This tax season is being affected by several issues, including the Inflation Reduction Act and macroeconomic risks. Those and other factors are impacting accounting firms and their clients.
Stefanie Kane, the managing partner of PricewaterhouseCoopers’ Los Angeles office, told the Business Journal that the firm has provided its tax professionals with upskilling opportunities and development courses to keep up with clients’ needs during the hectic season.
“We understand that this is a busy time for our people, and we are providing support and encouragement by limiting distractions and focusing on each other’s well-being,” Kane wrote.
Tax accounting is just one of several services that PwC offers, and the firm boasts a deep bench of professionals in that area, but that has not stopped the PwC from strongly prioritizing its hiring power.
The firm’s Tax Acceleration Center acts as a natural extension for its U.S. teams and allows them to hire at a larger scale. In addition to the center, the firm operates a talent exchange that connects prospective employees with PwC opportunities.
Kane added that there is a greater focus on technology and data than ever before, with firms adopting more of a tech-first, tax-second approach to hiring.
“The ideal skill set we’re looking for is evolving. For example, Excel was previously the gold standard, but now executives want tax professionals who can use cloud-based technologies, data visualization tools and artificial intelligence,” Kane wrote. “All of this reflects the changes we’re seeing across businesses. It’s critical for companies to either innovate or fall behind, and that’s no different for corporate tax departments.”
KPMG, another large accounting firm with a strong presence in Los Angeles, is confident that it is well positioned for a busy but smooth season.
“Despite the pretty well-known and widespread tax and accounting talent shortage, we have numerous programs to attract talent to our firm and the profession,” said Adam Boyar, the firm’s Los Angeles Tax Business Unit partner-in-charge.
KPMG recently expanded its Master of Accounting with Data and Analytics program to more colleges and universities, including historically Black colleges and universities. The master’s program was launched in 2016 in collaboration with the Villanova School of Business and The Ohio State University Max M. Fisher College of Business. KPMG also recently announced a program with the University of Northern Iowa to support a hybrid learning program to help students with associate degrees further their education and eventually join the accounting profession.
The tax and accounting talent shortage Boyar referred to has worsened in recent years. Last year, a Bloomberg Tax analysis found that in 2021 the total number of employed auditors and accountants dropped 17% from its 2019 peak, which was nearly 2 million at the time.
KPMG Chief Executive Paul Knopp told Bloomberg Tax last year that his firm was not immune from the “great resignation” that materialized in early 2021.
In addition to employing hiring and recruiting tactics meant to curb talent shortages, accounting firms are also monitoring outward challenges and changes.
According to Kane, there are several matters that PwC is keeping track of that other tax professionals and clients should be aware of this season, including the challenge of managing employees, operations, and supply chains at a time when the United States and other countries are managing significant macroeconomic risks.
“Along with these challenges, business leaders should be prepared to engage with policymakers throughout the regulatory process,” Kane wrote. “Additionally, business leaders should proactively monitor geopolitical risks that may disrupt supply chains and operations while realizing opportunities to leverage new investment incentives offered by the United States and other countries.”
Such incentives were put at the forefront of this tax season with the Inflation Reduction Act, a 10-year plan that covers new and reinstated tax laws that will affect individuals and businesses via credits and deductions. Many of the changes to be implemented by the act put clean energy and health care at the forefront.
Brian Rose, office tax managing partner for Deloitte Los Angeles, said that businesses and firms need to stay on top of the changes brough on by the act.
“The Inflation Reduction Act has a number of tax-planning opportunities that if taxpayers or even service providers haven’t been keeping up with, they’re going to want to get caught up soon, because the risk there is you’re going to leave money on the table that you’re entitled to,” Rose said.
He added that there are several hundred pages of new credits and incentives included in the act, and accounting firms and taxpayers alike have been forced to quickly study them to ensure they are used to their full advantage.
For example, incentives for small businesses include a tax credit that covers 30% of the cost of switching to solar power. Small business building owners can also receive a tax credit of as much as $5 per square foot to support improvements that generate lower utility bills.
Boyar said that although the Inflation Reduction Act is a unique factor on the tax landscape this year, it has fewer provisions than did the 2017 Tax Cuts and Jobs Act. “So, with a bit less macro change to the tax code, we’re in a good place to meet our clients’ needs,” Boyar said.
Boyar and Kane both noted the act’s corporate alternative minimum tax as one of the most important new provisions that companies need to pay close attention to. It is likely that many more companies fall within its scope that might be anticipated, Boyar said.
According to the Internal Revenue Service, the tax imposes a 15% minimum tax on the adjusted financial statement income of large corporations. It generally applies to large corporations with average annual incomes exceeding $1 billion.
“As with most new regulations, questions still remain about how to apply the (tax). The U.S. Treasury tackled some of these questions in its December release of interim guidance, but a lot is still unknown,” Boyar said.
Corporate tax filings for this year are due on March 15. However, businesses affected by the recent wave of storms in California qualify for an extension to May 15.