Tax Reform and Technology Challenges
A Message from the President, December 2017
I recently had the opportunity to participate in a radio interview where I was asked how I thought the Tax Reform bill would affect accountants and tax preparers. As I write this letter, it’s not certain whether a Tax Reform bill will be passed that retroactively affects 2017 tax returns or will affect 2018 tax returns. My thoughts are that either way, if a Tax Reform bills passes late in 2017 or early 2018, it will likely affect this tax filing season even if none of the changes are retroactive. The reason I believe it will affect our 2017 season is that we will need to determine the changes for next year and clients will ask us how they will be individually affected by any Tax Reform legislation. Accordingly, we will likely spend additional time with clients evaluating their specific issues under the new law. You can count on NSA to keep you informed when a tax bill does pass and the relevant changes included in the new law.
Our members are the accountants on Main Street, not on Wall Street. As a “Main Street” practitioners, we have different needs and face unique challenges in comparison to larger firms. Challenges that include such things as finding competent staff at an affordable salary, advances in technology, clients that opt to do the work themselves, accounting standards designed for larger firms, and of course, new requirements from the IRS, just to name a few.
It’s amazing how much technology affects our industry. Having somewhat of a technical background myself, I continue to be amazed at the advances in technology especially in the last few years. I note that my NSA membership card shows that I became an active NSA member in the year 2000, apparently just after the Y2K scare was over and it was safe to use computers and other electronic devices.
Computers and devices keep getting smaller and faster. Devices talk to us, we can talk to them, and better yet, they seem to understand what we are trying to say. There is software and apps that type words for reports for you while you speak with amazing accuracy. Advanced algorithms used in search engines provide relevant information after only a few key strokes. The cloud is not only those puffy white balls of cotton high in the sky, but it’s this mystical place for computers and where data is stored. This magical thing of technology is all around us wherever we turn.
There is a new technical term in the tax and accounting industry that has been growing in popularity over the last year and that is Artificial Intelligence. Artificial intelligence, accordingly to the encyclopedia is the ability for a computer system to reason, determine meaning, generalize, and learn from past experiences. When artificial intelligence is paired with optical character recognition technology, we can have the ability to capture and analyze scanned or photographed paper documents such as invoices, receipts, bank and credit card statements, along with tax forms that can input data directly into our accounting and tax software. I think this is exciting news especially for small firms. After all, we, as small Main Street firms typically may not have the staff or resources needed to do extensive data entry to clients. Being able to scan client documents and have the content be understood and input into accounting software would certainly be helpful and a huge time saver. This concept now for accounting is very similar to the software that’s been around for several years that reads tax forms and inputs the information directly into a client’s tax return. However, it’s only recently that I’ve heard of this technology being utilized for accounting transactions. Technology has sure come along way and we will no doubt continue to see advances.
We are so reliant on computers and the internet that data security has become a huge concern in our industry. Our office computers possess a goldmine of data that identity thieves and hackers would love to have in order to steal client identities and/or file fraudulent tax returns. I think for a lot of us, computers and the internet are sort of like magic. We are amazed by these magic boxes and what they do; however, we really don’t understand how they work and therefore may not understand how to protect what’s on them.
Data security and identity theft are not necessarily new unless you’ve had your head stuck in the sand over the last few years. The Internal Revenue Service has been sending out warnings almost on a weekly basis over the last year that tax preparers are specifically being targeted by hackers and identity thieves. Unfortunately, I have heard a several reports where tax preparers have had to notify all of their clients that the firms computers had been hacked. Personally, I can’t imagine the impact and effect on my own firm if I had to tell clients that our systems had been breached and their data had been accessed by hackers. How would your firm be affected if you had to deliver this kinds of news? Accordingly, it is imperative that we all take action to develop better policies and procedures in our firms to keep data safe and secure. If you are not sure how protect your computer data, you may need to hire a computer professional, or possibly find a magician.
Identity theft has changed the way we do business from the simple things like password protecting clients to the more complex like using client portals and servers behind firewalls and a VPN, virtual private network. I’m sure it’s changed your processes as well. As technology continues to become more advanced, so do the threats we face. Because there are new threats all of the time, we all must continue to monitor our systems and stay up to date with security policies.
NSA has cyber liability insurance available through our insurance provider, Forrest T Jones. This would be a good addition to your cyber security plan. This way, if the unthinkable does happen, your business assets would be insured.
I wish you all a fruitful and a very prosperous tax filing season.
Brian L. Thompson
NSA President
