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Roger Harris: Well. Hello everyone. It's time for another Federal Tax Update podcast. This is Roger Harris and back by popular demand is Andy Schwab off a sabbatical. Annie, how was your sabbatical?

Annie Schwab: It was great. I did a lot of house projects that I had been putting off, but I also took a week vacation with my kiddos and [00:00:30] we did all the summer things, you know, water parks and all those types of things. It was great, but it's nice to be back and back to the podcast. So, um, what do we have going on today? Roger?

Roger Harris: Well, we debated to just let you spend the next 50 minutes telling everybody what you did for the last two weeks. But we, but we thought we would we're going to do something a little different here. We I'm making a presentation at the National Association of Tax Practitioners Convention, and I guess a couple of weeks now. And The [00:01:00] presentation started off with one kind of goal in mind, and then it kind of morphed into something else. So what we're going to do is kind of give you a preview of it. And by the way, if any of you are attending that come by and see us as well as the IRS tax forums, we'll have a presence at all of those. So hopefully if you're attending any of those conferences, you'll come by and say hello. But the concept of this originally was how to take these many tax changes and court changes and new guidance and all the things that, you know, I think [00:01:30] we look at initially as just pains because we have to go learn something and do something different. How to turn it into a revenue stream, how to, how to monetize it. And it's kind of morphed as I have talked to Annie about it. And as I've prepared it into something a little bit different that we'll kind of bleed into as we go through it.

Roger Harris: But we're going to, we're going to go through some of the things that have happened to us in the industry in the last few years and talk about how they could have [00:02:00] been income producers and client enhancements and a lot of different things. And then we'll talk about what that means going forward. So I want before we get into the details, let me say one thing. Andy and I are experience is obviously with certain softwares and certain products that we've used. So we're going to be referencing products and things, but we're not endorsing them. We're not saying that they're the only one that can do it, but you need to make sure that whatever products you have have the [00:02:30] same functionality. So again, a lot of our experiences are going to be inside a pageant because this is where we dealt with these things. But but we're not here endorsing any special product. But so I think, Andy, maybe kind of start by talking about because the one thing that's different, you know, when you talk about client knowledge, about tax changes and things like that, you know, there used to be wholly dependent on us. But now there's TikTok, there's [00:03:00] Facebook, there's all the socials. I mean, they're getting information from everywhere and they don't know what's right and what's wrong.

Annie Schwab: And, and that's a good point. A lot of what they're getting is incorrect. And that even makes our job more difficult trying to get the real message out. Plus, you know, avoid having a client fall down a trap of thinking that they can do something or implementing something that that's incorrect. And you're right, we've got some really awesome job security these [00:03:30] days with all the changes, all the new tax legislation. Um, but, but it does present an opportunity. It can be frustrating at times, you know, trying to navigate a new piece of legislation maybe that hasn't had a lot of guidance issued yet. But if you think about the opportunity that it presents, that's really how, how our I feel like that's kind of how like our industry is going. It's it's reacting to something and [00:04:00] making it a revenue generating opportunity.

Roger Harris: So yeah, and again, all these different sources of information mean that, you know, again, we could almost take our time, figure out how and when to communicate and what to tell people. And, but now that you're finding more and more people or at least exposed to it at some level, again, sometimes it's good information, sometimes it's bad, particularly if the bad guys jump in to whatever the issue is and start trying to make [00:04:30] more money off of it. We talk about IRC, as we always do, and you'll hear that. So, um, so it starts with the idea that clients, um, are exposed to information more often than they used to be. But the other thing, Andy, and we've got some surveys here, I'll let you comment on what do clients say they want from us? Uh, it's not just preparing tax returns.

Annie Schwab: No. I mean, obviously you need to stay compliant. You know, prepare [00:05:00] tax returns, meet filing obligations. But they want a relationship with you that allows you to help them with their tax planning. Um, more advice, um, more hands on, um, you know, entering data and generating a return that they sign, um, is not, is not really what they want anymore. They want more proactive advice, um, saving opportunities, um, advisory, [00:05:30] you know, planning opportunities. Um, and I've, I've seen that in the past couple of years really increase. Um, and I think that's because we have the ability and the capability of doing more than just crunching numbers and printing out financials and, you know, having them file a tax return once a year.

Roger Harris: Yeah. And what's interesting is, um. Most everything that we do in terms of a product is, is about [00:06:00] some past time frame. It can be last year, if it's a tax return, it can be last month or last quarter if they're financial statements. And yet clients always talk about wanting to look forward and look ahead, uh, which is where planning opportunities come in. It's interesting the reason what they say, what they want and the reason they say they leave and change. Accountants really come back to the, the value of the communication they have with whoever their professional is. It's, uh, I think maybe the product themselves [00:06:30] is I don't want to say it's secondary, it's important, but they really want to know that the person they're dealing with is on top of things and communicate to them. And I think that's what we have to respond to.

Annie Schwab: Absolutely. And they want to know firsthand from you. They value your opinion. They don't want to hear it on social media. They want to hear it first from you with details and accuracy and and there's different ways of communicating. I mean, you can put stuff out on your website, you can send email blasts, you can, you know, send [00:07:00] an article to them. You know, it can be, you could do a record yourself explaining something and have them have access to that. So it doesn't when you think client communication, it doesn't have to be sitting on the phone talking one by one to, you know, to the clients. But I do think that timely and accurate client communication is where the relationship builds and becomes more secure.

Roger Harris: Yeah, we, we need to prioritize that more than we [00:07:30] have historically because that's what the clients say they want from us. And yet, I think, I think I've already said this, but, you know, historically when we would get tax changes, we almost looked at it like it was interrupting our normal course of business and we just had to learn it so we knew how to prepare a tax return properly at the end of the year, and most changes historically were tax related. They were more into the year calculations, though the planning for [00:08:00] them or the changes that need to be made obviously happened in real time. They couldn't wait until, uh, tax season in all instances. So, um, I think, and we're going to actually talk a little bit about, uh, the future as it relates to AI, which is going to, I think, which is kind of where I thought this presentation when I was originally agreed to do it and when I finished planning for it changed because I think, and I'll tease it this way, and then we'll jump into some examples [00:08:30] of as we get to AI and the product production is going to be more systematized and automated and things like that. It's going to be these types of discussions and these types of, uh, relationships that are going to allow us to maintain the value that, I think we have with our clients, but it's not guaranteed to be permanent.

Annie Schwab: Yeah, I definitely understand where you're coming from. And I, and I think with [00:09:00] AI, there comes some responsibility as a tax practitioner. There are going to be AI tools out there. But selecting the right one and, and doing your due diligence with its output is, is a reality that we're going to have to address. Yeah. It's not a replacement of, you know, knowledge of human, you know, you have to apply what you're getting from AI and you need to be [00:09:30] knowledgeable about what could be misinterpreted or what or what these AI, where this information flows out into the universe. Um, there's definitely some due diligence. There's definitely some security concerns, um, accuracy concerns and all of that. And I don't, it's not going anywhere. So we need to adjust accordingly and make sure that we're dealing with all these eyes appropriately.

Roger Harris: Right. And, and again, we'll, [00:10:00] we'll circle back to that as we get to the end. But we want to go through a couple of examples. And of course, if, if you've listened to this podcast long enough, we're going to find some way to get IRC in, in all in any way possible. And I think it's a good place to look back. I want to tell you kind of what we did through that. I want you to look at how you dealt with it with your clients, how the industry has dealt with it. And I think the biggest thing I'm going to kind of end, I'll kind of go to the end. Well, it's not over yet. I think we just saw some stats today.

Annie Schwab: Yeah. [00:10:30] They're still pending claims and appeals and all kinds of stuff.

Roger Harris: Yeah. So I mean, it, it may never end. And I think part of that was because I think a lot of us and you got to remember we're back in a pandemic. We go back to the pandemic when all this happened. P p loans, IRC. All of that started coming at us in the middle of what was a tax season or an extended tax season, as it turned out to be, and a lot of us continued to focus on getting the tax work done and didn't focus [00:11:00] on the IRC and the p s like maybe we should have. And it created a void where a lot of these mills popped up and was going to the small businesses with, let's say, maybe not all the information that they needed or not, you know, and then we ended up getting caught in the process anyhow, because they would come to us and they had gotten a claim, and maybe we didn't know if they could get in a claim or whatever the case may be. [00:11:30] But let's go back and look, because again, we're going to share kind of how we handle this. Uh, just to point out again, some, some points and some information about how this needs to work going forward. What kind of tools do you need? What kind of approach should you take from? How do you learn it? How do you implement it and all that sort of thing. So we're going to look at IRC to start with. So um, any quickly, I mean when something like an IRC or we'll get to the web in [00:12:00] a minute, you know, what are the kind of resources that firms need to have access to, to be in a position to come up with a plan on how to turn changes into money.

Annie Schwab: Right. And you are exactly right. It was in the middle of tax season. It was a massive, ever changing piece of legislation. It was almost daily. I mean, I remember daily we would wake up and be like, what happened overnight? There's another twist, another change, something added, another [00:12:30] amendment or FAQs released, or did you see this article or you know, all of that? It was just so fast that it, it did take a complete mindset change to say, okay, this Yes. We need to get tax returns done. Yes. People want their their refunds. Yes. We want to continue our revenue generating through tax preparation. This is this is our busy season. But then all of a sudden it was this wait a minute. The best way to help my my clients, [00:13:00] my small businesses is to address this, you know, PGP or the SBA loans or what, all this stuff that was coming out because that's what's going to keep them afloat. You know, if I miss this opportunity to bring to my to my clients the ability to keep their doors open, um, then, then really you're doing a disservice. And that was such a mindset change for, for our industry. Um, you know, being proactive and saying, okay, our [00:13:30] priorities have, have changed. Um, it's okay to put some returns on extension. It's not okay to put ERC on the, we'll handle this later after April 15th, or we'll figure, we'll figure all this out once busy season's over, and I can see how easy that would be.

Annie Schwab: Because it was complex. It took time. You had to stop what you were doing and go pay attention to every detail coming out, sifting through, [00:14:00] like you said, the the incorrect information they were I mean, there were articles in social media. I mean, it made it sound like anybody in their grandma could just get ERC money and without proof of calculations or ways to do this. And you're right, the mills were right there waiting for, for, you know, tax practitioners, attorneys, whatever, to turn their back to this because they were swooping in and promising, um, you know, huge refunds, whether it was legit or not. So it [00:14:30] was a, it was rough. And when it started, you thought, oh, okay, we can this is, this is going to be, you know, a, a month of learning something new, uh, put something on the back burner for a moment type thing, but it was evolving. I mean, it went on and on and on and the legislative changes. And I mean, it was we had spreadsheets and checklists and webinars and client letters and all kinds of. I mean, it was every day you were updating [00:15:00] or, you know, adding, uh, redacting or changing or, you know, it was intense. It was very, very intense.

Roger Harris: And it may not be something like IRC coming, but something else is like that. And again, you know, we're going to, we'll talk about the quantum case, we'll talk about the OBB. So the first thing is like, where are you getting your information? You know, in addition to where do the clients get theirs? Where are you getting yours? You can't wait to go attend a seminar in November when something is happening during the year. So [00:15:30] first of all, look inside your firm and talk about how do you get information? How do you stay current when things are changing fast? Because again, as your clients are hearing things on the news, they're going to maybe come to you. So if you don't have a good research tool, I mean, we use a TR product called checkpoint edge, you know, and so it publishes daily updates. It furnishes things like client letters, which are helpful when you get into something.

Annie Schwab: So flowcharts, worksheets. [00:16:00]

Roger Harris: Checklists.

Annie Schwab: All those kinds of things.

Roger Harris: So you have to have the tools internally to get the information and then take that information. And we talked about client letters communicate, you know, you can communicate on a website, you can communicate by an email, you can by a letter. It's helpful if someone like a, again, I'm not endorsing anything. I'm just using what we have. Like checkpoint edge is good at giving you client letters that you can basically [00:16:30] email to people, mail to people, put on your website, they can be modified. So I think one of the things that we have to all look at ourselves and AI is of course going to be coming soon, right?

Annie Schwab: Yeah. During Covid, you know, it was more of the TikToks and the social media type stuff. It wasn't as much AI focused. Um, but clearly that's going to take a play, a big role going forward with any of the types of things like IRC.

Roger Harris: All right. So as any changes [00:17:00] or any opportunities come, the first thing you've got to have is the internal resources to be aware of the changes, to help you understand and communicate the changes. And then it's, well, how do you communicate it? You know, how do you use your website? How do you do? What do you do? Uh, you know, I think particularly the other mindset that I think you have to change is if there's something like an IRC and we're using it as an example, obviously it's not something currently that you can take advantage of if [00:17:30] your clients need information. So do people who want to be your clients.

Annie Schwab: Absolutely.

Roger Harris: How do you communicate to the Non-client that you are the quote unquote expert in this field, and you're there to help them because it creates revenue opportunities internally and externally.

Annie Schwab: Yep. And I think that's a really good point because when A, when all of this information came out, it was like, who, which [00:18:00] of my, my clients, you know, how do I sort through my client list and let them know that they could, you know, be in an industry or qualify for these ERC funds. And then, you know, so are you data mining your clients or you, did you, do you have somebody in your office that's, you know, searching for who, which one of your small businesses are in, let's say, restaurants? I mean, they took a big hit or retail things that that would, um, identify them as a potential person for this. But as you start going [00:18:30] through that, there's lots of firms out there that completely ignored it. And now they have clients who are are wanting this information. And so it's an opportunity for you to build your client base. Um, you know, show them what you're doing, get in new clients and certainly generate revenue associated with this. Um, I mean, there's a value added to being with a tax practitioner who is aware of what's going on with ERC and knows what they're talking about and will [00:19:00] bring you the opportunities for tax savings or refunds or those kinds of things. Um, so that's a very good point there. You were marketing to the outside and you were also providing opportunities for your existing clients.

Roger Harris: And I think most everybody has a website, but how often is that website updated? How often is it? Do you understand how websites work? And I think a lot of us have a website, primarily we what [00:19:30] its primary function is in reality is, is it's a way to find our phone number, find our address. It's to do things like that. But it can also be a very valuable, valuable tool in something like this where as people, because think about how we react when something impacts us, we usually go to the our computer and go online and start searching for a plumber. If I have a leaky pipe or whatever the case may be, is your website equipped to to maximize [00:20:00] its search engine optimization? I think that's the most technical term I know about websites. So that, you know, you come up is the information relevant to what the people are looking for? Because they're going to be looking for someone to help us, and we don't have a current relationship with them. So they're looking to figure out who do I contact. So websites, you know, they, you don't just put one up one day and forget about it.

Roger Harris: You know, it needs to be updated. So again, [00:20:30] having access to the information and keeping that website up is a great way to communicate to the outside world and changing it up. Don't just stick something up there. Hey, I do IRC. Call me kind of thing, you know, put a little thought into it. If you should have a good partner, whoever helped you develop your website. If not, we could do a whole show on websites, but you find out when. I think the first mistake I saw is and I'll you comment, see if I'm right. I think the first mistake [00:21:00] we made with IRC is we delayed dealing with it. We kept doing tax returns when we got around to it, we only got around to it for existing clients and in many instances, we never saw it as an opportunity to grow our firm by getting new clients. And those, I think, are the three. What I think were the three main mistakes that we made with IRC, which you can make, whether it's IRC or something else. Yeah, you can make the same mistakes.

Annie Schwab: And you said clear communication. You know, we, we polled, you know, [00:21:30] several of our offices and their clients are saying, you know, client communication turns in to retention. And I think that's very important. But I think it's also the best way to get new clients is by referral. And so we've had many studies done on refer a friend, you know, promoting refer a friend or especially during Covid and IRC where, you know, a lot of it is like, okay, well, what are you doing? What are you doing? How are you addressing [00:22:00] this? Are you closing your doors? Are you keeping your doors open? Are you hiring or firing or changing how you deliver a service to, you know, for the pandemic? And I think there was a lot of, hey, my friend down the street or this restaurant owner that I, you know, my favorite restaurant, he contacted me and wanted to know, you know, where did you hear about this? Who are you talking to? How are you getting, you know, information about this? Who's filing this stuff for you? And I think that was very important for, for our clients. Um, you know, if [00:22:30] Your referrals need to be a part of your practice, whether it's refer a friend, get a discount, um, you know, ask for feedback, ask for, um, client, you know, go on to all these different websites and do a, do a like give an evaluation of their experience. I think all of those things are really important.

Roger Harris: You know, now again, every firm is different. We recognize some very strong financial benefits by jumping [00:23:00] on IRC early. Um, which is always good. It's always great to get paid, you know, extra. But one of the other things that I think we've learned maybe more recently is we bypassed a lot of the problems that other people are facing because we did prioritize it. We did do it early. We got on to it quickly, which made our clients happy. And therefore, our clients did not go to Mills. They did not have to wait months and years to get [00:23:30] their money because we were able to get into the game, if you will, before the the rush hit.

Annie Schwab: The crazy before the craziness and everything stopped moving. I mean, there was a period of time where it was just just stop. No processing, no accepting. Erc is, you know, on hold. And, and by that time, a lot of our you're right, a lot of our clients had already received their money, um, and already got through the, the process before.

Roger Harris: Which is what it was [00:24:00] intended for. I mean, people were waiting for ERC money now when it was originally, and this is probably more opinion than anything is that this money isn't going to help them survive the pandemic. You know, uh, they've either already survived it or didn't. So, uh, it's almost just like free money right now. So yeah, in addition to getting ahead of the curve and doing the things the right way, you did it when the clients needed the money the most needed, whatever the break was the most. And. And [00:24:30] I think that, again, we have to be cognizant of what our clients want from us and we deliver it and not jumping on an opportunity at best to communicate it. And then that will we'll get to Kwong, but that may be all we can do right now is communicate it. But the the idea that we got on it first, jumped on it early. The people that were eligible got the money. The people that weren't eligible knew they weren't eligible. And when the mills came, they at least have been told [00:25:00] you're not eligible. Here's why. And as persistent as the mills were, they would usually continue to call and say, well, this this company is telling me, you told me I'm not eligible. They're telling me I am and this and that. But at least they knew that they had heard from us. They had something that they knew that this doesn't sound right because Annie told me I wasn't eligible. And this company is telling me I am. So before they signed up with the company, think about how that would a transaction would have happened or that arrangement, had they not [00:25:30] heard from Annie, they would have just said, okay, I'll do the money. Let's go. Yeah, yeah. And then you would have got found out about it when they came to get their taxes done and you realized they got money they weren't entitled to. So now you've got the bigger problem and you didn't get any of the benefit.

Annie Schwab: Mhm. Yeah.

Annie Schwab: And it's still going. It's still going.

Roger Harris: Yes. It may never end. But um.

Annie Schwab: And that was a result of the pandemic. It was the, the goal, the mission, the idea behind it was, was admirable. I mean, people needed money. We needed cash flow. [00:26:00] Um, that, you know, that time was chaotic enough as it is. But you look at other recent legislation too, like, you know, the 0BBBA that, you know, that was not part of some sort of pandemic, some, um, you know, businesses surviving or dying. But it is enormous piece of legislation that had a lot of new New pieces to it that needed interpreting, that [00:26:30] needed reviewing and presenting and explaining to clients and adapting to. You know, data collection. And what do you now need the clients to provide to you? It was like over 900 pages of, of legislation. It was massive. And yes, it did have very specific tax major tax impacts, but it did. It had spending and defense and energy and health care. I mean, it was it was large, but man, social media took that and ran. I [00:27:00] mean, how many times did you hear I never have to pay tax on tips or Social Security is tax free now or, you know, I mean, the, the misinterpretation um, was, was pretty, pretty fierce.

Roger Harris: Yeah. And a lot of it came out of the people, the politicians.

Roger Harris: But you know.

Roger Harris: Not just but talk. This is probably the only be a is maybe a better example of where data mining could be really valuable. So any talk about again, our product is ultra taxed, not just so you know, but that's not again, I'm not selling ultra tax here, [00:27:30] but talk about how data mining and the importance of that. Because sometimes when we pick software, we just pick the cheapest one and we fail to look at other capabilities that could help in situations like this change like this wasn't ERC, they weren't handing out millions of money dollars. And, you know, a lot of people's excuse was, well, I don't do payroll. So I didn't have their payroll records. I don't do business. They didn't have that. But if this impacted everybody. But talk about and if you need to be be specific in ultra tax, where data mining [00:28:00] and something like this legislation becomes really critical for targeted, uh, outreach.

Annie Schwab: Right? So, so most professional softwares have some sort of data mining is what we call it a way to put in criteria. I'm looking for people with children who may qualify for Trump accounts, the age range there. I'm looking for those who would benefit from, you know, the new Salt deductions or [00:28:30] seniors. You know, we had that, you know, Social Security, that benefit of who qualify for the additional six K, um, tips and overtime. I mean, that was a big one. It could be searching certain industries where they worked or certain, um, places on a W-2 or tax return where you would have previously reported tips. And so remember, remember a lot of these things were retroactive. So when the legislation passed, it wasn't like, okay, [00:29:00] going forward, these are the questions we need to ask. These are the things we need to discuss. It was okay, looking back to the beginning of the year and trying to figure out how to identify business clients or individual clients, um, about the benefits. And so for us, data mining was putting in specific criteria and saying go and having behind the scenes go identify specific clients who have [00:29:30] these specific characteristics and then generate a report. So you would get a list of clients with their contact information and their email address. And it made it very easy for you to reach out. You know, we, we understand that you have, you know, your have children this age or you, um, are in work in, in, in somebody in your household works in an industry that may benefit from no tax on tips or no tax on overtime or the seniors, you know, searching by date of birth.

Annie Schwab: Um, so [00:30:00] it, it made the process of identifying who much easier. But a lot of these softwares, like we said, you know, we have client letters, we have checklists, we have, you know, diagrams and visuals and all these things. So once you identify, then you use the other resources that you have, the other tools that you have to send the pertinent information to those particular people. And so it's more of a [00:30:30] two step process. And a lot of it, you can do the same in our software. You can do the same with states. So you know, if you're in a high property tax state real estate, real estate tax state, um, you know, you could identify those clients and get them the information necessary. Um, so we definitely provide, so we provided all kinds of examples for our office owners, um, ways to identify clients, ways to, um, once [00:31:00] identified ways to communicate with client letters or other charts and tools and checklists. Um, so it was very beneficial. And I will say it, you know, picking a software that has all these capabilities, it's not cheap. Same with the research products. I mean, these are investments that you're making. You know, the really good research tools out there. I mean, there are thousands of dollars. But do you if you use them and you are and you reap the benefits, then it then it's worth it. So something [00:31:30] to think about as you renew all your softwares and technology pieces and tech stack, you know, be sure that you're getting what you need from it, not just picking the cheapest one.

Roger Harris: Yeah. Because I think, you know, a lot of times when we hear people, you know, say, well, I don't do this or I don't do that, it's because I don't have time. And yet we can leverage what technology can do. I mean, you just talked there. I mean, between the data mining that a good piece of tax software can do and the communication tools [00:32:00] that a good research product can produce, you know, you can marry the two software benefits or product benefits. And it's really not going to take you a lot of time to at least inform your clients of a change now. Out there wasn't again an OBB. There wasn't as much opportunity to sell upsell a product to a client. You know, of like doing an IRC claim because this was going to [00:32:30] be part of their tax return tax preparation.

Annie Schwab: Yeah, it wasn't an additional service.

Roger Harris: But it was a great way to help get new clients. On the other side, you know, is your tax preparer telling you about this? How does the changes impact your withholding or should they withholding or how do you manage the expectations? I mean, I'm sure we all went into restaurants and heard waiters and waitresses expecting their paychecks to immediately start going up because they all they were told there was no tax on tips immediately. Well, that's again, wasn't [00:33:00] 100% true. So whereas IRC presented a great opportunity to generate additional revenue from existing clients immediately, OBB should have done two things. It should have improved your relationship with your current clients by communicating to them the real facts, not what they were hearing necessarily on TV or YouTube or whatever. And it did obviously lead to increased tax preparation fees at the end of the year, but it didn't generate [00:33:30] anything, you know, immediately. But it did. It continues in each of these continues to open the opportunity for new customers who aren't getting this information but want it again. Survey after survey says what they want from us is better communication. And that's not just to say hi, happy birthday when it's your birthday.

Annie Schwab: Right?

Roger Harris: Want us to tell them when they're impacted by things and do it in real time and.

Annie Schwab: Yeah.

Roger Harris: To the extent that they need to change something or do something differently, they want us to help them do that or tell them what to [00:34:00] do. And some of that starts with decisions we make when we make decisions on what tax, where to use, what research product to use. You know, again, I keep talking and we'll get to a, you know, AI but good Lord, there's no telling how many different things out there now of AI products, which we'll get to in a minute. But this is where we don't realize that we're making decisions when we buy a tax software. We all want to keep the same software we have because we know how to use it.

Annie Schwab: And yeah, [00:34:30] that's okay. Change is hard.

Roger Harris: Yeah. But is it going to give us the tools in today's world to enhance our professionalism, our client relationships, and ultimately to make more money? Uh, I think if you, if you have to spend a little bit more money on your software or your research product, you should recover that if you use them properly in either new clients or existing clients fees.

Annie Schwab: Mhm.

Annie Schwab: Of course.

Roger Harris: So, you know.

Annie Schwab: Well let's do one more example [00:35:00] before we get to, to AI. Um, this one, um, by the time you're watching this podcast, uh, the, the deadline for taking advantage of this is, is quickly approaching. So, um, we have spent at least two previous podcasts on this topic, and I'm sure we've mentioned it more, but it's the Kwong versus United States case. Um, and this is a federal court ruling that affects the time frame of the pandemic. [00:35:30] So it essentially allows that through the pandemic. So January 20th of 2020 through, let's say May 11th of 2023, that was the federally declared disaster area. Um, and if penalties or interest was charged for late filing or late payment, um, or late failure to file information returns, all those types of things. It's not just income tax, it's payroll, it's, it's [00:36:00] IRC, it relates to IRC. If the business or individual was charged during that period, again, January 20th through July 10th, which is the 2023, that's sort of how the 60 day pandemic time frame went. You may be eligible for a refund, but the deadline to get that refund is July 10th. So here we are again. We have a court ruling, um, as it, you know, on, on the forefront, maybe it didn't, you know, hit your radar, you didn't get a [00:36:30] news thing, pop in your email. It wasn't let's, let's be honest, the IRS isn't excited about this. They don't want to have to refund all of these penalties and interest that they've collected. So I don't think.

Roger Harris: God knows how many. 843 that they've got to process.

Annie Schwab: Absolutely. So, and the IRS did appeal this, this court ruling, but as of where it stands right now is by July 10th, if you if you don't fill out this form. 843 which has to be done by paper, and it has to have a wet signature on it, and it has to have the calculation [00:37:00] of, hey, you charge me penalties and interest related to this return and this many dollars, and now I want it back. You miss the opportunity. And so yes, this is a could be a huge benefit. You know, if you have a client that paid lots in penalties and interest or late filing penalties or something, this could be, you know, a way to help your clients. The scary part is if you're not staying on top of the news and [00:37:30] you're not communicating this potential opportunity for your clients, then you could, after the deadline pass, you're going to lose. If your clients come to you. Like, why didn't you tell me? Why didn't you know? I think I could have done this. I could have, you know, it's, you're going to lose the respect. Um, you're, you need to this, this is building that relationship with your clients. And so it is important that, you know, you let them know of the opportunity before the opportunity disappears. [00:38:00]

Roger Harris: Yeah.

Roger Harris: And this is something court cases Quang presents potentially, uh, a great benefit for our clients and a great benefit for us financially. But court cases don't get near the publicity in the tax world. Certain cold cases do. But this one tax world, they don't. So you know your clients are not going to hear about it on the evening news or read about it on, you know, social media, like they will a change in tax legislation, but it can have the [00:38:30] same potential change and benefit there. So it can this goes back to why it's important to have good products or services that touch on not just tax legislation, but on court cases, because this this is, again, is a court case, I think that came out in November of last year.

Annie Schwab: Yeah, November.

Roger Harris: You know, there was no big lead up. There wasn't Congress debating something. And, you know, one side fought one side against it. And so you could pick your [00:39:00] TV station and find out if it was good or bad. Um, this is something that if you're not connected to the tax world in ways that this kind of thing comes across you. And, look, I'm going to admit to you, you have to read about ten things that don't apply to find the one that does. But the one that does can be so important to your clients and not all of them. This one doesn't apply to everybody.

Roger Harris: But.

Roger Harris: It has the potential to. I mean, it could.

Roger Harris: Um.

Annie Schwab: And [00:39:30] this is where data mining comes in. You know, who's filing late having access to their online accounts. You know, clients can go in their online accounts and pull transcripts that have the calculations needed to file the. 843 um, but you got to train your clients to set up the online accounts and access the transcripts.

Roger Harris: That's a great point. You know, we, you know, the online accounts as it relates to Quang specifically are invaluable. And, you know, a lot of us, I mean, you hear it all. Well, my client won't do it. They can't do it. It's too hard. It's this or [00:40:00] it's that. And you've heard us say this before, the IRS is putting a lot of their efforts into the improving of the individual online account. The business Online account and the Tax Pro online account. And that's where we're going to be doing a lot of our work in terms of, again, being able to very quickly go in and access a client. Transcript in the case of Quang would be terribly invaluable in terms of otherwise, how do I go back? Because, you know, again, a lot of these penalties and interest [00:40:30] aren't calculated when you prepare the return, they're done subsequent to the preparation of the return through a notice.

Annie Schwab: Notice, right.

Roger Harris: How many of your clients would have a notice they got two years ago, and they wrote a check to pay penalty and interest that they could find for you, but you could. So again, what you're seeing is all these pieces out there online accounts, good data sources, good tax software, all of these things are are what a real professional firm [00:41:00] is going to have to have. And even the taxpayer advocate. One of her big complaints about the case was that the IRS was leaving it up to the preparer to inform their clients about the quantum case. And that meant it was important. The quality of the prepare that the business owner or the individual had selected. And I think if that's going to be the message we want to be in the good side of that, that we were the professional, [00:41:30] we were the people who were made aware of something like this. We had the ability to learn about it, and then ultimately had the tools internally and externally necessary to, to fulfill our client's expectations of us.

Annie Schwab: Very good point. And, and it's, you know, we, we told all of our offices, like, we put together a client letter with some basic information that they could send to their clients. We talked about using, you know, the data mining tools associated with it. And, [00:42:00] and I, and a lot of our clients, I mean, some of our franchise owners were like, I don't I don't want to do this service, but I still think that the important part is that you're communicating the opportunity, even if you're not going to perform the service and saying, this is an opportunity out there, I can refer you to someone else. I can give you some basic information. I don't want you to miss this opportunity, even if it's not a service that you're going to take on. There are a lot of firms who, you know, chose not to do IRC, but referred it to [00:42:30] somebody else. I think it's still important that you are aware of it, understand it, and can communicate to the clients about it. Um, so this one short lived, um, I guess if you're listening to it now, there's not much you can do. I mean, there's still an opportunity to file, I guess, a protective claim.

Annie Schwab: Um, if you have a client or put something together again, it's got to be filed on paper, a wet signature, who knows where the snail mail goes or how, if and when the IRS will actually look at it. Obviously [00:43:00] the case is under appeals. So, you know, we don't know the outcome. And I agree with Aaron Collins. I, I wish the IRS would have provided clarity or at least addressed it in some way to help tax practitioners. That kind of left us in a bind on the on the flip side, I totally understand why one that's going to be super expensive to send all of this money back. And then the manpower of processing the, the 843 is going to, you know, take a toll. [00:43:30] And now, you know, we've got they're not issuing checks. So now what are they doing? How are they going to get this money back? Um, you know, it goes circles back to the whole, you know, you need a banking information and, and those kinds of things. And then it's another push for the online accounts. I mean, it's just this trickling of, of things that, you know, changes, so to say. So there's my spiel on that.

Roger Harris: Yeah.

Roger Harris: And as we head into, I think, you know, we're kind of beginning to start the season where a lot of us go to, um, seminars [00:44:00] and education and all that sort of stuff. But you may not hear a lot about quantum because I said, July 10th, it's over.

Annie Schwab: Come and gone.

Roger Harris: You know, how are you going to feel if you're sitting in a classroom learning about something that's over? And you can think of five clients that would have saved thousands of dollars and you didn't know about it, and so you didn't tell them. So maybe the best thing is they probably won't talk a lot about quantum because it's already passed. So you won't be embarrassed to learn about something.

Roger Harris: That you didn't know.

Roger Harris: But again, a couple of key points. Court cases can drive revenue [00:44:30] and can drive client communications just as much as law changes can and.

Roger Harris: You know, we can't just focus on one without having a focus on the other. We need to make sure that that we have the ability to learn when something like. And it's harder, I admit, you know, hearing and reading about every court case and understanding, some of them are so narrow, they don't really impact a wide variety of taxpayers. This potentially impacted, gosh, tens [00:45:00] of millions of taxpayers.

Annie Schwab: Absolutely. Because it was income tax. It was payroll tax. It was IRC, it was whatever. Failure to file or late filing of information returns. And it spanned over such a long period that you could have so many different, um, tax software searches, you know, 2019 stuff, uh, 2020 stuff, 21 stuff. So it was, it's intense.

Roger Harris: So as we sit here today, you still have a little over two weeks. I [00:45:30] don't know when this will air or when you'll listen to it, but, um, again, it's an example of where court cases present opportunities to grow your firm. And again, if nothing else, to set yourself apart, even if clients don't qualify for it, they appreciate the fact that you knew about it and that you reached out and told them because they might know somebody else to Annie's earlier point and say, hey, you should go see Annie. She told me about something that, you know, from what you've told me, you might benefit [00:46:00] from. And you know, how many times have we heard in our long years? Well, I got more than you, so I won't. You know where somebody said, gosh, I wish I had my tax preparer told me that. And, uh, sometimes you can be corrected, sometimes it can't. So before we jump into AI, I just want to walk through kind of the, the, the process that you have to go through. Obviously, first of all, you have to be aware of whatever we're talking about, whether it be a tax law or change [00:46:30] or a court case or something, then I think at a minimum, you owe everyone the opportunity to alert them about it.

Annie Schwab: Sure.

Roger Harris: And if that's as far as you want to go, you can stop there. I don't think that's good business practice, but you can stop at alerting. But at least your clients deserve to know about things that would impact them. At some point. You have to then prioritize based on timing, resources, you know how to what to do first or last, and.

Roger Harris: Who do we go after first? You've [00:47:00] got to put together a plan on how to implement whatever is necessary based on this program or law, or whatever the case may be. And you've got to be able to advertise it to get new clients. Now, you can again, some of these, and I'll shut up in a minute. Let any comment you can pick and choose. You can just alert if that's all you want to do. That's probably the minimum that you have to do. But you got to know about it first, and then you got to have a plan on how to alert people and communicate. You got to at least do that. You can [00:47:30] not advertise because you don't want new clients and focus just on existing clients. That's that's certainly your choice.

Annie Schwab: There's not one. Yeah, it's there's opportunity for whatever your bandwidth may have, your tools that you have. If you don't have the right communication tools, it's going to be really hard, more time consuming than the new, you know, but you're right, it's not a one shoe fits all. It's, it's definitely, it's dependent on the tools you have. What's your research? What's your tech software? How's your website? [00:48:00] What kind of, um, you know, are your clients tech savvy? Are they in their pro accounts or are they, you know, how are you getting information on your portals? And, and another part of that is, you know, another tool that we're going to, as we mentioned, you know, AI is coming into play and utilizing AI to generate charts, examples, client letters, communications stuff for your website deliverables, compare comparison type things. Um, it is going to be advantageous to those who invest [00:48:30] in, in an AI, um, piece of product.

Annie Schwab: So.

Roger Harris: Yeah. One thing AI is really good at right now is helping you draft. And I'm sure a lot of you are doing this draft communication, whether it be to an IRS notice or to a client or whatever, where you're not down in the weeds about an exact detail necessarily in some instances, but you're just trying to say, how do I say this the right way to, my client or my prospect or whatever the case may be. But so again, it [00:49:00] starts with knowing about it, then making sure you don't cherry pick who you tell and assume that, you know, none of my clients want to do that. We've had people in our company say, well, the coin case, they, they, I'll have to charge you more than it's worth. Well, that's not your decision. Your decision is to tell them about the coin case and what you will charge, and let them decide whether or not they think it's a good business [00:49:30] decision. But if you never tell them they never had the opportunity to make that decision, you made it for them. And that's not, I don't think, good business. So let me jump into a little speech I'm going to make about AI, and then I'll let any comment on it. You know, I think we all recognize that AI is here and it's not a fad. It's it's here to stay. We're all trying to figure out how is it going to fit in? How is it going to change our lives? How is it going to make it better or worse? [00:50:00] Is it going to get rid of all my employees or worse than not, get rid of me? Uh, um, and I, and I think that, you know, AI is like any new change.

Roger Harris: I mean, if you've been in this business long enough, you remember when we went from doing everything by hand to having computers and QuickBooks came, and that was a threat to all of us. And we seemed to have survived that. We will survive. Ai if we do it the proper way. Um, I'm not a tech guy. I'm way too old to be a tech guy, [00:50:30] but I can read and everything I read has kind of told me where AI is going to end, how our practice is going to end, how the story is going to end. There's a lot of questions and differences of opinion on how fast we'll get there and exactly how it'll work. But I think what and this is kind of hopefully going to wrap this session up and make sense to you. There seems to be a general consensus that sometime [00:51:00] in the near future, you define near the products that we deliver, the financial statements. The tax returns are basically going to be produced through an AI product that goes out and finds the data, does all the work, and our job is going to be reviewing those products. And we're not going to touch on it today. But the IRS just came out with some guidance on what our responsibilities are about not just taking whatever AI says for granted. We'll cover that in the future podcast.

Annie Schwab: Associated [00:51:30] with AI.

Roger Harris: Yeah. So we're going to be reviewing the AI product. So the product is going to not carry the same amount of weight in our firm as the advice we're going to have to find. How do we add value to a product that now AI is producing or generating and doing all the work, The guidance even says you were supposed to lower our fees if it saves us time. I believe that when I see it. But, you know, but anyhow, the it's [00:52:00] the consensus is we're going to have to rotate. You've heard about advisory for years. We've all said we've got to move to advisory. Got to move. Well, I was going to say you got to move to advisory because I've even read articles that said tax returns will be free soon because there'll be no value to them. The consumer can generate a tax return with an AI product as easy as you can. So where do we maintain our value with a customer? It's going to be doing the things that Andy and I just spent the last 45, 50 minutes talking about. It's being the proactive, [00:52:30] looking ahead, doing the things that AI is not currently able to do, and adding the value which the clients have said for years they wanted be proactive, communicate, do these sorts of things. So if you listen to this podcast, it's not just about looking back at IRC and Quang and these things and waiting for the next one. It's really the way your future firm needs to work. And again, I'm not smart enough [00:53:00] to know how quick that will happen or or things like that. But I really believe the kinds of things that we just talked about are the kind of things that we're going to have to do to stay relevant in the not too distant future. Now I'm speaking for me, and you tell me I'm a fool and an idiot, if you want to know.

Annie Schwab: I think if you ignore AI, you're doing yourself and and your clients a disservice. I think if you have AI do the work for you and [00:53:30] you stop there. I also think that you're doing a disservice. This is a tool. This is not a replacement of a human. This is a tool that can help you do something faster, um, or do tasks for you. But it needs to be verified. It needs you have to apply judgment. You have to apply context to it, using it for, you know, instead of looking up something in the past, using it for opportunities, forecasting, proactive planning, [00:54:00] budgeting, those types of things, pulling different topics and asking it to interpret well, which one of these are right and how do these things interact as you're doing tax research? I mean, these are all fantastic opportunities for you. But you know, you have to be stay in the know so that you know what is right or wrong, apply your knowledge, interpret the outcomes. Um, you know, what is the impact going to be? Uh, what, how do I price [00:54:30] for this? I mean, there's a lot of things that will benefit you from and choosing the right are a product is really important. There are AI products that are specific to our type of industry, our type of work. There are the free ones. They're the ones that share the data. You know, you got to look at all of the different aspects of it. But I think ignoring it is not the, the right path, but, but allowing it to do all of the work for you is [00:55:00] also not the right path. There's got to be a combination of applying your experience, your knowledge, what you know about the client to the particular opportunity there. Um, and I don't know about you, but just using AI to me doesn't sound like a reason to, uh, charge less for the value that you provide.

Roger Harris: No. So I mean, I, I mean, I get the, I get it at a high level that if it takes you ten minutes to do something and you take ten hours, you shouldn't charge the same price. But how [00:55:30] did you learn that it only took you ten minutes? How did and what how much knowledge did you have to have to make sure that that ten minute answer was correct? I mean.

Annie Schwab: Right, exactly.

Roger Harris: I get conceptually maybe that's just something they have to say, but I, I don't necessarily, you know, to me that's like if you know a heart surgeon can perform heart surgery quicker than another one because they're better. Which one do I want to go to? You know, I'm not going to choose. I just think the other great advantage that if we handle AI properly, [00:56:00] and again, I'm not an expert in a lot of it is we're going to be focusing on the things that are important to our clients anyhow. We're not going to be involved in the production of the product. We're going to be providing providing guidance on the result of the product and the.

Annie Schwab: Value added.

Roger Harris: Services value added. That's what we should want to do. That's what our clients want us to do. And if we're spending hours keying number in the tax software because we don't think anybody else can do that but us and we're working 80 [00:56:30] or 90. You should work less hours. To me, instead of saying charge less by working less hours, I would say take more time off and go spend time with your family because you're spending less hours. That's the benefit that it should do. And our clients will be supportive of it because even today, that's what they tell us they want us to do. They want us to follow this kind of stuff, give them advice, and if AI can help us do what they want, why don't we do it and be happy about it instead of afraid of it? But I'm still scared of it because I'm not a techie. But you know, I [00:57:00] know it can. I know how to basically use it, but I do know everything I've read says this is where the this is how the game, the story ends. So we can't fight it.

Roger Harris: We've gotta we've gotta get to it and we'll be happier. And I think our clients will be happier. And it's not going to put us out of business unless we don't follow. This sounds harsh, but I'm going to say it anyhow. If you don't listen to what we said on this podcast, and you continue to think that your value is in the doing of a tax return, [00:57:30] and that's it, then AI and a lot of other things are going to threaten your future. But if you if you become an advisor, if you become proactive, if you adopt the technology, spend a little bit more money on technology than you do today because it'll it'll actually pay for itself, uh, five fold if you use it properly and we'll all be better from it. But you're going to make that decision. That's kind of what that's where I ended up when I started this presentation. I thought it was all about making money. And then I realized, no, it's [00:58:00] not about, well, it is about making money. There's opportunities there, but it's more about staying relevant in today's world.

Annie Schwab: Yeah, absolutely. And I think that's the key takeaway from today's podcast. I know we covered a lot in detail, um, and, and focused a little bit on the past and a little bit on the future, but, um, well done. I enjoyed this one.

Roger Harris: Yeah. And as you are in the software renewal season for a lot of you pay more attention to some of the features that maybe you didn't think were worth paying for, you know, as you looked [00:58:30] at softwares, because you might, you might realize that they become maybe highly valuable to you.

Annie Schwab: Yep. All right.

Roger Harris: Well, it's good to have you back, Andy. It's nice to have someone I'm sure everybody was glad to hear somebody besides me talk, you know?

Annie Schwab: So yeah, this is great. This is a great topic. I hope everybody enjoyed it. Um, and of course, we will keep you posted on any new court cases, any new legislation, whatever's out there that's being brought to our attention, we will bring it to yours.

Roger Harris: We'll we'll talk about [00:59:00] it and depending again on when this airs and when you listen to it, I hope you either have or had a very happy 4th of July. And, um, yeah, it'll be tax season again before you know it and.

Annie Schwab: Enjoy the summer while it's here.

Roger Harris: Enjoy it while you can. Yes. Thank you Annie. Again, thank you for all our listeners and, uh, hope you enjoyed today's podcast. Hope you'll tell some other folks about it. And we'll be back in a couple of weeks with another federal tax update podcast. [00:59:30] See you Annie.