in that middle. And that’s where the bulk of people will be in our profession. Again, both corporate and public practice and how we evolve our skill sets and our competencies to align with that is going to be really, really critical. And when we do it, the services are going to evolve as well. And I really think that’s the biggest part of the horizon over the next five or so years. I would want to say 10 or 15, but the world is moving so fast, right? So fast that a five-year horizon is a really long-term horizon today.
Sheridan: What advice would you offer CPAs as you get ready to retire?
Melancon: Well, in the pipeline issues, we talk about telling the right story to young people about what we do as a profession and not to just talk about, oh, we do taxes or we do auditing. And Carla McCullough, our current chair, she says, don’t define ourselves as by
what we do. I’m an auditor or I’m a tax professional. That’s the wrong level of sophistication in that process. So my advice is that we have to think about the set of business information in a very broad sense. And you can have a political reaction to, I don’t believe in ESG as an example. Some people will say that. I say that political reaction is not relevant to the profession. What’s relevant to the profession is that there’s clearly a notion of we need to measure things in the E environment and the S in social and in the G in governance difference differently.
And we were big proponents as the association, I was chair of the board globally of integrated reporting. And the notion is what is the strategy? What are the risks? What are the measurements in a broad sense of a business, whether that business is your auditing it or business is a client that you’re doing advisory work on. And so we are in the business information business, not the accounting information business and not the tax information business that falls into the definition of business information. But we don’t want to narrow ourselves. And I would say the most at risk person in our profession or group is the mid-career person. They got 20 more years to work and the world’s going to change dramatically, and they got to really speed up their skill and their competency evolution, A person entering the profession’s coming to the table with a different set of certainly digital skills and digital competencies and data analytics competencies.
And so it’s about how do we change our skills? And I don’t really like that word skills as much as I like competencies, because competency is a way of leveraging a skill for better decision making and then thinking of ourselves as the purveyors and the important professionals that deal with this broad set of business information, some of which we can anticipate today and much of which we can’t. But when it’s broad-based information, that’s how businesses are going to survive. That’s how economies are going to survive, and that’s how we’re going to create prosperity and standards of living around the world. And that is a really critical component of us to think that way because then we’re incredibly valuable as a profession. And then the dot on the I and the cross of the T in that sort of long equation is that we must be committed to trust.
We earn the position of doing all these things because we’re trusted. We’re more trusted globally than any other group is. And there’s a lot of different surveys and people put it, but if you just watch the economy, we’re more trusted and we’re more trusted, and this is a podcast, but I’m pushing my hand up to the right and in a world in which trust is coming down from the left, the world today just doesn’t trust people don’t trust. And so when you’re highly trusted and you think of yourself broadly from a competency perspective, you’re in this perfect spot as it
relates to certainly the business world and certainly to the economic world and to the standard of living world. And that I think is what people in our profession need to get our arms around and to constantly have as something we touch our touchstone and how we need to communicate it to the next generation.
Sheridan: How about for those early in their careers — students or young professionals. What would you tell them about the profession going forward?
Melancon: I would say this is a purpose-driven profession, and the people coming into our profession are in a generation. Their demographic is such that they want to be purpose-driven. They want to see the world differently, they want to make a difference. And the things that we touch in this broad sense that I just described are very much about the purpose of how the world is going to evolve. And so when you’re trusted and you’re joining a profession that is trusted, and when you have these broad competencies and when you are thinking about things in a broad sense, you’re going to be critically important as to how the world evolves, whether that’s how governments evolve or political issues evolve or business opportunities evolve or risk or business change, which is going to be dramatic. We know because of technology and regulation that if you want to make a difference, a broad sense difference on how people live and how businesses function and how we’re going to evolve as a people in an artificial intelligence world, that where we sit, where you sit as an entry person is really, really important. And you have just an incredible opportunity to be at the table to see things totally different than virtually anybody else in society and sees that as a young person and help the profession continue to grow and evolve on how important it’s,
Sheridan: You mentioned changing the narrative about the profession and telling our stories. What’s the purpose behind your work? What do you accomplish by doing what you do?
Melancon: Well, hopefully the number one thing is that been a great advocate for the profession. I would say that what I hope we did at the association, the A-I-C-P-A is we gave permission to all of these things. We didn’t tackle the challenges and say, no, we can’t do this, or we shouldn’t do this, or let’s be careful doing this. What we did is we talked about all these changes over these 30 years and we said, we can do this. We should do this. Let’s figure out how to do this. Now. Everything we said wasn’t super successful. We made mistakes. The profession makes mistakes. We’re not a perfect profession. I’m not perfect. People aren’t perfect. And the reality though is that if you really think about the profession, we were profession with a bunch of rules and a bunch of things that said, no, don’t keep into your box.
And what I think my purpose was to change that and to create a tremendous staff of people, tens of thousands of volunteers serving on committees that tackled the issue of the day of the moment in that fashion. And I think it’s hard for me to talk about it because you’re sort of asking it from my perspective, but I think if we’re honest about what’s different, that’s different. That’s the different thing is we see opportunities and we take advantage of them. And I mean, I’ll go back to Covid as an example. And when we created the town halls and we created the guidance that was coming from the profession when the government wasn’t there, we said to the profession, look, you can help save. You are important to save the economy, and we don’t have all the answers, and the government isn’t giving us all the answers.
So here’s our best guess. Go out and do it. And you know what? It’s okay if we make a mistake. And we actually said that a lot to the government. Like in the PPP program, we said, you have a choice. This is the voice of the profession. You have a choice government. You can do it in such a way that you can get it pretty much all right and minimize fraud, or you can do it quick and save the economy, but you can’t do both of those things. And so we advised do it quick and save the economy. And we did that particularly from a small business perspective. And I say we, the government, it was a government program, but the profession was so important in that process. And you know what? The incidences of fraud that occurred in those programs where the profession was involved was minuscule compared to the incidences of fraud where the profession wasn’t involved. That’s just
one example, and there’s going to be other opportunities and other things like that in the future. And hopefully, back to your question, my purpose was to set a tone that that’s how we should think about our role and we should get permission to that, not rules that prevent those types of things.
Sheridan: What’s next for you?
Melancon: Well, hopefully at a slightly different pace. I want to stay involved. I want to balance some things in life. I’ve had an incredibly supportive family that probably didn’t get the right balance for me, but the reality is I want to stay involved in the broader business world and also the relationship and where the profession is evolving. Firms have talked to me and private equity groups have talked to me. There’s going to be some things that I do in that space in my career. I’ve been fortunate to be in 40 different countries to be a spokesperson from the profession, literally in every corner of the globe. And there’s a component of that that I think I can continue to contribute to. So there’s a part of that I want to do on a global stage, but a lot of it is also going to be on boards or things of that nature. Now, I don’t want to do 15 boards, but I want to do enough that I’m continued to be mentally stimulated and challenged, and I can make a difference and I can create value. I don’t want to do it just for the sake of doing it, but I think my knowledge of where the profession is and where it’s still going to be headed, I think can help the profession, but in a different role than I’ve been doing. So I look forward to that.
LEGACY MEMBERSHIP
The MACPA honors the 2024-2025 class of new Legacy Member inductees
Jeff Wellener
Greg Lloyd
Dave Rosas
Katy Giannelli
Rico Talerico
Amy Rivera
Diana Petro
Wally Eddleman
Ellen Silverstein
Carol Beauchamp
Jack Slick
Mark Krebs
John Cecil
Charles Meehan
Ronald Lipella
Susan Murk
Karen Holweck
James Burgess
Neil Moyer
Rick Potocek
Phil Mantua
Kimberly Chaney
Dan Lentz
Stan Fredericks
Bob Baldassari
Jim Summers
Frank Ecker
Steve Lapointe
Timothy Michaels
Bernadette Harwood
Gerry Walsh
Mitch Berman
Jeff Pruitt
Rick Hoffman
Judy Hines
Jonathan Lowenberg
Joyce Leege
Leo Bruette
David Miller
Pam D. Morris
Rich Neuman
Howard Tash
Fred Leffler
Joseph Lanciano
Fred Burke
Ed Norman
Ernie Viscuso
Dani Mckew
Jim Ellis
Greg Reisler
Lauran Penn
Donald Stevens
Frank Savarese
Cindy Herman
Michael Kleger
Sharie Hyman
Bill Larash
Paul Wallace
Mathew Aloth
Janet Gomes
William Busch
Ira Bormel
Donald Cunningham
Al Nishi
Aaron Bloom
Mark Moser
Bruce Reeder
Clif Williams
Bob Balin
Helen Sadorra
Ellen Horner
Ronald Katzen
Dinah Hanson
Karen Mitchell
Heidi Garman
Steven Gelblum
Margie Frisk
Carole Wiedorfer
Jeffrey May
Craig Rosin
James Judge
Patricia Mckenna
These professionals are joining a group of over 200 MACPA Legacy Members, a new designation started in 2022 to honor those with over 40 years of membership with MACPA.
Thank you for your service to the public, our profession, and our association. We are #CPAProud.
SIX KEYS TO SOLVING ACCOUNTING’S TALENT SHORTAGE
By Bill Sheridan, CAE
National Pipeline Advisory Group releases final recommendations. The group’s chair, Lexy Kessler, takes a closer look.
Accounting can open doors to limitless career paths –unlocking rewarding and in-demand jobs across every industry. But the profession continues to grapple with outdated misperceptions and a shrinking talent pool.
Scores of conversations are being held throughout the profession in an effort solve the continuing talent shortage. Perhaps the highest profile is the work being done by the National Pipeline Advisory Group, a collection of 23 leaders representing a cross-section of the profession who have been working hard to come up with a unified pipeline strategy that reflects the needs of multiple stakeholders, leverages unbiased research, and leads to meaningful change, all in the hopes of helping to alleviate our profession’s ongoing talent shortage.
The advisory group released an initial report back in the spring. They took some public comments and then, just a few weeks ago, they released the final version of their Accounting Talent Strategy Report. Six key recommendations in that report. They are:
‣ To make the academic experience more engaging.
‣ To address the time and cost of education.
‣ To grow support for CPA Exam candidates.
‣ To expand access for underrepresented groups.
‣ To enhance the employee experience.
‣ And to tell a more compelling CPA story.
These are the same themes outlined in NPAG’s draft strategy report, which was released in May 2024. This new report features the latest data on accounting enrollment and relevant research, final results from NPAG’s national survey, and additional context.
To ensure any recommendations are grounded in data and reflect input from all stakeholders, NPAG pursued a number of research and outreach activities. In addition to conducting a comprehensive review of existing research, NPAG collected insights from a national pipeline survey, focus groups with state societies and firms, and discussions with professional and regulatory bodies. More than 7,950 students and accounting professionals took the national survey, and more than 1,600 people participated in the focus groups.
The advisory group’s chair, Lexy Kessler, mid-Atlantic regional leader and a partner with Aprio and a former chair of the Maryland Association of CPAs’ board of directors, recently sat down with MACPA Chief Communications Officer Bill Sheridan to examine the advisory group’s final report — what’s new and different in the final version, what comes next, and just as importantly, what individual CPAs can do make a difference in this critical area.
The following is a lightly-edited transcript of that conversation. Listen to the conversation in its entirety as part of the MACPA’s “Future-Proof” podcast.
Sheridan: Now that the final report has been out for a little while, what kind of reaction have you received from folks in the profession so far?
Kessler: The response has been very positive. One comment that stood out was how nice it is to have all these themes organized in one place. Many people knew these issues existed but appreciated seeing them validated, with proposed solutions included. While some suggestions have been considered bold, they’ve been welcomed as fresh, outside-thebox thinking. I’d say that’s a positive reaction overall.
Sheridan: There have been so many conversations across the profession— each bringing valid ideas — but it seemed like we needed a single place to pull it all together. Has the advisory group accomplished that?
Kessler: Yes, I think so. We had 1,600 responses in our fall forums testing these concepts, plus two large surveys with 5,800 working professionals and 2,000 students. It was helpful to hear directly from them instead of relying solely on assumptions. We also analyzed more than two dozen existing reports and surveys. This consolidated input was invaluable.
Sheridan: Was there anything that surprised you during this process?
Kessler: Absolutely, there were a few “aha” moments that made us rethink our approach. One surprising area involved academia. There’s a push toward three-year bachelor’s programs; currently, 16 universities in the U.S. offer this. That shift could impact the traditional 150-credit requirement for CPAs. We started using the term “bachelor’s degree” instead of “hours” to align with these changes. Another surprising insight came from a Carnegie-Gallup survey showing only 54% of parents, if given a choice, would recommend a four-year college path. The rest leaned toward alternatives like trade schools or two-year programs.
Sheridan: Those six key recommendations seem similar to what was in the draft report. Could we do a quick run-through of each one with your thoughts? The first is making the academic experience more engaging.
Kessler: We looked at retooling introductory accounting courses. For instance, the AAA is exploring ways to make accounting more relatable through case studies rather than just focusing on debits and credits. When it comes to intermediate accounting, it shouldn’t be a “weed-out” class but rather a “pull-through” one. Also, supporting at-risk students can make a huge difference in their success.
“Many people knew these issues existed but appreciated seeing them validated, with proposed solutions included”
Sheridan: Moving on to the time and cost of education. What was the advisory group looking at there?
Kessler: There’s a disconnect between education costs and starting salaries in accounting, which aren’t competitive with fields like engineering or law. We discussed shifting from credit hours to a competency-based approach while preserving mobility and quality. This could involve experiential learning post-bachelor’s degree under a structured competency framework, possibly reducing reliance on credit hours.
Sheridan: The next recommendation is growing support for CPA exam candidates.
Kessler: Larger firms often support candidates, but smaller firms may not. Suggestions include offering students time off to study for the exam or sitting for specific sections as soon as they complete relevant coursework, like taking the audit section right after an audit class. This approach could improve pass rates and make the process more manageable.
Sheridan: recommendation is to expand access for underrepresented groups. Tell me your thoughts on that.
Kessler: college immersion programs and reaching high school students in underrepresented communities to introduce them to the CPA career path. We’re also working to make it easier for students to transfer credits from community colleges to four-year institutions. Helping career changers navigate the process is another priority.
Sheridan: employee experience by evolving business models and cultures. That seems like a big one.
Kessler: It’s critical and largely up to employers. Competitive starting salaries, work-life balance, and revisiting business models are essential. Peter Sheahan, one of our keynote speakers, said it best: “The war for talent is over, and talent won.” To attract top talent, the profession must commit to meaningful changes in these areas.
Sheridan: The final recommendation is telling a more compelling story about accounting careers.
Kessler: One idea is grassroots campaigns to improve accounting’s image and even gamify it to help people understand the profession at a high level. Everyone can contribute here. For instance, instead of saying, “I worked long hours,” we could share the impact of our work, like helping a
client succeed in a major transaction. By celebrating what we do, we can inspire others to see accounting as a fulfilling career.
Sheridan: Changing the way we talk about our profession seems key.
Kessler: Absolutely. We play a part in shaping the perception of our profession.
Sheridan: What’s next in this area?
Kessler: While the advisory group’s resolution work is complete, a subgroup is now working on immediate, actionable steps. Key organizations in the profession, including AICPA and NASBA, are collaborating to set baselines and determine each stakeholder’s role. This kind of collaboration is essential to making progress.
Sheridan: It’ll be interesting to see how this collaboration unfolds. What can individual CPAs do now to help?
Kessler: CPAs can start by signing the national pipeline pledge, which is a commitment to engage in just two activities that support the talent pipeline. This could be as simple as talking to a high school class about our profession or posting positively on social media. Imagine the impact if even half of the 700,000 CPAs worldwide did two things. That would create a real movement.
Bill Sheridan, CAE, is editor of The Statement and chief communications officer for the MACPA.
AICPA, NASBA seek input on proposed additional pathway to CPA licensure
BY THE AICPA
In a joint effort to support the next generation of accountants while maintaining accounting’s rigorous public protection mandate, the American Institute of CPAs and the National Association of State Boards of Accountancy have proposed an initiative aimed at helping CPA candidates meet initial licensure requirements.
The CPA Competency-Based Experience Pathway would provide an additional option for candidates to demonstrate their professional and technical skills after earning a bachelor’s degree and meeting their state’s requirements for accounting and business courses.
Designed to increase flexibility for candidates, respond to market conditions, and protect the public, the pathway allows candidates to meet the final stretch of licensure requirements by exhibiting competencies according to a model framework that has been developed by AICPA and NASBA. The
framework was developed with significant input and advice from a diverse cross-section of the profession, including members of an AICPA and NASBA working group made up of practitioners, regulators, academics, and state society leaders.
“The proposed pathway encompasses the perfect mix of flexibility for CPA candidates while maintaining rigor for public protection,” said NASBA President and CEO Daniel Dustin, CPA. “We look forward to the input and direction from the 55 U.S. Boards of Accountancy on this important and necessary framework to strengthen the CPA pipeline.”
Attaining the competencies is expected to take most candidates a year but there is flexibility in the timing for completion. Candidates pursuing this additional pathway would also be required to complete a separate year of general experience and pass the CPA Exam. Competencies would be verified in the workplace by licensed CPAs.
Public input on the proposed model competency framework and other aspects of the potential additional pathway can be submitted through Dec. 6.
“Our goal is to ensure that accounting professionals have the necessary experience, knowledge, and competencies to handle the complex nature of CPA work, while also providing paths to licensure that reflect market conditions and make licensure as accessible as possible,” said Susan Coffey, CPA, CGMA, CEO of Public Accounting for AICPA. “Feedback from the profession is essential to building a workable pathway.”
The competency framework at the heart of the proposal includes seven professional and three technical competencies. Candidates would be required to exhibit all professional competencies and at least one of the three technical competencies, which would be verified by one or more evaluators in their organization.
Professional competencies are spelled out in areas such as ethical behavior, critical thinking, and communication. Technical skills are in audit and assurance, tax and financial reporting.
Comments on the proposed pathway are due by Dec. 6 and can be submitted through this form
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SELL YOUR ACCOUNTING FIRM ON YOUR TERMS.
Honor your legacy by exiting with the right buyer. As the industry’s leading team of accounting firm intermediaries, Poe Group Advisors has the resources to help you at every stage of your career. Buy, build and sell your practice with knowledge and guidance you can trust.
Future Leader
JEREMY KNUPP
Are there any mentors or resources that helped you along the way? (Any teacher shoutouts?)
Future Leader highlights future accounting and finance leaders in Maryland as they share their inspirations, challenges, opportunities, and lessons they’ve learned about leadership and our profession along the way.
What inspired you to study accounting?
I initially applied to college as a kinesiology major, but I soon switched to pursuing a degree in finance. As part of the major, I had to take several accounting classes, starting with Principles of Accounting I. I excelled in the course and genuinely enjoyed learning the fundamentals of accounting. I found myself more interested in accounting than in my other finance classes, and after completing the course and attending events, I decided to make accounting my profession. I’m excited to finish my degree and pursue a career that will continue to teach me the skills of an accountant.
My first accounting teacher in Principles I, Michelle Sotka, made a lasting impression on me regarding the importance of accounting. She expressed confidence that I would succeed on the CPA exam if I continued to pursue my passion for accounting both in and outside the classroom. She introduced me to MACPA, which ultimately led to me receiving the MACPA Foundation Scholarship. Additionally, she recommended that I tutor other students in our school’s accounting lab, and I’ve greatly benefited from that experience. Overall, Professor Sotka has been a significant influence on my pursuit of an accounting career; her passion for the field and her efforts to get me involved early on have been invaluable.
What is the most important thing you have learned in the last five years?
The most important lesson I’ve learned in the past year is the value of resilience. I faced many setbacks in high school, both academically and personally, but I persevered through those challenges with the support of my parents, friends, and teachers. Looking back, I’m grateful that I trusted the process and kept moving forward. I want to encourage anyone feeling hopeless in their career or personal life to remember that there is hope for the future. Being resilient can be hard in the moment, but it can lead to great rewards and insights in the near future.
Howard Community College Accounting Student
IRS scrutiny of abusive micro-captive insurance companies can increase a firm’s liability risk
BY AON
The IRS continues to successfully challenge in court that certain micro-captive insurance companies (hereinafter referred to as “micro-captive(s)”) are not eligible for the benefits provided by IRC §831(b), recently winning multiple Tax Court decisions. CPA firms with clients who have established, or are considering establishing, a micro-captive should pay special attention to this risk alert.
Tax practitioners should be cognizant of the IRS’s latest activity, which is increasing and focused on micro-captives. Additional scrutiny and skepticism of micro-captives may increase the professional liability risk of a CPA firm.
What is an abusive micro-captive insurance company?
Generally, amounts paid to third parties for insurance policies are deductible, but amounts set aside as a form of self-insurance are not deductible. A captive insurance company is one that writes insurance policies for its owners and affiliated companies
of the owner. A micro-captive is a captive insurance company that meets the statutory written premium limit, indexed for inflation, required to make a IRC §831(b) election. A microcaptive that makes this election is taxed only on its investment income and not on its underwriting income, but only in years where its written premiums do not exceed the annual limit.
Since the owner(s) of a micro-captive receive(s) a deduction for premiums paid to the micro-captive, and the micro-captive may exclude those same premiums from its income in years when it meets the IRC §831(b) premium limit, an unusual situation is created whereby cash transactions between related parties are deducted but not correspondingly taxed as income, reducing the overall tax burden of the combined group.
The IRS responded to this mismatch in 2016 by publishing Notice 2016-66, identifying certain micro-captive transactions as “transactions of interest.” In response to court decisions ruling against the IRS for its failure to comply with the Administrative Procedure Act, the Treasury Department vacated Notice 2016-66 in 2023. In April 2023, the IRS issued proposed regulations identifying certain micro-captive transactions as either “listed
transactions” or “transactions of interest” (herein referred to as “abusive micro-captives”). Simply put, in an abusive microcaptive transaction, the IRS determines that the “insurance company” does not resemble a traditional insurance company and is a form of self-insurance established to take advantage of the income exclusion under IRC §831(b). Examples in the proposed regulations of abusive micro-captive transactions include the following:
The insured losses and claim administration expenses are less than 65% of premium income less dividends paid.
The micro-captive loans, or otherwise transfers, capital to the operating entity or its owners.
To demonstrate the IRS’s thoughts, previous guidance included the following micro-captive transactions as indicative of abuse: The insurance coverage is for an implausible risk (e.g., hurricane insurance for an operating entity located in St. Louis).
Premiums paid are significantly greater than the prevailing market rate.
Claim administration procedures have not been established. The rules regarding these transactions are complex, and clients should consider engaging an experienced micro-captive insurance company attorney to review them.
Captives have been around since the 1950s. Why should we care about them now?
The IRS continues to increase its scrutiny of micro-captives with the goal of targeting abusive micro-captive transactions. Specifically:
In 2014, the abusive micro-captive tax strategy was identified in the IRS’s annual “Dirty Dozen” list of tax schemes.
In 2016, IRS Notice 2016-66 described micro-captives and identified abusive structures as a transaction of interest requiring taxpayers to disclose the strategy to the IRS.
In 2017, the IRS Large Business and International Division adopted an audit campaign focused on micro-captives.
Between 2017 and 2021, several court decisions held that certain micro-captive transactions were not eligible for the benefits provided by IRC §831(b).
On Sept. 16, 2019, in IR-2019-157, the IRS offered a timelimited settlement for certain taxpayers under audit who participated in abusive micro-captive transactions.
During 2020 and 2021, the IRS issued the following guidance:
IR-2020-26: the IRS announced that it had established 12 micro-captive examination teams and stated that it plans to open several thousand micro-captive examinations. The notice also revealed that 80% of taxpayers eligible for the 2019 program accepted a settlement offer.
IR-2020-226: the IRS notified taxpayers participating in micro-captive transactions to consult with an independent tax advisor to determine if the transaction is abusive.
IR-2020-241: the IRS offered a second, time-limited
settlement for certain taxpayers under audit who participated in abusive micro-captive transactions.
Office of Chief Counsel Memorandum 20211701F finding a certain micro-captive promotor’s program was similar to an abusive program described in IRS Notice 2016-66.
On April 9, 2021, in IR-2021-82, the IRS urged those involved with abusive micro-captives to exit these strategies as soon as possible and not claim tax benefits under IRC §831(b).
And in 2024, the IRS continues to successfully challenge in court that certain micro-captive insurance companies are not eligible for the benefits provided by IRC §831(b), recently winning multiple Tax Court decisions.
What should I do if a client or prospective client asks me to provide tax services to a micro-captive or a business making payments to a micro-captive?
Providing services to clients engaging in the micro-captive strategy, especially if an IRC §831(b) election has been made, increases the potential of an IRS audit and related professional liability risk. For example, if the structure is found to be abusive and anticipated tax benefits are not received, the client may assert that the CPA improperly advised the client or should have warned the client about the potential loss of benefits.
Implementing additional risk management protocols helps mitigate professional liability risks associated with this potential micro-captive strategy client service. At a minimum these should include:
Obtaining a thorough understanding of the proposed regulations.
Advising the client that these programs may be considered “abusive” to the IRS and require a Form 8886, “Reportable Transaction Disclosure Statement,” to be filed with the tax return including the import of that disclosure.
In situations where the CPA is engaged to provide advice or consult regarding micro-captives, considering whether or not a Form 8918, “Material Advisor Disclosure Statement,” should be filed by the CPA firm.
Providing advice on potential disallowance of tax benefits, penalties, and interest if the taxpayer does not qualify under IRC §831(b).
While it may seem obvious, communications should be with the taxpayer, not the captive manager that purports to communicate on behalf of the taxpayer.
Conduct
enhanced client and engagement
acceptance procedures
Not all clients using the micro-captive strategy may be appropriate candidates for the CPA firm. Appropriate candidates should be financially sophisticated, assume responsibility for their decisions, and have the wherewithal to pay any potential liability upon examination. Also consider
the client’s propensity to sue professionals. Even the most appropriate client may be upset and sue its professionals if the strategy is ultimately found to be abusive. Steer clear of clients that do not meet these criteria.
Gain an understanding of the most recent steps taken by the client to confirm that the strategy is not abusive. Has the client engaged an independent tax attorney to evaluate the structure? If the client refuses to obtain legal advice, is that an indication of its risk tolerance? Does the client’s risk tolerance match the firm’s? If not, the client may not be a good fit.
Strengthen your engagement letter template
Engagement letters, for both businesses making payments to micro-captives and micro-captives themselves, should include an additional provision referencing the proposed regulations. The provision should encourage the client to have an independent tax attorney review the transaction as recommended by the IRS in IR-2020-226. For example, the following could be included in the engagement letter:
Abusive micro-captive insurance companies
In Prop. Reg. 1.6011-10 and -11, the IRS has identified certain micro-captive insurance company transactions as abusive and others as transactions of interest. As a result, both micro-captive insurance companies and entities making payments to such entities are under an increased potential for IRS examination. If the structure is found to be abusive, tax benefits may be disallowed, resulting in additional income tax, penalties and interest being imposed. We, as well as the IRS, recommend that you engage an independent tax attorney to review the structure in order to help ensure that the strategy is not abusive.
Management representations
While uncommon for tax services, consider obtaining a management representation letter from the client clarifying its awareness of the proposed regulations. The management representation letter also should confirm that the client has reviewed the proposed regulations’ application to its micro-captive strategy with its professional advisors, and that the micro-captive fulfills the definition of an “insurance company.” The management representation letter should also address whether the client has engaged an independent tax attorney to review its structure, the date of the review, and its conclusion.
Other considerations
If the client’s attorney has determined that the structure qualifies as abusive, disclosure on the tax return is required. If no determination has been made, advise the client to engage a professional to do so. If the client requests a referral, review the article “Unintended Consequences of Professional Referrals” and proceed accordingly. It is not recommended that the CPA firm perform the analysis to determine whether the structure qualifies as abusive because many of the “tests” are related to either general business or insurance industry specific requirements, of which most CPAs lack the requisite knowledge.
Even if the structure does not qualify as abusive, discuss whether the client should proactively disclose the structure to the IRS.
What if the firm provides audit services to a micro-captive or a business making payments to a micro-captive?
The same recommendations that apply to CPA firms providing tax services also apply to those performing audit services. In addition, the CPA firm must assess the accounting treatment of payments to the micro-captive, the micro-captive’s tax benefit for the exclusion of premiums from income, and whether a reserve is needed for uncertain tax positions. Finally, auditors must determine if the microcaptive strategy and the risks related to it should be disclosed in the footnotes to the financial statements.
Identify those clients who may have engaged in microcaptive arrangements, and advise them, potentially a second time, in writing, of the IRS’ heightened scrutiny, the likelihood that they will be audited, and recommend they consult with an independent tax attorney.
Conclusion
When implemented properly, using a micro-captive is an effective tax planning strategy. Unfortunately, some taxpayers have abused the benefits, drawing the IRS’ ire. Without a telltale sign of abuse on the face of a tax return, it is anticipated that many “innocent” taxpayers will be audited. Clients should be made aware of this potential exposure so they, and their CPA firms, can plan appropriately.
SafeSend announces SafeSend
One: New A.I.-powered tools for tax and accounting professionals
BY SAFESEND
SafeSend®, the leading provider of automation technology for tax and accounting professionals, has announced today the launch of SafeSend One™ featuring the groundbreaking Next Gen Gather AI.
SafeSend One, the next evolution of the SafeSend Suite®, automates the entire tax process, from taxpayer document gathering and integrations with tax preparation leaders, to tax return delivery, offering firms an all-in-one solution that provides an unrivaled client experience. This secure, compliant, and user-friendly solution encompasses engagement letters, file transfers, organizers, e-signatures, and tax return assembly and delivery with more than 300 features to remove friction from the firm-client experience.
The most exciting feature of SafeSend One is the launch of Next Gen Gather AI, included as part of a new premium tier package. This groundbreaking innovation modernizes the first mile of the tax return process by streamlining the collection of e-signatures, generating questionnaires, and gathering important documents from taxpayers without
the need for traditional organizers. Gather AI leverages advanced artificial intelligence to automatically generate a document request list, identifies and categorizes uploaded documents, provides real-time visibility into document completion status, and ensures a frictionless document gathering process for both firm and client.
“Our goal has always been to provide a singular, comprehensive solution that enhances the firm-client experience while simplifying the tax process for firms,” said Andrew Hatfield, SafeSend co-founder and chief growth officer. “SafeSend One and Gather AI are the latest demonstrations of our commitment to innovate on behalf of our customers.”
Tax and accounting professionals often face significant challenges in the tax preparation process, particularly with document gathering. Many rely on insecure and inefficient email exchanges to request and receive documents, risking data loss and security breaches. Additionally, firms need to collect personal information updates, obtain client consent via signatures, and
Our goal has always been to provide a singular, comprehensive solution that enhances the firmclient experience while simplifying the tax process for firms.
Andrew Hatfield, SafeSend co-founder and chief growth officer
manage engagements involving entities and trusts, not just individuals. Customizable questionnaires and signable documents are also essential for a comprehensive tax document gathering process, all of which needs to be managed in a streamlined and organized manner.
SafeSend Next Gen Gather AI feature aims to create a new standard for the “Tax Ready” process by addressing these critical issues. With Gather AI, firms can:
Sort and identify common source documents for both customers and clients, streamlining document management.
Receive real-time notifications when source documents are uploaded, keeping clients on track and ensuring timely completion.
Gain real-time visibility into client completion status, allowing for effective progress monitoring and management. These features, along with the ability to customize engagements and receive enhanced notifications, position Next Gen Gather AI as a transformative solution for tax and accounting professionals, helping overcome traditional inefficiencies and deliver exceptional service to their clients.
“We’ve always listened to our firms, unconditionally,” said Steve Dusablon, SafeSend co-founder and chief innovation officer. “That’s why we’re setting the bar high for client experience. Our customers made it clear the challenges on the front-end of the tax engagement process, so we’ve extended our proven approach to address that need.”
SafeSend One builds upon the company’s legacy of providing intuitive, automated solutions that reduce touchpoints and streamline the end-to-end tax journey. The suite’s secure file exchange, enhanced e-signature capabilities, expansive APIs, and integrated tools for tax return assembly and delivery ensure that firms can consolidate their tech stacks and provide a high-end experience for clients.
SafeSend One comprehensive capabilities are underpinned by strategic partnerships and integrations with industry leaders such as Thomson Reuters®, Wolters Kluwer, and Intuit®. These collaborations ensure seamless integrations that enhance the efficiency and reliability of tax automation processes, ultimately delivering a best-in-class client experience.
“SafeSend One and Next Gen Gather AI redefine the standard for automated tax solutions,” said Mathieu Stevenson, SafeSend CEO. “We’re committed to innovation, ensuring our customers have the essential tools to thrive in an ever-evolving landscape. SafeSend One™ and Next Gen Gather AI represent a transformative leap for tax professionals, and we’re proud to lead the way.”
For more information about SafeSend One and Next Gen Gather AI, visit www.safesend.com!
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The connection between client experience and employee experience
BY JON HUBBARD
Editor’s note: The following article is reprinted with permission from Boomer Consulting, Inc.
Accounting firms have undergone enormous changes in recent years. Traditional approaches to serving clients are no longer sufficient to sustain growth and retain talent. Clients are looking for more from their trusted advisors, so they must adapt their business models. At the same time, talent leaders are grappling with talent attraction and retention issues. So, how can firms both do more and be more for their clients and deliver a better experience for employees?
If you think these two goals are at odds, they’re not. The employee experience (EX) and client experience (CX) aren’t in competition — they’re intrinsically linked, and together, they can drive firm success.
Evolving the business model is necessary for growth
Firm leaders increasingly recognize that the strategies that got them to their current level of success won’t suffice for future growth.
Automation, machine learning, and artificial intelligence are reshaping traditional tax and audit services. Clients expect more from their trusted advisors, leading firms to add consulting and advisory services to their offerings.
Embracing technology allows the firm to streamline transactional and compliance work and empowers professionals to become more forward-thinking advisors to their clients.
The talent crisis as a catalyst for change
The pandemic heightened a talent crisis, forcing firms to re-evaluate their organizational structures and cultures. With talent shortages impacting nearly every corner of the business world, employees voiced their need for supportive work environments.
Initially, firm leaders believed CX and EX were at odds. How could we deliver more value for clients while also giving employees what they need and want?
However, as firms started making changes in both areas, it became clear that a positive employee experience directly translates into a better client experience and vice versa.
Firms weren’t losing talent because they served too many right-fit clients who valued and paid well for their services. The unsustainable business model — wrong-fit clients, unsustainable workloads, and underpriced services — fails to provide a work/life balance. The long hours and high-stress
accountants have endured for years are no longer acceptable. As firms evolve their business models, they get better at attracting and retaining top talent.
Aligning the business evolution with employee and client needs
The evolution of your firm’s business model must align with the needs of both employees and clients.
This alignment includes:
Working with right-fit clients. Focus on engaging with clients who value your services and are willing to pay a premium for them. This approach helps employees build relationships with clients and work on meaningful projects, which improves job satisfaction.
Fewer clients, more services. Reduce the number of clients you serve but deliver a more comprehensive suite of services. This also supports deeper, more valuable relationships between clients and employees to improve client satisfaction and reduce employee burnout by allowing them to manage workloads more effectively.
Digital transformation. Implementing digital processes allows for greater flexibility. Employees can work from anywhere, anytime — a crucial part of attracting and retaining top talent. It also allows firms to expand their client base across the U.S.
Client experience and employee experience in harmony
CX and EX aren’t in a tug-of-war. They march together, creating a reinforcing loop that drives firm success.
A study from Deloitte underscores this point. Its research found the following correlations between employee experience and client experience.
Organizations with strong EX are 25% more profitable, on average, than companies with poor EX.
Engaged employees are four times more likely to stay in their jobs.
Companies that focus on employee experience double customer satisfaction, as measured by their net promoter score.
Organizations with highly engaged employees report a three-year revenue growth rate 2.3 times greater than average.
By evolving your business model to prioritize both EX and CX, you can create a thriving work environment that attracts and retains top talent while delivering exceptional client service. This holistic approach is a blueprint for sustainable growth and success.
Jon Hubbard is a shareholder and consultant with Boomer Consulting, Inc.
Reclaim your time: 3 solutions for reducing admin work
BY HANNA BRUNO, CPACHARGE
Do you often find yourself buried under a pile of administrative tasks, taking valuable time away from client work? You’re not alone. In fact, according to the 2023 Accounting Practice Management Survey, accountants spend just 55% of their time working with clients, with the rest dedicated to administrative matters.
CPACharge can help you automate and streamline these routine tasks, freeing up your schedule for more substantive, impactful work while ensuring your business stays on track.
Streamline workflows to save time
Accountants often spend hours manually reconciling accounts and generating reports—tasks that consume valuable time and increase the risk of errors. Nearly two-fifths (39%) of surveyed accountants said they spend over half of their day on manual tasks, yet nearly a third (30%) of respondents don’t have the tools to automate processes. Workflow was the biggest reported challenge in 2023, making up 63% of the overall general challenges they encountered. These workflow issues lead to lost revenue, missed deadlines, and poor worklife balance across 55.9% of firms.
Given these significant workflow challenges, it’s clear that automating administrative processes is crucial for improving productivity and maintaining a healthy work-life balance. This is where CPACharge steps in.
Reconciliation and reporting are crucial but tedious tasks that CPACharge streamlines significantly. Seamless integration with leading accounting software allows CPACharge to
automate the reconciliation process by accurately recording and categorizing transactions and matching payments to invoices, effortlessly keeping your accounts up-to-date.
Additionally, customizable reporting tools make generating detailed financial reports easy. Whether tracking payment trends, monitoring cash flow, or preparing for tax season, CPACharge provides real-time insights into your financial data. These comprehensive reports can be shared with clients or stakeholders, enhancing transparency and professional credibility.
Those who use CPACharge say that it saves them time on essential business workflows:
“CPACharge is extremely user-friendly on both ends. Our clients love how easy it is to use and so do I!”
— Danielle G., midsize business practitioner
“CPACharge has helped our firm to greatly reduce the time it takes to collect on invoices.”
— Amanda S., small business practitioner
“(CPACharge is) fast and straightforward. Easy to use and simple to manage.”
— CPACharge customer
*This is a collection of reviews from CPACharge’s G2 website, a third-party review platform.
Automate invoice creation and recurring billing
One of the most time-consuming administrative tasks is sending out recurring invoices. Data shows that in the United States, 400 billion invoices are produced yearly, growing 5 to 15 times annually.
Automating an accounts payable (AP) process can reduce paperwork by 90-95% and increase efficiency by 20-27%. Depending on the company’s size, automating AP can save $16 or more per invoice and start paying for itself within an average of 6 to 18 months.
By leveraging CPACharge’s robust automation tools, you can significantly cut down on administrative workload, improve efficiency, and maintain a steady financial outlook.
CPACharge’s invoicing feature lets you quickly and seamlessly generate invoices with detailed line items. This streamlined process saves you precious time every week, allowing you to focus more on client interactions and less on administrative paperwork. With CPACharge, invoicing becomes a quick and easy task, enhancing your efficiency and productivity.
The Scheduled Payments feature allows you to automate the process entirely, setting up your system with recurring charges for a specified number of billing cycles or until a certain dollar amount is met.
This not only reduces the time spent on invoicing but also ensures that your cash flow remains consistent and predictable.
Those who use CPACharge say that it makes invoicing a breeze:
“CPACharge has changed my life! They allow me to set up recurring payments from clients that I can set and forget. It really helps me not stress out about whether or not I’ll get paid.”
—Jennifer S., owner and accountant
“The best part of CPACharge is being able to set up a schedule for clients for recurring payments that are monthly, quarterly or annually, so they don’t have to remember to pay.”
—Diana B., firm administrator and controller
“I can do quick invoices for my clients just by entering their email address, their invoice amount, a description, an invoice amount, and click submit — and we’re done!”
—Greg L., small business practitioner
*This is a collection of reviews from CPACharge’s G2 website, a third-party review platform.
Secure and fast payment processing
Storing and managing client payment information can be cumbersome and time-consuming, especially when you repeatedly re-enter card details. Data breaches in
the accounting sector have grown by 47% in the last two years. Additionally, 60% of small accounting firms go out of business within six months of a cyberattack.
CPACharge’s Card Vault feature securely stores your clients’ card information in a PCI-compliant manner. This ensures that sensitive data is protected with the highest security standards, reducing the risk of data breaches. By securely storing card details, CPACharge allows you to quickly process payments without the hassle of re-entering card information each time, making the payment process both secure and efficient.
Beyond Card Vault, CPACharge employs advanced encryption technologies and continuous monitoring to safeguard your transactions and client information. This means that every transaction is protected against unauthorized access and potential fraud, providing you and your clients with peace of mind.
By integrating CPACharge’s robust security features into your payment process, you not only enhance the efficiency of managing client payments but also significantly reduce the risk of cyber threats. This protects your firm’s reputation and financial stability, ensuring you can focus on delivering exceptional service without worrying about security vulnerabilities.
Those who use CPACharge say that it enhances the security of their firm and gives them peace of mind:
“What I like best about CPACharge is the ease of being able to re-use a card or e-check that a client used to pay an invoice securely.”
—Renae T., small business owner
“(CPACharge) is a wonderful way to store confidential credit card information without exposing the number. We can set up reoccurring charges for auto payments easily as well as use stored credit cards to pay annual tax bills.”
—Veronique M., practitioner
“(CPACharge) is a very straightforward and simple platform to use. It syncs to my client portal app seamlessly. Knowing it is a secure and compliant payment processing platform is also reassuring.”
—Marc M., CPA
*This is a collection of reviews from CPACharge’s G2 website, a third-party review platform.
Streamline your work with CPACharge
By leveraging these three powerful features of CPACharge, you can significantly reduce the time spent on administrative tasks, saving billable hours every week. This boosts your productivity and allows you to dedicate more time to highlevel tasks and client engagements, ultimately enhancing your firm’s overall efficiency and service quality.
Ready to streamline your invoicing process and enhance your firm’s efficiency? Learn more about CPACharge today!
Fostering a culture of engagement: 6 essential retention strategies
BY ADP
T o thrive in today’s landscape, companies must not only attract but also retain top talent. In a recent ADP webinar on “Employee Retention in Accounting: The Big Picture,” ADP Senior Director of Global HR Amy Freshman highlighted six key strategies to positively impact retention.
1. Regular check-ins
Leaders should engage in meaningful conversations with team members to make them feel valued and heard. It’s important to connect on more than just work tasks. Take the time to get to know them personally. Show support and be present to build strong manager-employee relationships.
Additionally, consider asking employees why they stay or what motivates them to stay. Understanding what employees value about their workplace can help improve retention.
2. Team synergy
When team members support one another, share common values, and feel that their team members have their backs, it has a profound impact. Cultivate a team environment where members can get to know each other and recognize each other for specific achievements. Fostering engagement and team camaraderie can significantly boost retention.
3.
Prioritizing wellness
Wellness is pivotal for engagement and retention. Promote wellness through dialogues, activities, flexible work arrangements and encouraging regular breaks and sufficient time off. Leaders should lead by example in valuing self-care, including disconnecting from work communications during their downtime.
“Employees today want to feel that they can bring their whole selves to work,” says Freshman. “Employees who feel supported and know their company and their leader care about their well-being—they’re more likely to be engaged and to stay longer.”
4.
Growth and development opportunities
Offering growth opportunities within roles is essential for development. Encourage employees to enhance their skill sets, pursue certifications and embrace challenges. This helps boost their engagement and productivity and deepens their
commitment to the organization. They’ll likely feel more valued and see clear progress in their careers.
5. Belonging
Fostering a sense of belonging goes beyond simply including employees – it’s about empowering them to bring their authentic selves to work and making others feel included. Utilize social media to nurture a sense of community. Contribute to communities and give back. These actions, among others, significantly impact talent retention and development.
6. Culture
Maintaining a strong workplace culture is key. Building a positive culture involves everyone in the organization –from leaders at all levels to the employees themselves, as well as the company’s processes, programs, and benefits. This is reflected in how employees interact with clients and customers.
“Culture doesn’t happen overnight; it happens over time. It shifts and changes with the people in the organization,” says Freshman. This underscores the dynamic nature of organizational culture and the importance of consistently nurturing and shaping it in alignment with its members’ needs and values.
Conclusion
Retention is a collective responsibility within any organization. Leaders should use tools like employee surveys and exit interviews to gain insights and actively seek perspectives, especially from long-term, high-performing employees, to enhance retention.
Amy Freshman is ADP’s senior director of global HR. Interested in hearing more takeaways from ADP’s webinar? You can access the event on demand.
Crafting A.I. guidelines: A thought leadership approach
BY ERIN SHIVELY
Artificial intelligence is one of this century’s most exciting new technologies, and its use has spread like wildfire since ChatGPT was released in 2022. According to Deloitte, 74% of companies are testing Generative A.I. technologies, and 65% already use them internally.
A.I. presents both remarkable opportunities and significant challenges. Extensive regulations governing A.I. have yet to be established, so firms must proactively establish guidelines for its use.
This article explores why your organization needs A.I. guidelines and offers practical steps to help you develop these essential frameworks.
Why do we need A.I. guidelines?
The regulatory environment surrounding A.I. is still developing. There are few, if any, specific rules and policies governing its use in professional settings, including accounting. This regulatory vacuum makes it challenging to create enforceable A.I. policies, as policies must be specific and trackable. Instead, you should focus on crafting flexible and adaptive A.I. guidelines that can evolve with the technology and regulatory changes.
A.I. guidelines provide a framework for ethical and practical A.I. usage within the firm. They help ensure employees use A.I. tools responsibly, enhancing productivity without compromising professional standards or client trust. These guidelines also serve as a foundation for training staff on the appropriate use of A.I., promoting consistency and transparency across the firm.
Considerations for creating A.I. guidelines
A.I. guidelines aren’t one-size-fits-all, so we won’t offer a specific list of guidelines to incorporate into your firm. However, we will provide a few considerations when crafting your standards.
Understand A.I.’s limitations and potential biases: While powerful, A.I. systems aren’t infallible. They can exhibit biases based on the data they are trained on, leading to skewed results. For CPA firms, this means being aware of the potential for A.I. to produce biased financial analyses, recommendations, or content.
Your A.I. guidelines should address the process for regularly auditing A.I. outputs to identify and correct any biases in A.I.generated reports. When creating your own A.I. models, use
a wide range of data sources to train A.I. models, reducing the risk of bias.
Ensure accuracy through human oversight: A.I. is prone to “hallucinations,” generating incorrect or nonsensical outputs. The data sets used by A.I. may become outdated and not reflect the latest financial and regulatory information. Using A.I. requires rigorous fact-checking and human oversight.
Your guidelines should address procedures for humans to review A.I.-generated outputs before they’re finalized.
Recognize A.I.’s non-human nature: A.I. operates based on logic and data—it can’t understand context or emotions as humans do. This limitation means you should not use A.I. to answer ethical or emotion-driven questions.
Your A.I. guidelines should define acceptable A.I. use cases by clearly delineating tasks suitable for A.I. and those requiring human judgment. Educate employees about what A.I. can and cannot do so they have realistic expectations about its applicability to their work.
Promote transparency in A.I. usage: Being transparent about A.I. use is essential, as this builds trust with clients and stakeholders.
Inform clients when you use A.I. tools in their projects, explaining the benefits and limitations. Keep detailed records of how A.I. tools are used, including decision-making processes and data sources.
Address security concerns: Security is paramount when integrating A.I. into your accounting practice.
Your guidelines should address security and advise employees never to input customer or proprietary business information into public A.I. systems or those without adequate safeguards to protect the data.
Creating A.I. guidelines is crucial to leveraging A.I.’s potential while maintaining ethical standards and client trust. By understanding A.I.’s limitations, ensuring rigorous oversight, and promoting transparency and security, you can effectively navigate the complexities of integrating A.I. into your firm’s processes. Your guidelines will provide a solid foundation for adapting to new challenges and opportunities as the technology and regulatory environment evolves.
Erin
Shively is the IT coordinator at Boomer Consulting, Inc.
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Small businesses are worried. Your firm can help.
BY CPA.COM
According to the National Federation of Independent Businesses, 25% of small businesses say that inflation is the single most important problem they face in operating their businesses. The costs of raw materials, labor, employee benefits, health insurance, commercial insurance, financing, you name it— they’re all sky high and present real challenges for small businesses. Sure, they can raise the price of their own goods and services, but there’s not much wiggle room as consumer spending is also starting to cool and adding to the pressure.
Client advisory services (CAS) practices can really differentiate themselves as true business partners and advisors and create more value for clients by helping them address some of their toughest questions during these times, including how to think about margins, pricing, managing costs and securing much-needed capital.
Here are three services that your CAS practice can deliver to help your clients navigate this difficult environment.
Delivering a holistic view of cash flow
Operating with razor-thin margins and ongoing uncertainty, small business leaders need stronger capabilities for quickly and accurately forecasting future cash flows. It’s no longer as simple as determining how much cash is in the bank and comparing it to upcoming monthly expenses. Today, the payment landscape is much more complex, with myriad vendors establishing their own requirements for how and when payments are received. For example, some suppliers may require upfront payment by check. Some provide their goods or services first, then require payment by check. Others require credit card payments. They may even assign variable costs – like a 3% fee for credit card transactions. All of which makes it more difficult to effectively anticipate and manage cash flow.
Fortunately, firms have access to a number of advanced tools to help clients analyze and understand their cash flows to make more informed business decisions. As an example, BILL’s integrated financial operations platform
can help streamline the data, bringing it all together in one place to give clients a clear, accurate view of their current and future cash flow requirements. For firms, this creates an important advisory opportunity, giving them the ability to identify trends and provide more strategic insights to clients.
Enabling decision-making with financial planning and analysis
This is the time for clients to sharpen their focus on strategic, big-picture issues that will determine their success over the long term. Right now, they’re scrambling to make smart decisions on a host of critical issues. Should we hire more people—and how will that affect our financial picture? When can we confidently launch our new product line without affecting payroll? How will raising prices by 2% impact our finances — and how can we expect it to influence demand? And many more.
Firms have a key role to play here, collaborating with clients to understand their strategic goals and key business drivers, then using financial planning & analysis tools such as Jirav to create real-time, driverbased financial models to guide the planning process. With clients’ operational data, goals and business/ market assumptions built into the models, they can make smarter, more informed decisions about a wider range of scenarios they’re likely to face in the future. Along the way, they can also easily generate automated reports that summarize their financial forecasts, budget variances and other key metrics.
Accessing capital to accelerate small business growth
Many small business leaders are worried about having ready access to the capital they need to keep their businesses running — and to take advantage of growth
opportunities as they arise. But many are unsure whether they should take on capital now or wait. They need a trusted advisor who can help them find the right financing at the right time to accelerate growth opportunities and put the business on a path to higher profitability over the long term.
Today, most of your clients primarily rely on banks for their financing needs. But the process of securing critical business funding from banks can be overly time consuming and out of step with clients’ real needs. CPAs understand these clients’ financing needs better than anyone. And with new financial technology (fintech) tools developed specifically to help firms deliver financing services directly to clients with minimal effort, bypassing traditional banks, your CAS practice can help clients get the funding they need, when they need it. The CPA Business Funding Portal from CPA.com and Biz2Credit puts your firm at the center of clients’ loan applications and transactions throughout the process, giving your team real-time updates and access to document requests that help you advocate for your clients on one of their biggest pain points and advise them in their decision making.
Deepen your value as a strategic partner to small business clients
This article only scratches the surface of what’s possible for CAS practices as they look to help their small business clients navigate an uncertain business landscape and position for growth. Your clients’ needs are clear. The path to helping them is equally clear. Learn more about the opportunities to expand your value (and the technologies that enable them) and deepen your role as your clients’ most trusted advisor.
Creating joint tenancy with family members
BY THOMAS J. STEMMY, CPA, EA, CVA
Family planners will often do whatever it takes to ensure their family assets will eventually pass to their loved ones, intact and without unnecessary costs. Now, with unrestrained inflation and estate values growing to unprecedented levels, many believe something should be done immediately to change the ownership of assets that they own in their own name.
For starters, they usually focus on the probate hurdle, and they take one of the customary steps to eliminate probate entirely. Or they might get creative with one of the strategies for scaling back their estate tax liability. Meanwhile, the federal estate tax could be lurking in the background more than ever after 2025.
Too often, some planners will assume that creating joint ownership with a family member could be one step in the right direction and may be a quick-fix solution. It is true,
joint tenancy might be an easy way to sidestep probate administration. However, there could be costly downsides if you were to simply add Junior’s name to your bank account or, perhaps, make him a co-owner of the family residence.
First, legal liability issues (a matter for an attorney):
Creating a joint tenancy with a family member as part of your estate plan can result in unwelcome surprises down the road, including a disapproval from the family attorney who had not been consulted before you started handing out joint ownership in the family assets. An experienced attorney will look at the bigger estate picture with joint ownership and help you evaluate the risks that you might take on personally, because of your child’s potential exposure to liability — i.e. future lawsuits, divorce action, tax assessments, etc.
Second, the tax-related issues with joint tenancy: A tax professional will also be called upon to shed light on the tax implications when you make a family member a co-owner of a family asset. There are several tax-related issues to consider, but these depend on the type of asset that is being transferred into joint ownership. They are summarized as follows:
Creating joint ownership with a bank account or a brokerage/investment account
Family planners should first be aware of what needs to be reported to the IRS when you create a joint tenancy with a family member (other than your spouse).
Most commonly, we see scenarios such as with Marsha, who plans to add her daughter, Sue, as a joint owner on both her (a) bank account and (b) brokerage account. This is often done simply to have a reliable family member help with check-writing or to help manage the account.
However, this action raises the question: Will a gift tax return (Form 709) be required? Here are the general rules for Marsha to follow:
1. When you add an individual as a co-owner of your regular bank account: Treas. Reg. §25-2511-1(h)(4) shows that when you reserve the right to regain the funds in the joint account on your own, adding a co-owner (in and of itself) does not constitute a reportable gift transaction. That means a gift tax return would not be required if Marsha decides to add a family member (like Sue) as a joint owner of her bank account.
2. On the other hand, if Sue were to draw upon the joint bank account for her own benefit, a gift tax return would be required (Revenue Ruling 69-148). In such cases, the amount drawn by Sue for her own benefit would require the filing of a gift tax return (Form 709) if the amount she draws exceeds the annual exclusion ($18,000 in 2024).
3. What if Marsha makes Sue a co-owner of her brokerage / investment account? A regular brokerage account (which typically holds securities in street name) works like a bank account. That is, a gift tax return would also not be required unless Sue were to draw funds from the brokerage account for her personal use in an amount that exceeds the annual exclusion.
Who
pays the tax on the earnings from a jointly owned bank or brokerage account?
Matching problems with the IRS can sometimes occur when 1099 forms are issued at year-end. This is because banks and brokerage firms report only one Social Security number to the IRS — that of the primary account owner. If the income is not reported fully under that number, a deficiency notice will likely be issued. In most cases, however, this would not be a problem because the primary account holder is the one putting up all the funds anyway.
On the other hand, if the secondary account holder has
contributed to (or has a vested interest in) the joint account, a calculation will have to be made to determine the allocable share of interest or dividends attributable to each co-owner. The primary account holder will still need to report the full amount on schedule B of his return. However, he will then subtract the share that is attributed to the co-owner, along with the co-owner’s name and Social Security number.
A final thought on joint ownership with banks and brokerage accounts: Let common sense prevail
After reading the cautionary warnings noted above, some might conclude that there are too many risks in creating co-ownership with the children. They might even believe a joint tenancy that was created impulsively in the past could now be problematic but it is now fait accompli. The reality, however, is that the real risk is only with the value of the asset that is being placed in joint ownership.
Say, for example, Mike had a well thought-out estate plan, but a health issue came about and Mike believed it would be helpful to have a dependable child on hand (like his son, Junior) to write checks and pay bills for a limited time. If th is is done with a very small jointly owned bank account and a nominal bank balance, it would be hard to argue that Mike would have much at risk or much cause for concern.
On the other hand, if Mike still believed joint tenancy is not in his best interest, he can always authorize check-writing privileges with Junior under a Power of Attorney (POA) from his bank. However, keep in mind that POA forms vary from state-to-state and this document should meet the attorney’s approval.
Creating joint tenancy with “other property” that you own
Unlike a bank account or a brokerage account, if Mike were to make Junior a co-owner of another asset that he owns (such as real estate or investment property), a gift transfer will be deemed to have been made immediately. In those cases, a gift tax return (Form 709) will be required (Reg. § 25.25111(h)(5)).
To illustrate: What if Mike were to make Junior a joint owner of the family residence? This would clearly constitute a reportable gift transfer. But the question arises as to how to value the gift that needs to be reported on a gift tax return. If a donor lives in a state that allows joint owners of property to sever their interest on their own (like Maryland and most jurisdictions), the gift will simply be valued at one-half of t he property’s value. Thus, in our example, if Junior has the right to sell his one-half interest in the property on his own, the value to be reported by Mike would simply be one-half of the property’s fair market value. All Mike would need, as the donor, is an independent appraisal of the property and report one half of that value.
Note: If you live in a state that does not allow joint owners to sever their half interest on their own, the value of the gift will
need to be determined by a special formula that factors in the value of the donor’s life interest in the property. In general terms, the life interest value (which is based on the donor’s life expectancy) will be subtracted from the full appraised value to determine the value of the gift.
Finally, how will your jointly owned assets be taxed in your estate?
By now, you may have guessed that the joint tenancy you created with your child will minimize the value of the property that will be included in your gross estate and lower your exposure to estate taxes.
Unfortunately, the IRS doesn’t see it that way. Even though you may have met your gift tax reporting requirements, your estate must still report the entire value of any jointly owned property that you have at the time of your death. The only time this problem will be avoided is when the estate’s executor will be able to show that the new joint owner contributed his or her own funds toward the cost basis of the property.
A key takeaway
Creating joint tenancy with a family member should never be taken lightly – especially with regard to legal liability and unwanted tax costs. Your estate plan might have a valid, logistical purpose for you to create joint ownership with your kids. However, if you have several children and only one is named as a co-owner, there may be consequences to consider. The last thing you would want is to disrupt a
well thought-out estate plan – not to mention possible child disagreements down the road.
Before proceeding with plans to transfer ownership of your family assets (whether by joint tenancy or by outright gifts), take a moment to look at the entire estate picture. Your attorney or tax adviser will keep you apprised of the changing rules with both the income tax and the estate tax laws. You may find that your eagerness to get assets out of your estate with lifetime gifting could turn out to be an added tax burden (rather than a tax saver).
Thanks to the renowned step-up rule, your heirs could be permitted to step up the basis of property that had been inherited to the property’s value as of the date of death. This, of course, could minimize capital gains taxes upon sale – or it may even eliminate the tax completely.
Although basis step-up is sometimes regarded as the biggest tax loophole in the tax code, it is only one factor that needs to be considered for keeping your assets intact for your heirs. As the value of your estate continues to grow along with inflation, it may be time to review your overall estate planning picture with a focus on your entire tax liability under the changing rules.
Thomas J. Stemmy, CPA, EA, CVA, is a shareholder with Stemmy, Tidler & Morris, PA, in Annapolis.
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ETFs vs. mutual funds: The benefits that really matter
BY BRYAN ARMOUR
I n many ways, exchange-traded funds are an evolution of mutual funds. ETFs are like mutual funds that trade throughout the day but are more taxefficient, transparent, and accessible. And they are often cheaper than their mutual fund forebears.
But these advantages don’t apply to every ETF. Some purported benefits of ETFs are oversold, while others are underrated.
Let’s take a closer look at ETFs and mutual funds and which advantages really matter to investors.
Investors can trade ETFs like stocks. They can go long on ETF shares, sell them short, buy them on margin, buy and sell options on them, and lend them to others to collect a fee. This versatility can draw in a diverse investor base, which aids ETFs’ robust liquidity ecosystem. This keeps ETFs trading at or near their net asset value and limits costs for investors.
Mutual fund orders are priced at the end-of-day net asset value, which means investors can only trade at closing prices. They also don’t share the same versatility as ETFs in terms of shorting, options, and lending; and sales loads
can make them extremely costly to trade, making mutual funds much less flexible than ETFs.
The ability to trade ETFs like stocks, however, is not much of an advantage for most investors. Jack Bogle infamously detested ETFs (at least initially) because of their tradability. He believed trading to be a losing proposition for investors, and I agree. But flexibility adds value if investors stay disciplined.
Tax efficiency
ETFs have a tax advantage over mutual funds, but the size of their advantage depends on the investment strategy and asset class of the fund.
By virtue of in-kind creations and redemptions, ETFs come with tax magic that’s unrivaled by mutual funds. This creates
a huge advantage for ETFs among investment strategies that kick off capital gains. The more funds trade, the more susceptible they are to selling winners and realizing capital gains. The effect is more pronounced in strategies that differentiate themselves from the market, like strategic-beta or concentrated active funds, which have higher turnover.
Source: Morningstar Direct. Data as of Dec. 31, 2023
ETFs flex their tax advantage
Other types of strategies, like market-cap-weighted index funds and bond funds, don’t benefit that much from the tax advantage of ETFs. Market-cap-weighted index funds tend to require little trading, and much of bond funds’ returns come from income.
For example, Schwab S&P 500 Index SWPPX is a mutual fund that had no capital gains in 2023 and minimal gains over the past five years (0.07% in 2021 and 0.09% in 2019). This is higher than top S&P 500 ETFs like iShares Core S&P 500 ETF IVV and Vanguard S&P 500 ETF VOO, but the difference is negligible.
For example, momentum strategies trade often to keep recent winners in their portfolios. Two Fidelity momentum funds demonstrate how the ETF wrapper avoids capital gains distributions for a more tax-efficient experience (See chart below):
Source: Morningstar Direct. Data as of Dec. 31, 2023.
tax advantage is most effective for stock funds
Most ETFs disclose their holdings every day, allowing investors to see what’s inside their portfolios daily instead of quarterly like most mutual funds. Daily transparency
Likewise, bond investors may not benefit as much from the ETF wrapper. A high portion of bonds’ total return comes from income, which is taxed separately from capital gains. In-kind redemptions have no effect on taxes tied to income.
Other gaps in the tax efficiency of ETFs may exist when they hold derivatives, physical commodities, and certain foreign securities that don’t benefit from in-kind redemptions.
Overall, ETFs’ tax advantage is clearest in U.S. equities. And the ETF structure should never hurt tax efficiency.
adds accountability and removes some of the mystique of discretionary active managers. But it adds little value for most investors, who would be wise to go outside and get some fresh air rather than check their ETF’s daily holdings.
Accessibility
No investment minimums and innovative strategies, when appropriate, give ETFs a leg up on mutual funds for their accessibility, but investors don’t need most of the thousands of ETF strategies available. I’m looking at you, single-stock covered-call ETFs.
Fees
While ETFs often have lower fees than mutual funds, there are additional factors to consider when measuring the cost of owning an ETF.
Asset managers often price ETF fees at the same level as the institutional share class of mutual funds, with no sales loads. This is part of the reason why the average ETF costs half as much as the average mutual fund (0.50% vs 1.01%).
If you’re comparing an ETF and a mutual fund that track the same index, the fee difference may not outweigh the trading costs associated with the ETF. Trading at net asset value can be an attractive feature for low-cost index-tracking mutual funds.
ETFs vs. mutual funds: The bottom line
ETFs carry advantages over mutual funds. Some, like lower tax bills and fees, can make a big difference for investors; others won’t be noticeable. But they rely on disciplined investing to work, as Jack Bogle believed. Investors should consider their own behavior before deciding whether to buy an ETF or a mutual fund.
Bryan Armour will speak on this topic and more at the MACPA’s Personal Financial Planning Conference, scheduled for Tuesday, Nov. 12. Get complete details and register to attend here.
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Is your company prepared for a data breach?
BY STEPH BROWN
Editor’s note: The following article originally appeared on Aug. 2, 2024 on the website of Financial Management magazine. It is reprinted with permission.
IBM’s latest Cost of a Data Breach Report found that system complexity and skills shortages are amplifying breach costs globally
Weak defenses arising from system complexity and security skills shortages are putting more companies at risk of a data breach and raising the costs of those breaches, according to IBM’s Cost of a Data Breach Report 2024.
What’s the damage? Globally, $4.88 million — 10% more than the global average last year, the biggest jump since the pandemic, the report said. The top three drivers of this increase were security system complexity, security skills shortage, and third-party breaches.
The United States led the world in average breach cost — $9.36 million — for the 14th year, the report said. Making up the other top spots were the Middle East, Germany, Italy, and Benelux (Belgium, Netherlands, Luxembourg).
When asked how they’re dealing with these costs, more than half of respondents said their organizations are passing them on to customers, according to the report. “Having customers absorb these costs can be problematic in a competitive market already facing pricing pressures from inflation,” the report said.
The 2024 study was conducted across 16 countries and regions, and 17 industries.
Nearly half of cyberattacks reported this year were caused by system failures and mismanagement. “Malicious attacks — those committed by outside attackers or criminal insiders — made up 55% of all breaches,” the report said.
“As concerning as these breaches are, it’s important to remember the remaining 23% are due to IT failure and 22% are due to human error.”
The most common type of data stolen or compromised was customer personally identifiable information.
Costs from lost business and post-breach response also rose nearly 11% over the previous year. Following a breach, the report said, companies report revenue loss to system downtime, lost customers and reputation damage, and regulatory fines.
Companies turning to A.I. fare better
Artificial intelligence (AI) and automation can play key roles in identifying and reducing the cost of data breaches.
“A.I. and automation solutions are reducing the lifespan needed to identify and contain a breach and its resulting damage,” the report said. Those tools reduced the time to identify and time to contain for companies.
Using A.I. for preventing attacks is also cutting costs, the report said. Organizations using A.I. averaged $2.2 million less in breach costs compared to those with no A.I. use in prevention workflows.
But employee training, alongside A.I. and machine learning, is also important in improving defense systems and reducing breach costs. “Employee training continues to be
Editor's note: The following article was originally published by
It is reprinted with permission.
an essential element in (cyber defense) strategies, specifically for detecting and stopping phishing attacks,” the report said.
However, rushing to adopt technologies such as generative A.I. in understaffed cybersecurity teams is a double-edged sword.
“The continuing race to adopt (generative) A.I. across nearly every function in the organization is expected to bring with it unprecedented risks and put even more pressure on these cybersecurity teams,” the report said.
4 ways to prepare for a breach
The report sets out recommendations to reduce costs and lower the time it takes to identify and contain breaches:
1. Understand your data landscape. More than one-third of data breaches involve “shadow data,” the report said.
Security teams must now assume their organizations have unmanaged data sources, and data encryption strategies must consider the types of data, its use, and where it resides to lower risk in case of a breach.
2. Utilize A.I. and automation. “Organizations that applied A.I. and automation to security prevention saw the biggest impact from their A.I. investments in this year’s study compared to three other security areas: detection, investigation, and response,” the report said.
3. Secure generative A.I. models. Securing generative A.I. model development requires scanning for vulnerabilities in the pipeline, hardening integrations, and enforcing policies and access.
4. Invest in cyber response training. Security leaders are advised to work with business functions across the organization and with communications teams to draft and test response plans ahead of time.
Contact Steph Brown at Stephanie.Brown@aicpa-cima.com ... ... to comment on this article or to suggest an idea for another article.
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Meet the MACPA Team
We are excited to introduce you to members of the dedicated MACPA Team – the incredible individuals working tirelessly behind the scenes.
They’re all passionate about ensuring your membership experience is not only positive, but also rewarding and delivers exceptional value. Through this series, you’ll gain valuable insights into the team, their roles, and how their hard work directly benefits you as a member. Dive in and get to know the amazing people who make the MACPA so special!
LAURA SWANN Chief Financial Officer
What are your primary responsibilities at the MACPA?
My primary responsibility is to serve our members by overseeing the financial health of the association. This includes managing our budgeting processes, ensuring accurate financial reporting, and implementing effective financial controls. I work closely with our executive team to align our financial strategies with our overall goals, ensuring that we maintain a solid financial foundation that supports our mission to make a positive impact by Connecting, Protecting, and helping a CPA-led profession Achieve success.
How long have you been with the MACPA, and what drew you to work here?
I’ve been with the MACPA for just about my whole career — around 30 years! From my very first employment interview on, I have been drawn to the people who make the MACPA a family and who truly care about the wellbeing and success of our members.
What is the most rewarding part of working with the MACPA members?
I have been uniquely privileged to both work in and serve this amazing profession. The most rewarding part of working with MACPA members is learning from them and their diverse backgrounds.
Can you share a memorable experience or a favorite moment you’ve had while working at the MACPA?
There are so many memorable experiences and favorite moments! They often involve our team getting together to celebrate, to learn, or to volunteer. We have gone bowling, played laser tag, held pot luck lunches, competed in Pi Day competitions and scavenger hunts. We have supported the community through “adopting” families for the holidays and at back-to-school season. We have fun together!
What do you like to do in your free time?
I love solving jigsaw puzzles, gardening, vacationing at the beach, and spending time with my family.
“I have been drawn to the people who make MACPA a family and who truly care about the well being and success of our members.”
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MARGARET DEROOSE Finance Manager
What are your primary responsibilities at the MACPA?
As the finance manager at the MACPA, my primary responsibilities include managing payroll, benefits administration, accounts payable, accounts receivable, and financial reporting. I work closely with our CFO to deliver timely and accurate financial information both internally and externally, ensuring transparency, compliance, and accountability.
How long have you been with the MACPA, and what drew you to work here?
I was initially referred to the MACPA by the CEO at the time, and I quickly realized what a special place it is. What keeps me here is the culture — I love the work / life balance, the flexibility, and our shared purpose and core values.
“One of the most gratifying parts of working with MACPA members is my work with the scholarship program, which supports our student members on their journey to becoming CPA”
What is the most rewarding part of working with MACPA members?
One of the most gratifying parts of working with MACPA members is my work with the scholarship program, which supports our student members on their journey to becoming CPAs. Meeting some of the award recipients at our events adds a personal and meaningful connection to this work.
Can you share a memorable experience or a favorite moment you’ve had while working at the MACPA?
Some of my favorite memories at the MACPA are from the times we volunteered as a group to give back to the community. A few standout moments include participating in the Salvation Army’s Elf Night, working at Great Kids Farm, and supporting Junior Achievement.
What do you like to do in your free time?
In my free time, I love spending time with my family, especially being a grandmother to my two beautiful granddaughters. I also enjoy boating, road trips, hiking, going to the beach, and exploring new places.
Thank You to Our 100% Membership Firms
100% Membership Firms are those which ensure their staff has the latest and best access to professional community and continuing education.
While paying your staff’s membership dues is a nice employee perk, being a 100% Membership Organization shows your commitment to the CPA profession and your staff’s continuing success. Plus 100% Membership Organizations are afforded exclusive benefits from MACPA.
Albright Crumbacker Moul & Itell
Askey, Askey and Associates, CPA, LLC
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BDO
Benedict & Slack CPA’s
Berger, Nyborg & Cannon, P.A.
Berlin, Ramos & Company, P.A.
Berman, Goldman & Ribakow, LLP
Betz, Goldman, Clearfield, Kramer, & Ocampo, LLP
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CG Accounting Group, LLC
Chambers & Nier, PC.
CliftonLarsonAllen LLP - Baltimore
Cohen & Company - Baltimore
CohnReznick - Baltimore
CohnReznick - Bethesda
Crumback & Associates, LLC
Dembo-Jones
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Dorman CPAs & Business Consultants
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KBST&M
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Kest, Forte & Rottenberg, P.A.
Key & Associates
King, King & Associates, PA
Klausner Bendler + Associates, PC
KPMG - Maryland
Kullman CPA, LLC
Lanigan, Ryan, Malcolm & Doyle, P.C.
Lebson & Associates, PA, CPA’s
Leonard J. Miller & Assoc., Chtd.
Lindsey & Associates, LLC
Linton Shafer Warfield & Garrett P.A
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MKS&H CPAS and Business Consultants
Mister, Burton and Associates, LLC
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Murray, Wamsley & Schrader, LLC
Myers & Stauffer, LC
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Penan & Scott, P.C.
Polan and Hollis, LLC
PricewaterhouseCoopers, LLP
Radcliffe Corporate Services, Inc.
RLH CPA’s & Business Advisors LLC
RS&F LLC
SC&H Group - Sparks
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Smith Elliott Kearns & Company, LLC
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Squire Lemkin + Co, LLP
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TMDG, LLC
Tonneson + co - Columbia
Turnbull, Hoover & Kahl, PA
TRS CPA Group PA
UHY LLP - Columbia
Varanko & Black CPA’s
Weil, Akman, Baylin & Coleman, P.A.
Weyrich, Cronin & Sorra, Chtd.
YHB CPAs & Consultants
Thank you to our Maryland CPA firms that support our profession with 100% membership.
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MEMBER & FIRM NOTES
Eight professionals in the Baltimore offices of CliftonLarsonAllen LLP have earned career advancements, effective July 1. They are:
Lauren Bradford, director, State and Local Government
Will Drozdoski, director, State and Local Government
Kyle Bennett, CPA, has been promoted from tax associate to tax senior associate in the Frederick, Md., office of Brown Plus.
Collins Lethbridge, CPA, has been promoted from tax supervisor to tax manager in the Westminster, Md., office of Brown Plus.
Nicholas Chapman has been promoted to supervisor in the Hagerstown office of SEK, CPAs & Advisors.
Kayla Golden, CPA, has been promoted to supervisor in the Hagerstown office of SEK, CPAs & Advisors.
Leading accounting and advisory firm Brown Plus has been named one of the 2024 Best Companies to Work for in Maryland by The Daily Record . The award identifies, recognizes and honors the best places of employment in the state. It is a research-driven program from Best Companies Group that examines a company’s practices, programs and benefits and surveys employees for their perspectives.
SEK, CPAs & Advisors has received the United Way of Washington County, Maryland’s annual FIRE Award, presented for “distinguished achievements in the finance, insurance and real estate (FIRE) sectors.” This traveling award is presented annually to a company that demonstrates
Cody Powell, senior associate, VR Business Risk Services
Moiz Sadiq, senior associate, Construction
Nicholas Salatti, senior associate, Tax Center of Excellence
Logan Wilson, senior associate, State and Local Government
Spencer Hood has been promoted to senior associate in the Hagerstown office of SEK, CPAs & Advisors.
Reema Patel, CPA, CFP, has been named a partner and Director, D-PATH, at Councilor, Buchanan & Mitchell.
Steve Snee, CPA, has been named a partner at Councilor, Buchanan & Mitchell.
“Living United” through volunteerism and community involvement in Washington County, Md. SEK was recognized for supporting countless organizations through volunteer work, board service, financial contributions, and participation in various community events.
SEK, CPAs & Advisors has won ClearlyRated’s 2024 Best of Accounting® Award. This is the fourth consecutive year SEK has won the award. Recipients have proven to be industry leaders in service quality based entirely on ratings from their clients. SEK, CPAs & Advisors received satisfaction scores of 9 or 10 out of 10 from 92.1% of their clients, significantly higher than the accounting industry average of 56% in 2023.
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