Experts in a variety of accounting disciplines presented guidance at a huge gathering of accountants at the AICPA ENGAGE 2018 conference in Las Vegas in June. Seven AICPA conferences joined forces to present attendees with a vast array of choices and important learning opportunities. Here are just a few of the topics that were covered during presentations at the conference.
PLANNING IDEAS FROM FORM 1040 (AND BEYOND)
By Ilana Polyak
Form 1040, U.S. Individual Income Tax Return, is one of the most important documents that CPAs who do tax work will encounter. In addition to providing a view of the current tax situation, the form also provides insights into planning opportunities, and CPAs may want to make a Form 1040 review one of the first steps in a new client engagement.
"The 1040 always tells us a lot about the personality of a client," said Alpa Patel, CPA, tax partner in the Atlanta office of Charlotte, N.C.-based DHG. "It gives a lot of insight into the individual and their preferences."
During interviews before ENGAGE, Patel and her colleague Tara Thomas, CPA, senior tax manager at DHG, highlighted some of the ways CPAs can use clients' tax filings to uncover planning strategies, including:
Stacking charitable contributions
When reviewing a tax return, pay special attention to any itemized deductions, especially those for charitable donations. Given the changes made by P.L. 115-97, known as the Tax Cuts and Jobs Act, clients will likely need to rethink their giving strategies.
The new standard deduction of $24,000 for married couples filing jointly, $18,000 for heads of household, and $12,000 for all other individuals means that many clients will no longer itemize deductions, Patel said.
That presents challenges for charitably minded clients, who may not be able to realize the same benefit for their gifts as before. Depending on the client's charitable goals, you might recommend a strategy known as stacking or bunching deductions, Patel said.
For example, instead of making five $10,000 donations in five consecutive years — which, when combined with other deductions, may not push the donor over the standard deduction threshold — clients can "stack" $50,000 worth of gifts into one year.
Making sure clients' investments are tax-efficient
Another reason to scour the tax return is to figure out whether the client's investments provide the best after-tax return. For example, if a client is projected to be in the 0% capital gains bracket, Patel and her clients look for opportunities to sell appreciated investments in order to maximize the bracket.
Additionally, some clients might benefit from municipal bonds. "You might get a lower return, but [once] you factor in the taxes, you'll get a higher after-tax return," Patel said.
Determining whether they have the right type of 401(k)
A tax return can also tell you whether a client has been investing in a traditional or a Roth 401(k). This is the first step in evaluating the optimal 401(k) strategy.
Retirement savers like the Roth version of the 401(k) because it allows them to invest after-tax money in exchange for tax-free growth and withdrawals. However, high earners need to weigh the desire for tax-free retirement income against their current tax liability. A traditional 401(k) would allow them to deduct substantial sums.
Reducing taxable retirement income
A Form 1040 also outlines the sources of income that are available for clients in retirement. In the years leading up to retirement, clients should plan to minimize taxable retirement income.
First, anyone with a nondeductible individual retirement account needs to keep track of its basis to avoid having 100% of the distribution becoming fully taxable in error.
"A portion of the distribution from the nondeductible IRA would be tax-free because they have basis," Patel noted. "This is often overlooked."
HOW TO RECRUIT THE BEST JOB CANDIDATES
By Drew Adamek
The accounting profession is changing, and that means the ways firms recruit and retain top-tier talent need to change, too. Recent graduates have much different expectations of work and career than a generation ago, and technology is changing the way that firms reach and develop relationships with potential new hires.
However, firms aren't just concerned with filling entry-level positions. There is a continuous need to hire and keep experienced CPAs at all levels. Finding a one-size-fits-all strategy for recruitment when the talent pool has diverse motivations and firms have varied needs is nearly impossible.
But firms can address this steady demand for high-quality, talented CPAs in a tight labor market by being insightful, authentic, and proactive, according to Sarah Dobek, the founder and president of Inovautus Consulting, a marketing firm that helps CPAs grow their business.
Speaking in an interview prior to ENGAGE, Dobek offered tips to firms looking to improve their recruitment and retention efforts.
Attracting the right candidates
The first step is getting the right candidates to apply for the opening, and reaching them requires understanding their job search motivations.
"In order to attract the right candidates, you have to speak to them about what they care about," said Dobek.
Millennial candidates in line for early-career positions are looking for flexibility in work time and location, a personalized career path, efficient use of technology within the firm, immediate learning opportunities, and brand authenticity, according to Dobek.
It is important that candidates see those qualities in a firm's online presence, in their brand reputation, and in interactions with the firm, she said. That means making an effort to reach candidates as soon as possible in ways different from what firms may have traditionally done.
Craft the right job description
A good job description can persuade the right candidate to apply for the job, and crafting that standout description will be easier once you understand your target audience, according to Dobek.
"When you write in the right context, it can attract the right person," she said. "When you start focusing on the type of individual that you need, you're going to start using language that that person would identify with."
Don't wait until you need to fill a position to start recruiting and then expect HR to do all of the work, Dobek cautioned. Building an effective network that you can tap before it is hiring time means starting early, taking a proactive approach, and including a wide range of the firm's stakeholders.
"It is not just the HR department's job to recruit for your firm," Dobek said. "Every partner has a role, every higher-level staff person should be involved in recruiting because every person has a network."
Take advantage of digital platforms such as LinkedIn, Facebook, and firm websites to build a brand network that draws an audience. Firm executives should be using their digital platforms, and their audiences, to promote the firm as an employment destination, according to Dobek.
ADD VALUE TO AUDITS WITH CLIENT-FOCUSED ANALYTICS
By Liz Farr, CPA
Accounting services are rapidly becoming commoditized, and when clients don't perceive a clear difference between service providers, they may choose the least expensive option. This is especially true for audit services, where clients — as well as auditors themselves — may see little difference between the work of competing firms.
One way to change that perception, according to Debra Thompson, CPA/CFF/CITP, principal at DK Thompson LLC in Minneapolis, is to add value to audits using technological tools that make it easier to provide analysis.
According to Thompson, auditors have an opportunity to change the perception of an audit as a commodity by adding value to what is perceived to be a homogenous service. Thanks to technological advances, auditors are in prime position to do that by providing management and stakeholders what they really want.
What does management want? In an interview before ENGAGE, Thompson cited a survey of financial executives around the globe performed by Financial Executives International (FEI), which was released in 2016. "The biggest thing that they want is facilitating analysis and decision-making," she said.
They also seek improvements in business analytics, higher-quality data, more accurate forecasting and planning, and ongoing monitoring of business performance. While this survey was specifically looking into the technology needs of financial executives, as Thompson pointed out, auditors are in the perfect position to provide these insights to clients.
Auditors already have access to a great deal of information about their clients' businesses. Thompson's work as a forensic accountant has taught her that "you learn by looking at people's information what's important to them." By "marrying" the information auditors already have to the desires of management for better business analytics, Thompson said auditors will be able to provide added value to their clients, which will differentiate their services from those of their competitors.
The first step is to find out what businesses want and what information is most useful to that business. "When you're doing analytics, you can do a whole bunch of things," Thompson said. "But just because you can doesn't mean you should. It may not be useful to your client."
Insights into what businesses really want can only be obtained by having in-depth conversations with management and stakeholders. By improving their listening and questioning skills, auditors can help those stakeholders zero in on their desired outcomes. Thompson said she sometimes asks clients directly, "What is your endgame? What do you want your outcome to be?"
For example, a client may want to open a new store. Auditors can help with calculations to determine a break-even point or mine the data to determine the common characteristics of their existing successful stores.
TIPS FOR ACCOUNTING AUTOMATION SUCCESS
By Lou Carlozo
Compliance has always ranked top of mind for accounting firms and remains a major concern today, but things are changing fast. Just as paper and pencil gave way to desktops and laptops — and now automation and machine learning — the profession stands ready to leap from a compliance emphasis to one of insight and strategy.
"We don't want disruptions to happen to us, but to consider ourselves disruption agents within our firms — to be the disruptor," said Arianna Campbell, an Augusta, Ga.-based consultant for Boomer Consulting. "It's a really exciting time in the profession with new potentials for automation and growth. If we continue to look at it that way, lots of opportunities will emerge."
Campbell and Marc Staut, a Boomer principal and consultant, spoke on the opportunities that automation creates for the accounting profession. In interviews conducted in advance of their session, the two outlined key steps accounting firms can take to succeed at automation transformation:
Develop the right mindset
For Staut, mindset is the key that opens the door to automation success. "If a firm decides to stick its head in the sand regarding the opportunities that [artificial intelligence, or AI] presents, it is going to miss out," he said. "If you have a fixed mindset that focuses on limitations, things that could go wrong, and areas of failure that could hold you back, that puts you in a place of fear."
Build a framework for your change
Automation is not automatic. "This is not change for change's sake," Campbell said. She stressed that a strategic approach works best, with key stakeholders within a firm getting on the same page. "We have to understand what we're currently doing and identify the opportunities to maximize value from the client's point of view. And that's when you start outlining and implementing your solutions."
Set the right goals
Firms and finance professionals get much more out of automation when they grasp what it's best suited to do. "AI is great at solving routine problems, but they need to be complex enough to gain value from having the systems solve it," Staut said. There are also opportunities "to integrate artificially intelligent systems into our work life and let them augment how we can do our jobs."
Focus on the human-AI sweet spot
In the rush to adopt automation and AI, firms must keep in mind that these new technologies, remarkable as they are, serve as new tools to complement timeless skills.
Computers can process data exceptionally fast and exceptionally well. But they still depend on careful professionals to feed them the right numbers. And no matter how much automation and AI come to the fore in 2018 — or the decades ahead — computers can never be taught sound judgment or professional skepticism. That's what accountants do best, and always will.
To comment on this article or to suggest an idea for another article, contact Ken Tysiac, a JofA editorial director, at Kenneth.Tysiac@aicpa-cima.com or 919-402-2112.
Articles from ENGAGE
- "Increase Your EQ and Shine in the Workplace," JofA, June 12, 2018
- "Focus on Clients, and Revenue Will Follow," JofA, June 12, 2018
- "Tips for New Managers," JofA, June 13, 2018
- "What Clients Need to Know About Social Security," JofA, June 13, 2018
- "Why and How to Create Great Content at Work," JofA, June 14, 2018
- "Getting Along With Different Personalities at Work," JofA, June 14, 2018
- "Make Attest Engagements More Profitable," JofA, June 14, 2018
- AICPA Guide to Audit Data Analytics (#ADATA17P, paperback; #ADATA17E, ebook; #ADATAO, online access)
- 1040 Tax Return Workshop (#746413, text; #GT-IITW, group pricing)
- Annual Update for Controllers (#732184, text; #GT-SKSB, group pricing)
- Charitable Planning (#166890, online access)
- Retirement Planning Certificate Program (#166400, online access; #66480, online and exam; #166470, exam only)
- Tax Staff Essentials, Level 1 — New Staff (#157634, online access; #GT-TSE.LEVEL1, group pricing)
For more information or to make a purchase, go to aicpastore.com or call the Institute at 888-777-7077.