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What Tax Pros Charge & the PE "Dumpster Fire" · The Accounting Podcast

• Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding! Blake Oliver: [00:00:04] A Kansas CPA, just got sentenced to four years in prison. David, for one of the most audacious fraud schemes in recent memory. He created a fake company called Middle Finger Ranch to steal over $400,000 from his own family members, who were his clients. Middle Finger ranch. David Leary: [00:00:26] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:32] Hello. You're listening to the Accounting Podcast, your weekly roundup of news in the profession. I'm Blake Oliver. David Leary: [00:00:39] And I'm David Leary Blake, I see you. We're working on our title, and you're typing it up, and I want to just call the episode six seven. But that wasn't good enough. I think so, but you put P dumpster fire, and, like, I have no idea what you're talking about. I feel like I didn't see a story that came out this week about this, so I'm really interested in that story. Today. Blake Oliver: [00:00:56] Accounting Today did a survey about private equity, how staff and partners at firms who have taken private equity feel about it. I've got the numbers for you there. Very interesting disconnect between the partners and the staff. Also, what tax preparers are charging and ATP. The National Association of Tax Preparers does an annual survey and the numbers are a little bit scary. Tax pros underpricing themselves, at least when it comes to ten 40s. But I want to start with news about everyone's favorite accounting firm from the past, Arthur Andersen, which just raised $176 million in an initial public offering. It's not called Arthur Andersen anymore. It's called Andersen. And we'll talk more about that after we thank our sponsors, David, who are our sponsors for this episode? David Leary: [00:01:51] Sponsors this episode are on pay and cloud accounting, staffing. Are you tired of payroll headaches getting in the way of the client experience that you want to deliver manual workflows, creating bottlenecks, compliance, nightmares, and endless support calls that go nowhere. There is a better way for your team and your clients. On pay is the payroll partner that accountants and bookkeepers actually love. Why? Because it's easy to use. Packed with value and backed by support that actually supports you, their team gets rave reviews for being fast experts and actually reachable when you need them. On pay on pay handles the heavy lifting. You get a dedicated onboarding coordinator who sets up worker profiles and transfers your to date data from previous providers, all at no extra cost. Their seamless QuickBooks and Xero integrations eliminate manual journal entries, and they support any types of businesses that you serve. Farms, restaurants, nonprofits, you name it on pay can handle unique requirements without adding complexity, and on pay keeps pricing simple to everything your clients expect from multi-state filing to off cycle payroll. Payroll runs is included. No hidden fees, no surprises. And here's the kicker for a limited time, earn up to $10,000 when you switch clients to on pay. Add three clients and run payroll by January 31st, 2026 and you'll get $1,000. Then earn $200 for each additional client. To book a demo, head over to The Accounting Podcast that is Accounting Today. Blake Oliver: [00:03:15] Thank you and welcome to our live stream viewers! Follow us on YouTube. Hit that notification button after you subscribe and you'll get notified when we go live and can tune in and let us know what you think. So if you're listening in, you're watching in on YouTube LinkedIn feel free to put in a comment. Also, don't forget that you can earn free continuing professional education for listening to this podcast and many other fine accounting and tax podcasts. Get the free earmark app, go to Earmark app in your web browser or download the free app on the App Store. Create a free account and earn one free CPE every week. If you've got a bunch of CPE to do between now and the end of the year. You can subscribe to get unlimited for just $170 a year. It's the best deal in CPE, and you can take it with you and do it anytime, anywhere. David Leary: [00:04:07] And you have seven more days. If you're on that December 31st deadline, seven days left. Blake Oliver: [00:04:12] It is Christmas Eve Eve as we record. Let's talk about Arthur Andersen, now known as the Andersen Group. Well, it's not the same firm, but it was created by former Arthur Andersen partners after Arthur Andersen collapsed. And I suppose we might need to go back in time for our younger listeners who don't know about Enron. It was so long ago. In 2002, Arthur Andersen was convicted of obstructing a Justice Department investigation into Enron's accounting following the collapse of Enron. And that conviction led to mass client and partner defections, which basically killed the firm. That was the same year that the Sarbanes-Oxley act was passed, which created all of the Sox compliance requirements that we're all familiar with today. The Supreme Court overturned that conviction in 2005. So Anderson Arthur Anderson was found not guilty, but it was too late. The firm was already done for. And in 2009, Arthur Andersen paid $16 million to settle claims related to Enron. So it was partners, former partners, who had left Arthur Andersen, who started a new firm in, uh, what was it, 2002? So when when Arthur Andersen collapsed, they started a new firm under a different name. And in 2014, they adopted the Andersen brand after market research indicated it would have a positive reception. David Leary: [00:05:47] And this is how we went from big five to big four, right? Because Arthur was huge. I think they had like 85,000 employees worldwide. They were a massive accounting firm and we used to have at one time it was like the big seven, right? And then it was big five for a long time. Then it went to Anderson was gone. Now we're down to the big four. Blake Oliver: [00:06:03] Well, Anderson Group is a lot smaller than Arthur Anderson used to be. There are just just a little over 2200 people in the US. They do tax valuation, financial advisory and consulting services. They're part of Anderson Global, which is Swiss based and Switzerland based and comprises over 300 member and collaborating firms worldwide. And the big news about Anderson Group is that they raised 106, 176 million in a successful IPO. Um, and they sold 11 million shares at $16 each. And actually, I'm curious how it's doing right now. David Leary: [00:06:43] Well, you're looking up the stock price. I did hit their website and yeah, they're offering tax services valuation, private wealth transaction advisory and outsourced accounting services. So it's a full accounting firm. Blake Oliver: [00:06:56] So it looks like Anderson Group is A and G. And they are currently at just under $26 per share. So hey not too shabby. What was their IPO price $16 $16. So they've already they popped they popped up to 26 bucks. David Leary: [00:07:22] I have a question like do you have any insights or maybe a guess on why they went IPO type of route instead of keeping things private, like typical accounting firms and just having partners? Blake Oliver: [00:07:32] I have no idea. Uh, it's very unusual. There aren't that many accounting firms that do IPO, right. They tend to go the private equity route if they're going to do that. Um, and we do have a story about private equity. We've got that PE dumpster fire story. Um, shall we talk about that? David Leary: [00:07:51] Yeah, because I saw the same article, but I didn't put together the dumpster fire. So I want you to paint this picture for me. Blake Oliver: [00:08:00] Well, that was a quote from one of the survey respondents describing what is going on in their firm as a dumpster fire. David Leary: [00:08:07] I saw the other quote that said P is a cancer. So I think the opinions are very interesting. Continue on. Blake Oliver: [00:08:14] So Accounting Today did a survey of partners and staff at P backed accounting firms, and the survey data reveals what Accounting Today describes as a dramatic shift. There is p described as far outweighing expectations. That's a quote. And then there's p described as a quote dumpster fire unquote. Interesting context. Background on this before we get into the data. There have been fewer than 400 of the 44,000 US CPA firms that have taken private equity. So it's actually a really small group. You know, 1%. David Leary: [00:08:57] But isn't it a much higher percentage than like the top 200? Like like really skews? Blake Oliver: [00:09:02] Yes. They tend to be high performing larger practices. And it really only began in like 2022 when this started to take off. So it's happened quickly. But it's still small. But like you said, yes, David, it is concentrated among the bigger firms. And so one of the questions is what's going to happen when smaller firms start to take a lot of money or more small firms. So, um, let's go ahead and look at this report. And I want to share my screen here so that I can share with you, uh, some of these stats. So how satisfied are you with your firm's experience partnering with your private equity investor. Now, over here on the left, you have partners and owners. And then over here on the right, you've got all other employees. What do we see? Well, partners and owners, 40% are very satisfied and 27% are somewhat satisfied. So satisfied. Two thirds of partners at p back firms are satisfied. The other employees, if you add up somewhat dissatisfied and very dissatisfied, it is 52%. So over half of the staff, the other employees, the non partners at these firms are either very dissatisfied or somewhat dissatisfied. David Leary: [00:10:31] It's almost like for our listeners who can't see the graph, these two graphs, these pie charts, if you they're almost like mirrors of each other but opposite mirrors. Right. So 10% of partners are not happy, but only 10% of employees are 40% of partners are happy, are very satisfied, 38% of employees are dissatisfied. It's almost the exact very dissatisfied. Blake Oliver: [00:10:52] Yeah, yeah. You're right. It's like a mirror, isn't it? David Leary: [00:10:54] Yeah. Blake Oliver: [00:10:55] Yeah, it is a dumpster fire, said one director at a large firm, low morale, people leaving bonuses cut, pay raises eliminated or lowered. It's horrible and dysfunctional, agreed a director at a very large firm. Losing clients, staff leaving partners pay more attention to their bank account than taking care of staff. Most partners are counting the days until they can leave with their money in hand. I'm reading directly from the article here. Here's another stat how much independence, as a firm do you currently have since your private equity partnership? So this is showing the topic. Uh, it's a bar chart showing topics and then or types of decisions. And then we have the bar chart showing how much control The respondents feel that their firm still has. And we can see that when it comes to, you know, staffing decisions, complete control or most control, that's like 55% leadership decisions. You know, the control, it's like 60% still feel that there's still complete control or most control the area where the firms seem to not or the respondents don't feel like their firm has control anymore. Is financial strategy decisions. Fewer than half of the respondents feel that their firm still has, um, most or complete control. And that's the area where respondents feel like there's no control. 15% of respondents say that their firm retains little to no control of financial strategy decisions. David Leary: [00:12:34] I would love to see this year over year like next year and the year after. Like this. I imagine technology decisions is going to be less and less control that's going to be pushed down from the. I mean, that's one of the reasons the P firms do this is so they can consolidate stuff like tech and HR and resources and things. Blake Oliver: [00:12:52] Here's another chart. It's titled who is helped and who is hurt. What kind of impact do you expect private equity investment in accounting firms will have on the following parties over the next 5 to 10 years? And we can see whether it's going to be very positive, positive no impact, negative impact or very negative impact. The ones that are standing out here, to me, uh, on the positive side is the partners at firms who've taken PE investment. The sentiment seems to be that it's going to have a positive impact. 55% believe positive and much smaller for the negative. Although it's interesting, still like, uh, 35% say there will be a negative impact or a very negative impact on the partners. David Leary: [00:13:35] And this is over a you know, this was asked in the Guidance of 5 to 10 years. Like how is it going? Blake Oliver: [00:13:42] 5 to 10 years. David Leary: [00:13:43] Half to a full decade away. And I could see like indirectly, if you look at this, the one of the biggest ones is clients. It's super negative impact. Blake Oliver: [00:13:51] Yeah. That's it. Yeah. The clients. David Leary: [00:13:53] And that would eventually affect everybody else on this list. Blake Oliver: [00:13:57] Yeah. Only it's like just over 20% of the respondents say that clients will experience a positive impact. And the rest it's either, you know, an equal amount say no impact, but what is that? 56% say that clients will have like a negative or very negative impact, or there will be a very a negative impact on clients. And the other big one is the accounting profession broadly. That's even bigger. 58% of respondents say there will be a negative impact on the accounting profession due to private equity. And these are people at firms that have taken private equity. David Leary: [00:14:34] So the industry is going to take a hit and the clients are going to take a hit. That's not going to bode well for everybody else left on this survey. That's not good. Blake Oliver: [00:14:45] What impact will private equity investment in accounting firms have on these elements over the next 5 to 10 years? We've got public accounting's ability to attract new talent. That's positive. Um, it gets the most positive response. 40% of the respondents say that private equity will have a positive impact. But you know, the rest. Either are it's an equal almost equal amount that are negative about that. 37% are negative on that. Um, let's see what's the one that's the most. Yeah. So we'll go from positive to negative right. So on the more positive side, we've got public accounting's ability to attract new talent. The profession's ability to retain talent for the long term. And then it starts to get negative quality of client service. Negative job satisfaction among accountants. Negative. The reputation of accounting firms. Very negative. Half a 60%. Actually, that's 60% of the respondents think that the reputation of accounting firms will be harmed by private equity, client perceptions of public accounting firm service almost the same amount, and the the greatest harm will come to the integrity and independence of public accounting firms. 24% almost a quarter of the respondents say a very negative impact and 40% say negative, coming to a total of 64%. David Leary: [00:16:11] Just under two thirds, right? Yes. So basically just under two thirds of all accounting firms that tick p money think it's going to ruin the independence of accounting firms. This is crazy. Blake Oliver: [00:16:23] Two thirds of the people who work at these firms. David Leary: [00:16:25] Work at the firms. Yeah yeah. Blake Oliver: [00:16:27] Yeah. David Leary: [00:16:28] I don't know like that's crazy. In the meantime, AICPA do you do these these forums and PE and they're, they do seem kind of pro for it and they're rah rah ra in it. And I don't know so much for protecting the public. Blake Oliver: [00:16:41] Well, uh, let's see, maybe maybe the AICPA will will figure this out because they are seeking comment on an ethics rules update for alternative practice structures. Alternative practice structures, or APS, are what enable private equity to invest in CPA firms. David Leary: [00:16:58] So this is one of the things where I go to a website and I read it, and I can put some comments of what I think or my firm thinks some. Blake Oliver: [00:17:04] That's right, there's a public comment is available. They sent out a press release. But here's the thing. Uh, I got the press release like this week or last week, but the actual exposure draft is not going to be posted online until December 29th. So they sent out a press release to me and I. I can't yet actually read what it is they want us to comment on. David Leary: [00:17:30] And we have a link. We don't have anything. Blake Oliver: [00:17:31] So there's no link. But in hopefully in in January. In our first episode, we will be able to see what this, uh, ethics update includes. David Leary: [00:17:41] Can be ready on the 29th. Blake Oliver: [00:17:43] They said they hope to post it or it will be posted online on December 29th, I think. David Leary: [00:17:49] Let's step back and just pull up in the calendar here. Today is the 23rd. If it's not done today, when are they doing this? Christmas Eve, Christmas Day, that Friday, the 26th. Are they doing the weekend? Like when is this getting done if it's not done already? This is kind of crazy. Blake Oliver: [00:18:06] So the press release is really teasing us on this. Yeah. Apparently they're saying that there's going to change. They're going to make changes in several key areas. There's going to be a new independence interpretation, distinguishing between significant influence and control by investors over non attest entities. They will revise the definition of what a network firm is to include entities that control or are controlled by the network firm, and cooperate to enhance professional services capabilities. There will be updates to the conceptual framework for both independents and members in public practice, and revisions to the alternative practice structures interpretation under the form of organization and name rule. So stay tuned. David Leary: [00:18:49] So this could take a decade right. The survey it get feedback. They'll survey it get feedback. It'd be a very long time. They'll do studies. This is going to be I could see this already five years from now we're doing an episode. You're going to be so frustrated that it's taking this long to. Blake Oliver: [00:19:02] Actually it might. I think it'll be sooner than you think, David, because the press release says that if adopted, they'll take place the next year. So I think it would be next year or the year after. I am not totally sure. So all right, David, let's thank our next sponsor. David Leary: [00:19:22] Actually, we don't have a sponsor for this slot, so we'll do it later on in the episode. Blake Oliver: [00:19:26] Okay. David Leary: [00:19:26] Skipping that, skipping that scratch. Blake Oliver: [00:19:28] Hey, have you ever thought about reaching Tens of thousands of accountants. Every month. You could do that by sponsoring the accounting podcast. David Leary: [00:19:38] I could put an ad on this episode. Still, just give me a ring. Blake Oliver: [00:19:42] That's right. I was actually really amazed. David, um, I didn't realize this, but if this is right, it's crazy. Op3, which is a podcast metrics site. We link all our shows to that that we produce. It said when I went on there that in November we had 30,000 listeners, like 30,000 people. By analyzing all the different IP addresses, 30,000 people listen to this show in November. So, you know, if you want a sponsor in 2026 or this episode right here, which still needs a sponsor for the second slot, you should, uh, check check it out. Email us sales at me. And if you want to let us know what you think. David and I love reading listener mail. Email The Accounting Podcast at me. That's the accounting podcast at earmarks. We love getting listener mail. We always read it, and sometimes we even read them on the air. What do tax preparers charge? David Leary: [00:20:51] Do you want to do that right now or do you want. I have some Big Four related stuff we could talk about first before we get off you. Blake Oliver: [00:20:58] We'll save that. Okay. So we'll talk. We're going to hit it. We're going to get this survey. We will. But let's first talk about Big Four. David Leary: [00:21:04] Yes. There was an article in Business Insider about the Magnificent Seven in the Big four. So the Magnificent Seven are those tech giants Apple, Microsoft, alphabet, Amazon, Nvidia and Meta and Tesla. So basically they combined. It's a market value of over $20 trillion. And all their audits are done by Big four. And they were kind of calling out each company and who does their audit. So like Microsoft is done by Deloitte, Apple Z, alphabet, Google's EY, Amazon's EY, PwC does Nvidia and EY does meta and PwC does Tesla. But then it talks about the, um, how long they've been doing it. And Deloitte's been the auditor for Microsoft since 1986. And I'm like, I thought they were supposed to change every few years. Am I not understanding this? Blake Oliver: [00:21:51] It's the audit partners that have to rotate. Not the firm itself. David Leary: [00:21:55] Not the firm. Okay. And they're the audit fees Deloitte got from Microsoft in 2025 was $78 million. So if they've been the auditor since 1986, that's about 30 years or 40 years, right? 40 years. Blake Oliver: [00:22:11] Don't make me do mental math. David Leary: [00:22:12] Okay? This is like a $2 billion relationship between Deloitte that Deloitte's getting from Microsoft over the last 35, 40 years. Right. So like with that much money is involved. How like I'm very skeptical about the public being Protected. There's just way too much money. Like, the motivations are just they can't be aligned with the public when there's. You have $2 billion relationships with clients. Blake Oliver: [00:22:37] Yeah. Well, you know, that's always been an issue. And I mean. David Leary: [00:22:48] These are major I mean, Amazon, uh, paid e 51 million, uh, paying e 36 million. Blake Oliver: [00:22:55] You know, there's lots. So so I'll take the I'll take the other side of this, David. Right. Like, audits are expensive. They require a lot of people with a lot of expertise. And when you're auditing a company like that, you need really talented people. Like, the salaries are huge. And that's why the audit partners on those engagements make, you know, millions of dollars a year, I'm guessing. David Leary: [00:23:18] And so it's a major project basically. Yeah. Blake Oliver: [00:23:21] It's a it's a big deal and it's complicated. And so like, you know, you can't just look at the money alone. Um, in an ideal world, yes, there would be no financial relationship between auditors and their clients. But this is the system we have, right? Uh, companies select and pay their auditors, and then we try to make the auditors as independent as possible. The area where I struggle is when the auditors have financial relationships beyond just with their clients fees, like with private equity. That's where I think things start to get really dicey. David Leary: [00:23:58] Or I think it doesn't. Deloitte sell Microsoft Consulting type services and they implement Microsoft Copilot AI type things, but they're also the auditor for Microsoft. Blake Oliver: [00:24:07] We were talking about that. Yeah I did. Was that a story we talked about in a recent episode? I think it was. So like this is an issue because these firms are audit firms, but they're also consulting firms. And consulting teams are some of the biggest resellers now of the technology being developed by their audit clients. And that to me is a concern. David Leary: [00:24:29] So where does this take into the next thing? So I saw another article that talked about how AI has cost 50,000 layoffs in 2025. And the big companies that are laying people off, it's Microsoft, it's Amazon. So what happens with Microsoft who just cut 15,000 jobs in 2025, right. They go back to their auditor and be like, we don't want to pay this much for our audit. We don't want to pay you $50 million a year, $67 million a year. We want to pay half. We want you to use AI. Like what is like it seems like that's inevitable. It's going to happen. There's no way. Microsoft, why are you sending 2000 people into my building to audit us? You could just do it with AI. And the big firms are going to have to take a revenue cut on this. There's just no way this this keeps going. Blake Oliver: [00:25:11] Well, they're not going to there's no way they're going to. And here's how they're going to solve it is they're going to stop billing for time. They have to this is going to do it. The AI stuff is going to do it. Because like you said, these are companies that are developing AI. They are studying the potential for it to reduce the hours in this kind of work, and they're going to demand that their auditors cut the hours. So the auditors are going to have to not bill by the hour. They're going to have to move away from that model if they're still even if they're charging a fixed fee, that it's based on a number of estimated hours, and they're tracking time, and they're going to have to move away from that if they want to survive the same way. All of us who did bookkeeping work and client accounting services work and outsourced accounting work had to move away from billing for time. When we got all the efficiencies of cloud based accounting systems, it's the evolution of the profession. It's just happening decades later in audit and tax. But it's going to happen. And it's amazing to me to continue reading. Every now and then, there will be an article that pops up on one of these accounting sites, like CPA Trendlines, for instance. And the headline is accounting firms must start stop charging for time. This is a piece on CPA Trendlines by Michelle Golden River, CFP, or CPF, who is a Growth and Profitability Analyst strategist at For Advantage. And you know, the basically the premise of the article or the the message of the article is that traditional hourly billing is outdated and preventing accounting firms from achieving the revenue growth they need to remain competitive. So I think this is finally going to do it. We're going to get away from the billable hour as the foundation of pricing in big firms. David Leary: [00:27:00] Because a company like Microsoft is going to be like, hey, we're not going to pay you $67 million anymore. We're going to pay you $30 million. You better figure out how to do it. And the firms will have no choice but to use AI, essentially. Blake Oliver: [00:27:11] Well, yeah. Or Microsoft will just start questioning the bills. Yeah, right. Like we you're you're reselling. All of our. David Leary: [00:27:19] Companies are asking for discounts. A couple of months back. Blake Oliver: [00:27:21] Exactly. Exactly. So they're going to put pressure on that. And the firms will have to start implementing AI. And as they do the hour, the the hours will drop. Right. And the only way to fix it will be to pad timesheets. And it'll just get to be the point where it's, like, absurd. Welcome. Live stream viewers numbers organized says happy holidays, gentlemen. Happy holidays to you as well. Let's see. Jp says I think accounting firms usually go PE instead of IPO because of the conflicts of interest with the audit firm. They do separate or they do separate. But maybe for SEC regulations it's risky. Tate says caught the live again. I am becoming a regular. Great to have you with us, Tate. Tate also says as long as audit remains separate and independent, we are good. This just means there will always be business opportunities in audit. And Tate says, can I sponsor a slot? Yes. Reach out. Happy to get you our pricing. Um. Let's see. David Leary: [00:28:25] I mean, I think since you talked about the billable hour, you want to jump into what tax preparers are charging. Blake Oliver: [00:28:30] Let's do it. I want to highlight one more comment here, Gemma. Arcot says or j j e m a r c o t says. Casts are typically casts. Engagements are typically priced by revenue or expenses of the business that correlates to time. It still comes back down to time. I beg to differ. No, um, actually, many cast engagements. Rule of thumb is just charge a percentage of revenue or expense. So like business managers in LA, if you're a if you work in business management, right, which is just doing like the outsourced accounting for, you know, high net worth individuals that's generally priced based on a percentage of their revenue. And you could say it's 5%. Or for bookkeeping, you say it's 1 or 2% or for light CFO work, it's 3%. That has nothing to do with time. That's value. And so it doesn't come back down to time. In that case, for me, I priced it based on, um, I had like a pricing matrix that priced it based on number of bills, number of employees, number of bank accounts. Like that's how we price it. And then we would rule of thumb ballpark it with a percent. But we didn't do it based on time. David Leary: [00:29:56] Or figure out how much it would cost them to do it themselves. Blake Oliver: [00:29:59] And that's compared to what it would cost them to hire an employee to do. That's honestly the best way to to do it, because, uh, when you actually add up the time versus, you know, if you price based on time, you're way undercharging versus what it would cost them to hire somebody. Okay. What did we say we were going to do next? David Leary: [00:30:23] Uh, the. Blake Oliver: [00:30:24] Oh yeah. David Leary: [00:30:24] Taxpayers are charging. Blake Oliver: [00:30:25] What tax professionals charge. What do tax professionals charge? This is from the 2025 National Fee Survey from the National Association of Tax Professionals, the Natpe. All right. I'm just going to give it straight to you. This is for a basic form. 1040 CPAs charge an average of $280. Enrolled agents $228. And non-credentialed preparers approximately $185. David Leary: [00:30:58] Where are these people? Because ever since I've stopped doing my own taxes and I'm paying an accounting firm to do them, it's 1200 to $1300 of return. I've never been quoted this low of a price. Well. Blake Oliver: [00:31:11] I mean, you have more than a 1040. You have an S Corp? David Leary: [00:31:14] Well I do. I get charged for both. Right. I get charged for the 1040. 1200 bucks. And the S Corp is another 1500 bucks or something? Yeah. Blake Oliver: [00:31:22] I mean, I don't know. David Leary: [00:31:23] It's not 250 bucks, I'll tell you that. Blake Oliver: [00:31:26] So, you know, it's. I mean, you have to remember, this is a national survey, and these are the averages across the whole country, and there's a huge range. Uh, it's interesting that, like, the cheapest areas, the Midwest, $214 for a 1040, a basic 1040, up to $235 in the West for basic 1040, but not like a huge amount of variation there. Right? Just like really 110%. No more than 10% variation. David Leary: [00:32:04] In one takeaway in the survey that I saw that stuck out was the data overall shows that when you regularly increase fees, clients don't leave. It just does not drive the clients away. So you always have this opportunity to raise your fees every single year over and over again. Blake Oliver: [00:32:19] Yeah. One of the one of the people that Accounting Today talked to when they featured this survey was Melissa Bowman, who's an EA in Ohio. And Melissa says that she increased prices 12 to 20% across the board twice since 2020, and not one client left because of pricing, unquote. And if not, one client leaves after you implement a substantial price increase like that, that means you're still underpriced. David Leary: [00:32:51] Yeah. Do you think? So they talked about how credential preparers charge more. So if you're non-credentialed, it's about $185 a return. Ea's are charging 228 and CPAs are charging 280 for a base 1040 should be from a tax knowledge situation. They're. They're probably just as good as the CPA, right? Should IAS be charging an equivalent of CPAs, or do you think it's a brand thing or customers just like, no, you're not a CPA, I'm not going to pay that much more. Is it a brand issue here? Blake Oliver: [00:33:21] I have no idea. I, I think everybody is undercharging and undervaluing themselves. Yeah. Across the board. And maybe the EA is just do it more than the CPAs. There's also details about revenue breakdown where these preparers are getting their revenue. Two thirds of revenue for tax preparers on average comes from tax Prep work, 65%. They get 12% from bookkeeping, 6% from amendments, and 4% from helping clients with payroll. So if I were an average tax preparer, or if I were giving advice to an average tax preparer who answered the survey, I would say increase that bookkeeping revenue and take fewer tax returns, because that's how you're going to make more money and spread it out around the year. How often do. Preparers raise fees? 83% of them raise fees every 1 to 2 years, and it's typically 6 to 10%. 48% charge a minimum fee plus complexity based adjustments. I'm assuming that's, you know, by the form add. Add more for more forms. Minimum fees. I think these are way too low. They range from 150 to $350. Just have a really high minimum fee like have a higher minimum fee that maybe that's one way to to do it. The average hourly rate, if they're charging hourly, is $182 an hour. David Leary: [00:34:52] And that's only up $3 since 2023. Yeah, it's up $1.50 a year. Blake Oliver: [00:34:58] Business form, minimum fees. So David, this is more, I think, um, helpful if you have a business Then if you're doing taxes for a business, then the minimum or the the minimum average fee is $634. Anyway, still really low compared to the fees that you and I are used to paying. David Leary: [00:35:19] And the other stat here that stuck out to me was 18% did not charge an additional fee fee for state returns. Turbotax has trained 45 million taxpayers over the last 30 years that you have to pay extra to get your state return done. They've trained people that used to have to buy a separate box for each state. They've trained people to pay extra for a state return. On top of the federal like that, that number should be 0%. Everybody should be charging extra for the state return or charging so much on your return. You bucket it in, you know, and market it that way. But the fact that almost 20% don't charge for doing the state return seems crazy to me, because the market is the market is trained to pay extra for state returns. All right. I hope you don't charge me for the state return for that? Scratch that. Blake Oliver: [00:36:07] Yeah, let's. I hope I hope that our guy isn't listening. Let's thank our next sponsor, David. Yeah, and this is Cloud accountant Staffing. 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And honestly, how different would your life feel if you could instantly add 40, 80, 120 hours of extra capacity every single week to explore the new cloud accountant a cloud accounting staffing? It's the cloud accountant staffing candidate portal. Head over to The Accounting Podcast. That's The Accounting Podcast forward slash c a hey, I got some good news, David. On the economic side of things, GDP grew 4.3% in Q3. Gross domestic product. It surged. I spotted this in the New York Times. What is driving the growth? Consumer spending rose at a 3.5% annualized pace, constituting roughly 70% of economic output. We are still a consumer driven economy. Military spending increases also helped to power growth. Corporate profits jumped by 166 billion. It was just 6.8 billion in Q2. So corporate profits way up. And according to Michael Pierce, the chief US economist at Oxford Economics, it's wealthy households that are leading spending. Disposable personal income was flat. So inflation is still eroding purchasing power. That explains why there's been this like news cycle focused on how everything's more expensive recently. And Trump's been out there stumping around talking about the affordability. David Leary: [00:38:42] Buy a 2 pound bag of M&Ms at target or the grocery store right now. You'll be shocked how expensive it is. Blake Oliver: [00:38:49] How much is it? David Leary: [00:38:49] I think it was like $16 or some ridiculous amount. It's crazy right? Blake Oliver: [00:38:55] Yeah. So the tariffs, as we've talked about on the show before, have turned out to be less than promised both the amount that businesses are paying. In reality, with all these exemptions and exceptions, um, and so while prices have increased, it hasn't it hasn't led to a recession, like economists were thinking would happen based on the promised rates. And there's also like, no, it basically it's not enough. It's like something like 10% increase. So it's not enough to actually make a significant difference in the economy. Affluent Americans continue spending on travel, restaurants, recreation and discretionary items, while lower income families are basically, you know, the ones who are struggling more in this economy right now. So it's the wealthy families, right? The affluent upper middle class that are driving the economic growth right now. So, you know, if you're an accountant, if you're a tax pro, that's who you want to be serving. And that's why the markets are up S&P 500 is up 17% year to date Nasdaq up over 20% year to date. Are we in a bubble. I guess we'll find out in 2026. Do you want to talk about let's talk about um here's a funny story. David Leary: [00:40:27] And I got a funny story too. So we'll pivot to some funny stories. Blake Oliver: [00:40:30] Okay. Uh, this is the the the tale of Middle Finger Ranch. A Kansas CPA just got sentenced to four years in prison, David, for one of the most audacious fraud schemes in recent memory. He created a fake company called Middle Finger Ranch to steal over $400,000 from his own family members, who were his clients Middle Finger Ranch. His name is. David Leary: [00:41:01] Family members. Blake Oliver: [00:41:02] Quentin Flanagan. And he used his access to their business accounts to write checks to this made up ranch, Middle Finger Ranch over eight months. And when his family questioned the missing money, he created fake flowcharts and blamed other people. He then used the stolen money to build himself a house while continuing to lie to their faces. The US attorney said, quote, after stabbing his family in the back, Flanagan lied to their faces, unquote. He has lost his CPA license and now has had to forfeit $369,000 in assets. Quentin Flanagan, CPA, no longer a CPA, age 45, from Colby, Kansas. His sentence is 48 months in federal prison. Middle finger ranch. David Leary: [00:41:54] So this is very premeditated. Then he named the rats. This was not a long term plan for him. Blake Oliver: [00:42:01] I guess so. What's your story, David? David Leary: [00:42:05] So my funny story is police in Scotland retrieve a ledger from a toilet. So, uh, police have jailed a Glasgow man after the police literally caught him trying to flush away the evidence. So he had a ledger and a notebook or whatever, and he was tearing the pieces up and throwing it in the toilet. So the officers recovered the shredded ledger from the toilet, taped it back together, dried it out, then taped it back together to piece together the large cash movements. And they were able to take these handwritten ledger pieces and tie it to some phone, uh, photographs on his phone of bundles of money and match the ledger names found on the phone. And they pieced it all together, but they had to reach in the toilet and grab the ledger out of the toilet. Blake Oliver: [00:42:45] What kind of financial crimes? What kind of crimes are we talking about? David Leary: [00:42:49] Organized crime. It didn't actually say, uh, money. Sophisticated laundering network is the way it was described. So he got sentenced to four years and six months in prison for this. Blake Oliver: [00:43:00] All right. David Leary: [00:43:01] Police are heroes. I mean, they just reached in and pulled out the ledger before it got flushed down. Blake Oliver: [00:43:05] I'm picturing this like a scene from a movie. He rushes into the bathroom. The police are chasing him, locks himself in, and starts tearing up the ledger. David Leary: [00:43:13] That's about it as well. Blake Oliver: [00:43:15] Flushing the pages. David Leary: [00:43:16] They literally were making him stop throwing that away. Usually it's people flushing drugs down the toilet, not the ledger. So. Blake Oliver: [00:43:25] Um, let's talk about the PCAOB, the public company accounting oversight board. They are going to cut their budget in 2026. The Pcob voted Friday. I guess that was maybe a week ago. Friday? No. Was it Friday last week? I think, uh, whenever it was, it was recent. They voted to approve a $362.1 million budget for 2026, which is surprisingly a 9% decrease from the previous budget. David Leary: [00:44:02] And I forgot, how are they funded again? Obviously from the fines, but then also. Blake Oliver: [00:44:06] A fee on public companies. David Leary: [00:44:08] Fee on public companies. Blake Oliver: [00:44:09] So all public companies pay a fee that then goes to fund the PCAOB. And um, yeah. So they they cut their own budget. And how did they do it? They reduced the board chair salary by 52%, and the other board members took a 42% salary cut. There were also salary reductions for highly compensated staff, but not most employees. And they cut 47 employees, um, down to. So they're down to 817. So the accounting support fee that is assessed on public companies and broker dealers will drop 18% as a result. Acting chair, George or boutique. I wish I never I always forget to look up how it's pronounced. He defended the budget as a continuation of belt tightening that is already underway. So basically it seems like this was sort of like inspired by the whole Doge thing, you know? Um, and they just kept. Yeah. David Leary: [00:45:11] Didn't we cover a couple of weeks ago that like, they, they want to just replace the entire board of the PCAOB. I feel like, well. Blake Oliver: [00:45:19] They basically are they're working on it. David Leary: [00:45:21] Like they're working. Blake Oliver: [00:45:22] On it turning over. David Leary: [00:45:23] Is this a way to like, hey, look, we're not being paid that much, so you could just keep us on the board. Is this some sort of weird negotiation tactic, like to try to save their jobs or save their board? Blake Oliver: [00:45:33] I don't know, no idea. But those board members make a lot of money. The chair makes $673,000 and other members make over half $1 million. But the I guess the pay cuts are going to bring that down like 40 to 50%. But that's yeah, it's a lot of money. Very, very highly compensated compared to other government type jobs. Of course, the justification for that is that, you know, you you can make easily that much money in public accounting or in corporate. David Leary: [00:46:08] Finance at Deloitte and work on the Microsoft project. Yeah. Blake Oliver: [00:46:11] So it's like if you want to get people on the pcob who are like of comparable talent to like audit partners at big four firms, and you need to pay them comparable amounts, otherwise you're not going to get the right people. But that's that. I got some more Pcob news. The Pcob has barred an audit partner who issued clean opinions on four audits without performing adequate procedures on material accounts, and in some cases, she did no procedures at all. The CPA is Jennifer Crofoot. She also skipped the required quality review. Sign offs. Before releasing reports she's been banned for three years and must complete 40 hours of audit. Cpe. Her firm, Fruity Farooqi and Associates, was fined $50,000 and censured. So. She issued unqualified audit opinions, clean audits, but in some cases didn't do any procedures on material accounts. We've seen this before. Bf borgers in Colorado did this. David Leary: [00:47:23] Yes. Blake Oliver: [00:47:25] So like basically did the audit or said she did the audit but didn't got paid to do the audit. And what's the penalty for that if the pcob catches you. It's a three year ban, 40 hours of CPE and $50,000. How much do you think she made doing these audits without doing the proper procedures. How many audits were like, I don't, I don't know. I don't have that information, but I just feel like even if it's like one audit, like how much, you know, like $50,000 is the fine. Can that possibly be close to the like? It's I feel like we're not offsetting. There's like not like. David Leary: [00:48:11] The penalty is not doesn't fit the crime. Blake Oliver: [00:48:13] Right. Like I'm a CPA, I'm looking at this and I'm thinking if that's if that's the penalty, let's, let's say I don't have any ethics. Right. And and you know, I don't want to be a podcaster anymore. I go open up a CPA firm and I just start doing audits, giving out audit opinions, handing them out for years and years, making money. Finally, I get caught. And the penalty is that I can't do audits for three years and I pay $50,000. Like that. Sounds like not a bad penalty. Like, how long could I get away with it? We saw Borger's got away with it for years and years and years. Right? So I don't know, what do our listeners think about this? To me, this just feels like like toothless regulation or enforcement. Like, here's the pcob, you know, making what budget of over $300 million a year. And this is the enforcement actions that we get, like, does this really change anything? David Leary: [00:49:12] Or not doing the sole job, which is to perform the audit and do the work? Blake Oliver: [00:49:17] And the whole point of the Pcob is to, like, protect the public against unethical auditors. David Leary: [00:49:23] Sham audits. Blake Oliver: [00:49:24] Because, you know, like in any population, you're going to have bad apples. So their whole job is to defend against this and this is the penalty. I feel like this is not really a disincentive. David Leary: [00:49:35] And if they would find a more they'd have a bigger budget. Maybe, maybe there should be a budget, an incentive based budget at the pcob. Blake Oliver: [00:49:43] I feel like the fines, the fine. Yeah. The fines should be based on how much money the auditor made from the audits. And it should be in excess, far, far in excess of the amount of money that they made or profit that they made. David Leary: [00:49:56] Because taxes worked that way. Right? If I don't pay my taxes, I'm going to get fines. But the fines are tied to how much I owe. Right? Blake Oliver: [00:50:03] Yeah. And it's like a significant increase. David Leary: [00:50:07] So if my revenue on this sham audit was $1 million, I should be paying a significant amount. 50 grand's nothing. Yeah. Blake Oliver: [00:50:17] All right. Um, going back to this discussion about tax prep fees, all pro says in the live stream there's a lot more competition coming from newly minted enrolled agents with no experience who just passed the exam and hanging out a shingle. People have been pushing this lately, so maybe that's the answer. David. Why enrolled agents charge less is there's just more competition. Not as many CPAs. Right. Nightlight says how far down till AI will do your taxes? It already will. That's how I tested this out. And maybe I'll do it again next year. But basically you can use these like new AI browsers like ChatGPT has Atlas and um, perplexity has one called comet. And I think Claude now has a plugin for Chrome. And you can go into like TaxAct or TurboTax, which are the do it yourself tax softwares. And you can do your tax return and have like the AI on the side helping you. So even though like TurboTax still hasn't implemented a really good AI, like it's not great. It's like terrible. Like it doesn't exist in my opinion. Like based on what I did in TaxAct. The same. Right? They haven't figured it out yet. You basically get AI and it can even like click around and help you if you want. And so at this point it's like, I don't know. David Leary: [00:51:38] But who cares actually, because that's not where the real work is. Like, yes, AI could do all the taxes, but the real work is it needs to have all these stupid pieces of mail that come in my mailbox. It has to know what to put in to calculate the taxes. It has to get all the inputs. And that's where there's the disconnect. Right? Like how does it get all these inputs into the browser or whatever, whatever the medium is that this AI lives in to do the taxes? I guess technically if it if you gave it all the perfect data, it could probably pump out a tax return. But that's not where the work is. The work is what forms does it need? What data does it need? Does it have all the data before it starts? That's the real knowledge. Blake Oliver: [00:52:18] David, I have a story about one of Trump's pardons, but I'll let you decide if you want to share something else. David Leary: [00:52:24] Yeah. Since we're talking about taxes, um, this this news just came out late last night or this morning. Uh, senators want to know if the IRS is ready for tax season. So our famous our favorite senator on the show, Elizabeth Warren, did what she always does. She has penned a letter to the Treasury in the IRS raising her serious concerns. The concerns, you know, now that staffing the IRS is down, right. Uh, a lot of filing season functions are now cut 17 to 19%. They're really worried about the service taxpayers are going to get this year, the IRS. And then the other thing that's flaming these, uh, flame or fanning these flames is former IRS commissioners, uh, were like on an AICPA event. And they're echoing the warning, predicting noticeable declines in taxpayer service. But I don't know if like, is this just like sky is falling or should we wait till we get through the tax season and see what the real results were, and then then write mean letters and pass legislation and actually make changes? Blake Oliver: [00:53:24] Well, I mean, it's not looking good, right? Like what? The IRS, um, staffing is way down. They haven't modernized any of the systems because those seven. David Leary: [00:53:34] Different commissioners or acting commissioners just in 2025. Think about that. That is insane. How can nothing. Get done. Blake Oliver: [00:53:40] It's not looking good. All right. David. Um. That's all the time we have for this week. I guess we'll we'll talk about that, uh, that Trump pardon for a fraudster. I want to talk next week, hopefully, about how small business owners are using AI. There's something in there that should be of note to accountants. This move toward, uh, this idea of moving towards semiannual reporting. I didn't get to that today. And then we got a bunch of avenues we got to catch up on. So and then I think the last thing we'll do is, um, predictions. David Leary: [00:54:10] I got a lot of prediction episodes or articles I've been stacking up. Yeah. Blake Oliver: [00:54:15] Uh, thanks everyone who tuned in. Join us on YouTube. Subscribe. Get notified. Uh, the accounting podcast. Just search for that. Tens of thousands of you are now consuming this podcast on YouTube. Great to have you with us. And don't forget to earn your CPE. And actually, we've been talking a lot about enrolled agents. We should Highlight that enrolled agents can earn their continuing education for listening to tax podcasts on earmark, just look for the green no purple IRS ce banner in the earmark app. David Leary: [00:54:51] All those on the home page. We just have a section called essentials. It's just great. But EA courses now right on the home page. Blake Oliver: [00:54:58] So you can get your IRS CE. We report that to the IRS. Make sure you enter your Pin in your profile in the earmark app. And when you complete a course, we will report it every Monday. David Leary: [00:55:10] Every Monday it's not instant, but once a week we send a week. Blake Oliver: [00:55:13] We send it to the IRS through their systems. Um, and you can earn CPE for listening to accounting and tax podcasts. This one. Many others like oh my fraud federal tax updates, tax tax in action, fantastic shows. Uh, who's really the boss? Check those out, get your CPE done, and support our work by subscribing for the low, low price of $170 a year right now. Maybe we should take the advice from that tax prep survey and raise our prices again. David. David Leary: [00:55:44] We just raised the price on October 1st, so. Blake Oliver: [00:55:48] Well, I think next year at some point we're going to go to 200. And if you subscribe at 170 we're going to honor that for at least a year and hopefully longer. We have actually honored the current pricing for all of our members since we started. David Leary: [00:56:02] I'll even admit that I've been honoring people that somehow did not take advantage of the Cyber Monday discount. I've been honoring even that people who are tracking me down like I was. There's always this email of like, I was out of the country and I couldn't buy it on the Cyber Monday deal. Can I still get it? And they forwarded me the email, but they talk about it. But yeah, so I've been I've been honoring these things. I want to take care of our customers. Blake Oliver: [00:56:25] Thanks everyone for listening. We will see you around here later this week. Bye.