IRS challenges emerge as top concern for firms

By Kevin Brewer

Challenges when working with the IRS has emerged as the top issue for firms with 10 or fewer professionals, according to the 2022 AICPA Private Companies Practice Section (PCPS) CPA Firm Top Issues Survey, which was released Tuesday at the AICPA & CIMA ENGAGE 2022 conference.

The IRS issue didn't resonate only with the smaller firms. It also ranked as the No. 2 concern for firms that employ 11–20 professionals and third among those that employ 21 or more professionals — which generally have more resources to deal with such challenges.

"It's not a surprise IRS issues are a top challenge for firms — the AICPA has advocated for a number of urgent changes to help the agency perform better," said Lisa Simpson, CPA, CGMA, vice president–Firm Services for the Association of International Certified Professional Accountants, representing AICPA & CIMA.

IRS service issues have been the subject of congressional hearings and reports by the Treasury Inspector General for Tax Administration. Examples of the service issues include the IRS's inability to meet timeliness standards for most taxpayers' cases, sending erroneous automated messages, failing to answer most phone calls, and failing to process a large backlog of tax returns.

The PCPS survey data illustrates the struggles faced by practitioners. Last year was the first time that working with the IRS was a choice for respondents.

2022-pcps-top-firm-issues-1-640

The survey, conducted from April 19 to May 23, was completed by 752 firms. The firms were given a list of issues and asked to rank each on a scale of one to five, with one indicating that an issue was of little-to-no concern and five indicating that it was of utmost importance.

The survey, which began in 1997, was conducted in consecutive years for the first time. It will return to its every-other-year schedule in 2024.

Staffing issues

The top issue in last year's survey was finding qualified staff, which remained the top concern for the two largest cohorts (11–20 and 21 or more professionals).

While finding qualified staff remains among the top three issues for all firms, except sole practitioners, retaining qualified staff cracked the top five for only the two largest groups. It was seventh among firms with 6–10 professionals and 13th among firms with 2–5 professionals.

Aside from IRS challenges, the two issues that ranked in the top 10 for all size categories were keeping up with COVID relief programs and seasonality/layering of deadlines.

"Looking at the collective survey list, we know firms are being asked to do more than ever before," Simpson said. "Firm leaders have a difficult balancing act right now in serving their clients well and making sure demands on staff aren't too burdensome."

Developing the next generation of firm leadership ranks among the top 10 in all size categories except sole practitioners. This is the second straight survey in which firms have shown they understand the need to prepare for succession to new leadership.

As in the previous two surveys, respondents were asked which issues they expect to affect them most over the next five years.

A few issues ranked in the top five across most or all groups.

Changes in the regulatory environment was first among sole practitioners, tied for first among firms with 11–20 professionals, and second among firms with 2–5 and 6–10 professionals. Staffing issues were first for firms with 2–5 and 21 or more professionals and tied for first among firms with 11–20 professionals.

Emerging technologies (data analytics, artificial intelligence, blockchain, etc.) was cited as a top-five variable that will have the most impact on their firm over the next five years among all cohorts, and managing a hybrid workforce is an issue among all groups, except sole practitioners.

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"In looking at what firms anticipate will have an impact in the coming years, it's clear that emerging technologies and changing client needs are top of mind," Simpson said. "Firms can evaluate how to use these technologies to automate, improve efficiency, and increase their ability to meet changing client needs."

The survey results were unveiled Tuesday afternoon in a special live episode of the AICPA Town Hall Series held at the ENGAGE conference in Las Vegas.

Top issues affecting firms

Sole practitioners

2022

  1. Challenges when working with the IRS
  2. Keeping up with changes and complexity of tax laws
  3. Keeping up with COVID relief programs, such as PPP, EIDL, ERC, etc.
  4. Seasonality/layering of deadlines
  5. Keeping up with changes in technology and managing associated costs

2021

  1. Keeping up with changes and complexity of tax laws
  2. Keeping up with COVID relief programs, such as PPP, EIDL, ERC, etc.
  3. Challenges when working with the IRS
  4. Seasonality/layering of deadlines
  5. Keeping up with changes in technology and managing associated costs

Firms with 2–5 professionals

2022

  1. Challenges when working with the IRS
  2. (tie) Keeping up with changes and complexity of tax laws
  1. (tie) Keeping up with COVID relief programs, such as PPP, EIDL, ERC, etc.
  1. Finding qualified staff
  2. Seasonality/layering of deadlines

2021

  1. Keeping up with COVID relief programs
  2. Keeping up with changes and complexity of tax laws
  3. Challenges when working with the IRS
  4. Seasonality/layering of deadlines
  5. Finding qualified staff

Firms with 6–10 professionals

2022

  1. Challenges when working with the IRS
  2. Finding qualified staff
  3. Keeping up with COVID relief programs, such as PPP, EIDL, ERC, etc.
  4. (tie) Developing the next generation of firm leadership
  1. (tie) Keeping up with changes and complexity of tax laws

2021

  1. Finding qualified staff
  2. Keeping up with changes and complexity of tax laws
  3. Keeping up with COVID relief programs
  4. Challenges when working with the IRS
  5. Developing the next generation of firm leadership

Firms with 11–20 professionals

2022

  1. Finding qualified staff
  2. Challenges when working with the IRS
  3. Developing the next generation of firm leadership
  4. Keeping up with changes and complexity of tax laws
  5. Retaining qualified staff

2021

  1. Finding qualified staff
  2. Developing the next generation of firm leadership
  3. Keeping up with COVID relief programs
  4. Keeping up with changes and complexity of tax laws
  5. (tie) Effective staff utilization and management
  1. (tie) Challenges when working with the IRS

Firms with 21+ professionals

2022

  1. Finding qualified staff
  2. Retaining qualified staff
  3. Challenges when working with the IRS
  4. (tie) Developing the next generation of firm leadership
  1. (tie) Staff compensation and rewards programs

2021

  1. Finding qualified staff
  2. Retaining qualified staff
  3. Keeping up with COVID relief programs
  4. Developing the next generation of firm leadership
  5. (tie) Effective staff utilization and management
  1. (tie) Managing work/life balance initiatives

Impact over the next five years

Sole practitioners

  1. Changes in regulatory environment
  2. Emerging technologies (e.g., data analytics, AI, blockchain, etc.)
  3. Capability to adapt to changing client needs
  4. Political instability (local, regional, global)
  5. Competition from other practices or professions

2–5 professionals

  1. Staffing (recruitment and/or retention)
  2. Changes in regulatory environment
  3. Capability to adapt to changing client needs
  4. Emerging technologies
  5. Managing a hybrid workforce (remote and in-person)

6–10 professionals

  1. Capability to adapt to changing client needs
  2. Changes in regulatory environment
  3. Emerging technologies
  4. Staffing
  5. Managing a hybrid workforce

11–20 professionals

  1. (tie) Changes in regulatory environment
  1. (tie) Staffing
  1. Capability to adapt to changing client needs
  1. Managing a hybrid workforce
  1. Emerging technologies

21+ professionals

  1. Staffing
  2. Emerging technologies
  3. Managing a hybrid workforce
  4. Changes in regulatory environment
  5. Capability to adapt to changing client needs

— To comment on this article or to suggest an idea for another article, contact Kevin Brewer at Kevin.Brewer@aicpa-cima.com.

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