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Intuit Stock Gets Hammered & Trump's Wild IRS Settlement · The Accounting Podcast

• There may be errors in spelling, grammar, and accuracy in this machine-generated transcript. Blake Oliver: [00:00:04] The US government agreed to permanently drop current tax claims against President Donald Trump. This is according to a document that was posted by the Justice Department. The government the IRS is barred from examining or prosecuting Trump, his sons and the Trump Organization over current tax examinations. And it also says that the government is restricted from investigating Trump's family, affiliates and others tied to the matter. David Leary: [00:00:31] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:36] Hey, everyone, and welcome back to the Accounting Podcast, your weekly roundup of news in the profession. I'm Blake Oliver. David Leary: [00:00:42] I'm David Leary, I'm Blake. We're back. It's very obvious based on the video, we're back home. Both of us are back in our normal recording environments. But where did you go last week? Blake Oliver: [00:00:50] I was in New York at the black or AI tax Summit. Black haw is one of those automated AI tax prep Companies. They invited me out there. It was at Nasdaq Tower in Manhattan. It was so cool to see the product and moderate a panel. And I want to talk all about that. But first, let's thank our sponsors. David Leary: [00:01:11] Yeah, our sponsors this week we have cloud accountants staffing the value builder system. That's a new sponsor on Pay and maxima. Are you tired of the endless search for qualified accounting talent? You're not alone. Growing accounting firms are struggling to find available and affordable team members when they need them. Cloud accountants staffing has a solution with their revolutionary candidate portal. Unlike traditional staffing agencies that waste your time with sales calls, paperwork deposits, the cloud accounting staffing portal gives you instant access to highly vetted, qualified accounting professionals. No waiting, no hassle, just top talent. Right now, what makes this different? Speed and simplicity? What other firms make you wait weeks or months with cloud account and staffing? You can interview someone as soon as tomorrow. The boutique support ensures you're getting high quality talent that's both available and affordable. Exactly what you're growing firm needs. The candidate portal puts you in control. You can browse live candidates, make selections on your timeline, and build your offshore team without the traditional headaches. To find, review book interviews with potential team members, all in less than ten minutes, head over to The Accounting Podcast dot promo that is The Accounting Podcast dot promo forward slash CAS. Blake Oliver: [00:02:22] All right, so this company, black Gore, they've been in stealth for years. I think they started in 2022 and they recently went live with their product and they've been working with big firms. Ey, PwC, KPMG, Deloitte, Withum, Eisneramper, SaaS, elevate, they were all there. Kelly Phillips Erb from Forbes moderated. She hosted the event. Uh, there was, uh, the Wall Street Journal was in the room. Accounting Today was there. And so it was really exciting to go out there and moderate a panel about AI and what is happening in firms now, like the the bigger firms. David Leary: [00:03:05] So what does this do? What does Blackbaud do? Blake Oliver: [00:03:07] So so Blackmore and here's the example from your keynote. He's the CEO of Blackmore. They have built an AI agent that can do a complicated high net worth return with dozens of k-1's that would normally take 40 hours of human labor. And it can do it in five minutes. So. David Leary: [00:03:29] So is this the reason Intuit's stock is getting destroyed so much because of these AI startups that that exist? Blake Oliver: [00:03:36] I think so, I mean, that's a great tie in to one of our top stories today, which is Intuit stock dropping. What was it like 20% in a single day? David Leary: [00:03:45] A single day? I think for the first quarter of this year, it's the largest dropping stock in the S&P 500 or something. It's it's getting brutalized. I mean so it's zero. I mean, everybody's gotten Sage has gotten hammered. They've all got hammered pretty much. Blake Oliver: [00:03:58] And I think that in this case, the street is. And you and I will debate this, I'm sure, David, but I think the street has it right when it comes to the threat to Intuit's TurboTax business, because these AI tax prep tools are crazy good. They're getting good so fast. And I know that might come as a surprise to anyone who's tried to do it with chat bots, but the latest iteration of AI agents, they can eliminate the hallucination, the probabilistic outcome, and they can make it deterministic. So, for example, Black Haw claims that they have over 99% accuracy in the prep of these complex returns. It can do 8,098% of the work. It's a 98% time savings. And even when you factor in the cost of their software, it's still like an 80% cost savings. The review is two times faster And they're claiming just like 50 times efficiency. Now, you know, maybe you dial that back a little bit, but still, even then, it's going to fundamentally change how accounting is done and the business model of accounting firms. They had Ryan Stevens, who's the director of applied science at Ramp. He was there. He did a fireside chat and he talked about how, according to ramps data, that businesses that are spending a lot on AI are growing revenue 6 to 7 times faster than those that aren't. Blake Oliver: [00:05:28] What's also interesting is that they're not seeing widespread layoffs from these companies that are adopting AI, and he thinks that where the layoffs will happen will be in the future, potentially if it happens. But it's not going to come like internally at bigger firms. It's going to be when small firms leverage AI to take work or beat out the bigger firms. And this goes to what we've been talking about in recent episodes, about how I think that small firms are going to benefit the most from AI, because now, as a small firm, you can do the kind of work that you could only do at a big firm with lots of people and lots of experts and lots of leverage. Jeff Wang, he's the former former global CIO at EY. He said that at EY last year, for every $1 they invested in AI, they generated $6.50 in revenue. So that's a six times return on investment from AI. But it's not like cutting costs. David Leary: [00:06:33] That's tied to that because that's we can talk about e AI issues in a little bit. Blake Oliver: [00:06:38] Well, I think I had another hallucination problem right. David Leary: [00:06:40] Yes. Blake Oliver: [00:06:41] Yeah. So okay. Save that one. Um, you know, and very few firms, right. There are very few firms are actually like deeply AI or what you call AI first, right? Like 7% of firms are AI first. That's according to David for Jerry. He's the chief AI officer at Eisner Amper. Only 1% are AI native and the other 90% are buying tools. And they're getting a small bump right now, but they're still struggling to implement them like we are at the very beginning of these AI agents permeating the larger firms, and especially when it comes to tax and audit. What was interesting was listening to the panel discussions where you have these tech experts at large firms like Jim Balk from Withum talking about how they're starting to get calls or complaints in meetings from tax partners who are now seeing billable hours drop what they call charge hours. The charge hours are dropping, and the tax partners are freaking out because they're selling time, and these tools are making them efficient. And now their efficiency is eating into their revenue. And this is exactly what we saw when CAS practices when accounting and bookkeeping practices started making the switch to cloud, they really, really quickly had to change how they build. They couldn't bill for time anymore. I had that experience. I switched to cloud my efficiency. My productivity went up so much that my charge hours, my billable hours went down 80%. And like the very next month, I fixed my fees and I stopped charging for time. So I think we're going to finally see the same thing happen in the big firms. And I think this is going to be Ron Baker's dream come true. The death of the billable hour will happen in the next. Who knows how many years? 5 or 10. David Leary: [00:08:27] Bill for one hour. Just a crazy high cost now. Blake Oliver: [00:08:30] Well, yeah, but except you know what? What client is going to put up with, you know, thousands of dollars per hour from their accountant, right. So I think it's just going to have to do it. And, um, one of my panelists, Becky Munson from Eisneramper, she, um, runs the SaaS practice there. She said that cloud took them 15 years, but she thinks that AI is going to be 15 months, so it's fast. Right. This is happening very, very fast. Yeah. So, um, I just one more thing I want to highlight. Alan Colton was there, the private equity expert in accounting, and he gave a talk and he had some crazy stats. He predicted that by 2030, in four years, accountants are no longer going to be preparing financial statements for tax returns. And that 80% of the current work value in accounting is going to drop to zero. But but the remaining 20% is going to grow thousands of times in value. So that's what we have to focus on. And so it's funny because he had those crazy stats, but also the message was, it's never been a better time to be an accountant because all of that work that is just crushing us is going away. And we can actually focus on the, the good stuff. You know what we call the advisory work. The other stuff. David Leary: [00:09:48] Is even better at. Yes. Blake Oliver: [00:09:50] Well, we can argue about that. But anyway, you know, that's. So anyway, I wanted to thank, you know, for bringing me out to that. That was a lot of fun. And, uh, it was great to great to see what's happening in the larger firms because, you know, here on the show, we talk a lot about what's going on in small firms. And I got to really see what's going on in the big firm world. And it's funny because they're having like the same problems. Actually, sometimes it's worse because it's harder to change that business model. David Leary: [00:10:14] Yeah. So let's talk about Intuit. So that was the other big, big, big news, right? So Intuit had their Q3 earnings, right? They, uh, they had everything's up. Right. Things are up, right. Everybody except for their stock price. The street is still not happy with Intuit stock price. Intuit actually announced layoffs. So Intuit's laying off 3000 people across the board. Blake Oliver: [00:10:37] And what was surprising about that is normally when a company announces big layoffs, they actually get rewarded by the markets. David Leary: [00:10:43] In the last year and a half, if you if you laid people off and said, we're going to focus on. On AI. It has been helping people's stocks, but Intuit is getting destroyed from this. Blake Oliver: [00:10:52] It was 17% of their global workforce. They're going to lay off 17% and the stock price just dropped 20%. And just to put that in context for everyone, their price stock price as of today, Wednesday, May 27th, is down 59% over 12 months. David Leary: [00:11:08] Yeah. And all everybody's is down 50 to 60%. All the SaaS companies, because everybody assumes AI is going to take all this work away. Right. And you've made a comment, I think like, oh, TurboTax is screwed. You know, these these apps like black or these startups are going to do this. But like, if you really step back and I just saw all these LinkedIn posts about Intuit, like they're dead. They're cooked. It's over because of AI. But if you really step back, I think there's two camps. One camp is AI will never do accounting and bookkeeping, which I think at the basic, basic level, the all the work probably not going to happen. I've kind of been that camp. The second camp is AI cannon is going to do accounting and bookkeeping, which is basically what Alan Colton just said, right? Blake Oliver: [00:11:52] Yes. David Leary: [00:11:52] Okay. So my opinion is if you believe either one of these is true, if you believe A is true, it's accounting is never going to do accounting, bookkeeping, Intuit then is not screwed. And then B, if, if it is true that AI is going to do accounting and bookkeeping, right? All that work into it, and it's millions and millions of customers are going to benefit into it might benefit from it more than anybody. Right. And this notion of like, oh, it's going to take TurboTax work away. I'm not sure TurboTax is almost free as it is. Let's just when I say free hundred bucks, 150 bucks, it's basically free, right? Blake Oliver: [00:12:29] Turbotax for most people, that's not a small amount of money. David Leary: [00:12:32] That's true. But but TurboTax and these aren't for discussion numbers. Turbotax did about 41 million returns. Uh, so, uh, or tax professionals combined do to about 90 million returns. H&r block does about 1516 million returns, and then DIY other software is about 30 million returns. So of those four numbers, the. You. If you read LinkedIn and you read the street, the bet is 41 million. The TurboTax returns is going to get hit the most by AI. I predict it's going to be the paid tax professionals 90 million returns. Those returns are going to get destroyed because a lot of those returns. I'm paying 1300 bucks a year for two different returns. So what's that, 2600 bucks? You don't think I'm going to be looking for an off ramp? Blake Oliver: [00:13:17] Yeah. No, actually, that's a really good point. Um, because the AI stuff will enable software companies to do the more complex returns like yours. David Leary: [00:13:26] Like you just said, because it's like, how many K ones? 20 K ones. Blake Oliver: [00:13:30] Yeah, that's that's a, I think that's a decent argument. David Leary: [00:13:33] I, I think Intuit's going to benefit from this. Blake Oliver: [00:13:36] So are you buying more Intuit stock? David. Yeah. David Leary: [00:13:39] I only go for stocks and I've been destroyed. Oracle because because of NetSuite I have zero into it and I've Sage my poor. These are the only stocks I own. Blake Oliver: [00:13:49] Portfolio has been destroyed. David Leary: [00:13:51] That's like straight up buys. I mean, who knows what. Blake Oliver: [00:13:54] So you're gonna you're gonna you're gonna reinvest. You're gonna buy more. David Leary: [00:13:57] Buy more. Yeah. It's I mean, I think long term, everybody's got to use a gel. So one of these four is probably going to. Blake Oliver: [00:14:04] According to my quick research just now into its. David Leary: [00:14:07] Is down even more since we started the show. Blake Oliver: [00:14:09] Well, no, no, but so TurboTax accounts for 27% of Intuit's revenue. It's about 5 billion of the 18.8 billion in total revenue for fiscal year 2025. So I mean, that's the thing to think about is, and I guess this is why I'm I'm with you, I think, David, on this stock price, because let's say that let's, let's say that AI is a some threat to TurboTax. Okay. It's 27% of their revenue, but how much is it actually going to eat up? Like you said, it'll go after the small tax pros first, right? The the mom and pop shops because the, the it'll be easier for you to have like a good experience and do a complex return and be confident in it with AI. So you might be more willing to go to something like a TurboTax. And if Intuit can adapt TurboTax, you know, I haven't seen it recently. Like it feels very much like it used to be. Like they haven't really rolled out the new AI stuff, but if they can. David Leary: [00:15:09] Do 40 million returns, if they just get a 1% improvement from AI, that is huge to into its bottom line. They get the ripple effect that nobody else has set up to scale from AI in this way. Blake Oliver: [00:15:20] Well, and then there's also just the fact that like AI could help them with all these other business lines they have, right? Like, like QuickBooks. And I don't think, as I've said on the show before, I think we both agree that AI is not going to disrupt QuickBooks because it's not like people are going to be like coding their own general ledgers. David Leary: [00:15:38] And there's not that much I still agree. Like, yeah, the productivity boom. I think I've said this before on the show, from Non-cloud to cloud desktop software to cloud was like 90% productivity improvement. You just said in your own firm, right? You saw this. Blake Oliver: [00:15:50] Yes. David Leary: [00:15:51] Like AI to squeeze that extra 10% on top of cloud accounting. Cas, it's going to be hard. Like the CAS, the CAS gains have happened already in the last 20 years. They really haven't happened in tax and audit. And you're going to see those bumps. But Intuit is set up to benefit from these. If anybody's going to benefit from efficient AI, it probably will be Intuit because it just there it's the multiples, right? If they if they can take advantage of 2% better AI, it's huge for TurboTax. It's huge for Intuit. Blake Oliver: [00:16:22] Thanks to our live stream viewers for joining us. Hi, Jeffrey. Jeffrey says, I like cats and taxes. Great to have you with us. We've got Steven Hawthorne here as well. Steven is a second career accountant, loves the podcast. Thanks for tuning in live. Uh, we've got VGONYEAVE. Hello from Portugal. Just hanging out tonight, doing some laundry in our Airbnb in Lisbon. I got the notification and decided to join live. David Leary: [00:16:47] Amazing. Blake Oliver: [00:16:47] Glad we could keep you company while you do your laundry. And we've got Coby Block. Surprised I caught a live stream. Love the podcast. These podcasts help me gain insight into the accounting world that I'm soon headed into. Awesome. Hey, what do you think about the Intuit stock price? Are you a are you a buy side or are you going to sell on this? I would love to know. And and zero is kind of in the same situation. Zero stock over 12 months is down 58 almost 59%. It's crazy. If you had bought into it in zero stock five years ago with Intuit, you would be down 30% and with zero you would be down 41%. So that's crazy that that that the market is doing this to them. The street. I mean, I don't know, maybe there's something we're missing. David Leary: [00:17:31] In the layoffs. And I've seen this ship and this is Intuit's strategy. It's been like this for a long time. They do layoffs. People lose their job on July 31st, and they post. The new fiscal year goes into effect and budgets go in effect. And August 1st, and then they rehire a thousand people, right? Over and over again, because what they're doing is you're shifting the boat. And I saw this. Let's go back to the desktop to online transition. You had and you've worked at a big company, right? You have people that are entrenched in like this mindset and or they don't have the skill set to code for cloud, or maybe they don't have the skill set for AI. And so they lay off 800, rehire 300, lay off 700, rehire 400. Right. And they went through a cycle 2 or 3 years in a row to, to have a whole new company. And it's probably gonna, they probably will lay off people next year, again, the year after, because they're going to have a whole new set of employees. You just can't tell your current employees be AI coders now. It just doesn't work. You have to let them go and rehire new employees. And that's kind of what's going to happen. Blake Oliver: [00:18:31] Let's thank our next sponsor. And I think this is a new sponsor for this episode. Value builder system, is that right, David? David Leary: [00:18:38] Yes. New sponsor. Blake Oliver: [00:18:40] If you run an accounting firm, you've probably watched this happen. A client sells their business. They call their wealth advisor, their attorney, their consultant. And you find out about the deal when the K-1 hits your desk. It's happening more than you think. 12% of business owner clients got a written offer to buy their company in the last year. When that offer lands, it kicks off a wave of high margin advisory work, tax planning, estate work, succession planning, quality of earnings engagements that often run into six figures. But to most of your clients, you're the tax pro, so the work goes elsewhere. Value builder is an exit readiness platform built for accounting firms. We give you the tools and certification to start the endgame conversation with your business owner clients before someone else does. In a typical 2 or 3 partner firm, our data shows a hidden million in advisory fees sitting inside your existing client base. To see how value builder helps you move from five figure compliance fees to six figure advisory engagements, head over to The Accounting Podcast dot promo slash value. That's The Accounting Podcast dot promo forward slash VALUE, and that sounds like exactly the sort of thing that accountants are going to be moving more into as that tax work gets automated, more time to help clients plan their exit. So it's great that it's great that value. David Leary: [00:19:59] Timing. Blake Oliver: [00:19:59] Value builder system is a sponsor. Thank you. Value builder system. Okay, we got to talk about the Trump IRS settlement. It's kind of wild. So go go ahead. David. Sounds like you know it. David Leary: [00:20:16] It's it's at this point, it's not even shocking if that makes any sense. Like, of course it went down this way, but I think it like accountants should be very mad, like in the end of okay, but you want to cover the high level, what happened, how this then? Blake Oliver: [00:20:32] Then I want to get your opinion on this. Right. So the US government agreed to permanently drop current tax claims against President Donald Trump. This is according to a document that was posted by the Justice Department. Yeah. The government the IRS is barred from examining or prosecuting Trump, his sons and the Trump Organization over current tax examinations. And it also says that the government is restricted from investigating Trump's family, affiliates and others tied to the matter. David Leary: [00:21:02] It's like a pre pardon for future shenanigans. Blake Oliver: [00:21:06] It it basically gives the Trump Organization his family a different tax treatment than ordinary taxpayers. That's what former IRS commissioner Daniel Werfel said. And he doesn't know of any precedent in which the IRS has agreed beforehand to permanently stop examining previously filed returns for a particular person or business. David Leary: [00:21:27] And that was my thought. Before I saw Danny's article, I was like, I'm sure if I talked to every single accountant, not one has a client that has this sweetheart kind of deal. And this is where you as accountants have you. I tell you all the time, you can control the political narrative in this country. Tell your clients, hey, just to let you know, the president and his family is getting a sweetheart deal from the IRS, which he which he runs. So the president creates a legal scenario to sue basically himself because he's running the organization. And then since he's the plaintiff and the defendant, same time he, he he lets he creates a settlement between the two out of court before it actually gets to court. Or a judge questions it in any way, shape or form. And then here's the other crazy part. It's going to set aside that, uh, that fund the money because Trump's trying to play like this. Money's not coming to me. It's going into this fund. If you are prosecuted, like, you know how the AICPA the. Blake Oliver: [00:22:22] Sorry, it's the it's the anti weaponization fund you're talking about, right? David Leary: [00:22:25] That's fine. Blake Oliver: [00:22:26] Yes. It's like a nearly 1.8 billion fund that will compensate people who say they were unfairly investigated or prosecuted for political reasons. David Leary: [00:22:35] Yes. Kind of like we were by the AICPA for for the 150 hour rule. Maybe we should apply for this, but I digress. If you think about that though. So Trump is going to win a lawsuit for 1.2 billion. Whatever it is, he's going to put that money in this fund. Shouldn't Trump have a gain a taxable gain first? You can't just shove it in that fund and pretend like I never really got the money. Blake Oliver: [00:22:59] I don't, I don't. Well he didn't. It was. So it's part of the it's the settlement that he drops the $10 billion lawsuit against the IRS. And they're going to create this fund to pay victims of whatever of like government investing the fund. David Leary: [00:23:14] Is this a Trump creation? Like that's what I don't know. Blake Oliver: [00:23:17] It's the it's it's the government. David Leary: [00:23:19] Forcing the IRS to create a fund. Blake Oliver: [00:23:21] I guess so. Yeah. Or the Justice Department or. No, the Treasury or it's. David Leary: [00:23:26] That's what I said. It's not the craziness of it is not the surprise, but the fairness is definitely questionable. There's not one accountant that listens to this show that has a client that is immune from IRS investigations. Blake Oliver: [00:23:39] And the question is, does the administration even have the authority to enter into a settlement that limits IRS audit activity like this? And, you know, there's some sort of like 1998 law that restricts interference in tax audits. So did the white House interfere? And the signatory to the deal is IRS Chief Executive Officer Frank Bisignano, who is the chief, the CEO of the IRS, right, which they created as a runaround so that Congress doesn't have to like they don't have to get approval from congressional. David Leary: [00:24:15] Approval for a commissioner. Blake Oliver: [00:24:16] Yeah. So I feel like as with many things that happens with Trump, there's going to be legal challenges. And just that list there seems like this could all be invalidated. But of course, you know, and we're not going to find out for a long time. David Leary: [00:24:31] And I think this sets precedent, right. You have the IRS leaked tens of millions of taxpayers records to Ice and Homeland Security. There's going to be class action suits. I mean, because now it's very clear lawyers are like, hey, we might be able to settle out of court if the suits are big enough. We are going to see a crazy class action suit on behalf of millions of taxpayers. I argue, you could argue maybe they're not citizens, but they're taxpayers. Blake Oliver: [00:24:59] Let's talk about the Pcob and the SEC. Since we're talking about the federal government. I wanted to get to this last episode and we we didn't. So I want to make sure we do. The Pcob is considering significant staff reductions. That's according to the Financial Times. And they're considering reductions, especially in their inspections division. And this is part of a broader restructuring aligned with Trump administration priorities. So that's great news. If you are a PCAOB inspected audit firm, because it sounds like they're cutting back on this. The, uh, the other thing that I saw is that SEC chief accountant Kurt Hole recently said that the PCAOB should rescind its separate auditor independence rules and instead rely on the SEC's independence framework. And he said that the SEC expects to revisit auditor independence rules over the next year, and they may later pursue formal rule updates on more complicated issues. And but nothing. David Leary: [00:26:10] Has happened yet, right? I know there was talk in the past about SEC taking over PCAOB, but really they just want to take over, not the actual organization. They want to take over what they're responsible for. Blake Oliver: [00:26:22] Well, But this may be a precursor to eliminating the PCB because the SEC is building its own specialized enforcement unit focused on auditor misconduct. According to Bloomberg Tax. So put all this together. You've got the chief accountant at the SEC saying that the Pcob should drop its own separate rules for auditor independence. You've got the Pcob itself deeply cutting or considering cuts to its enforcement division, and then you've got the SEC building its own enforcement division. I mean, if I was trying to eliminate the Pcob, that's what I would do first. David Leary: [00:27:05] Yeah. Blake Oliver: [00:27:05] And then I would just roll its responsibilities into the SEC. And you have to do that first because you can't just eliminate the organization and then not have any enforcement that would get blowback and that would cause problems. David Leary: [00:27:17] That's how we do things lately in this country. Why not? Let's go for it. Let's see what happens. Blake Oliver: [00:27:21] So, uh, that is kind of like what, uh, what might be happening. All right, David, let's thank our next sponsor and that is on pay. 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Pay can handle unique requirements without adding complexity, and AMP keeps pricing simple to everything your clients expect, from multi-state filing to off cycle pay runs. It's included no hidden fees and no surprises. To book a demo. Head over to The Accounting Podcast dot com slash The Accounting Podcast dot promo forward slash ONPAY. David Leary: [00:28:42] So before we get off the IRS, did you see the news that came out? The new report from the Treasury Inspector general that I. Yeah, IRS this this is insane number. Between 2022 and 2024. So that's three years. Basically, they've received $3.2 billion in payments from taxpayers. And they don't know who it's from. But because people write a paper check, they don't put their name on it. They somehow pay on the website and they don't somehow tie it to their account or log in. I don't know how this happens, but people are sending $3.2 billion of cash to the IRS and not making sure they're getting it tied back to them as an individual or a corporation taxpayer. Blake Oliver: [00:29:24] Well, and the good news is that the IRS was able to match about 3 billion of that. Yes, to the correct taxpayers. But that still means that 218 million is unresolved. It's just sitting there waiting. And the problem is that they don't have a centralized system for this. David Leary: [00:29:43] Yeah. They said they have spreadsheets, manual tracking, different processing centers. It's it's. Blake Oliver: [00:29:50] It's, it's disconnected systems, right? You've got like processing happening in Ogden. You've got it handling in Kansas City. And so yeah, they're not talking to each other all that well. David Leary: [00:30:04] If people send money orders, which seems really risky, if you owe money to the IRS to send a money order, if that gets in the. Yeah. Blake Oliver: [00:30:10] So, so listen to this. When taxpayers contact the IRS about a missing payment and the frontline staff on the phones can't locate it, the matter gets referred to accounting operations as a, quote, hard core payment tracer. That's what they call it hard core payment tracer, hard core. And then these tracer requests are tracked manually in spreadsheets and merged in and managed inconsistently across the three different offices where these payments are received. So that that is that there you have it. David Leary: [00:30:43] It's it's a crazy amount of money is being sent. Blake Oliver: [00:30:48] Speaking of taxes, did you see the survey, that survey data point that 78% of accountants said tax season caused measurable damage to their sleep, health, relationships and decision making? Half slept fewer than six hours a night during busy season. 70% caught errors or near misses in the final 48 hours before the April 15th deadline, 44% had to repair personal relationships after the season ended. Well. David Leary: [00:31:15] You could also think of this stat stack this way. So they say eight out of ten tax professionals finishing busy season with measurable damage to their health, sleep, relationships, relationships and decision making ability. So we have 5000. So basically 4000 of our listeners, Blake. Are pretty much suffering right now. Blake Oliver: [00:31:37] Well, we've got we've got on an annual basis, I calculated over, um, it's like 100 to 200,000 listeners depending on how you calculate it. Right. So that's, that's a lot. That's tens of thousands of people at a minimum. David Leary: [00:31:53] 80% of our listeners are suffering. So I'm sorry for all of you. And hopefully next tax season will be better. Blake Oliver: [00:31:59] And then they have to listen to us and they have to suffer more. David Leary: [00:32:01] Yeah. Blake Oliver: [00:32:02] You know, it's like, I don't know what we're doing to help. David Leary: [00:32:05] But do you see that half of all responses said they slept fewer than six hours per night. Blake Oliver: [00:32:11] Yeah. David Leary: [00:32:12] That that is not healthy. That will catch up to you and aid you, and you're going to risk of heart attack and all the other stuff. Blake Oliver: [00:32:20] By the way, this comes from a self-assessment of 438 US accountants that was completed in the four weeks after the April 15th filing deadline and was published in CPA Practice Advisor. And the author is Atindra Patel. David Leary: [00:32:35] The one crazy stat in this, which is so silly 35% identified deadline week panic is their top pressure point. Blake Oliver: [00:32:43] Yep. David Leary: [00:32:44] Just file extensions everybody. Just just file extensions for every client. And then if you get their stuff done, great. If not, that's extensions filed or make them pay you extra to have it by the deadline for scheduling return scheduling. Blake Oliver: [00:32:58] Yeah. David Leary: [00:32:58] Don't just accept this deadline and then put the stress on yourself. You don't have to do that. Blake Oliver: [00:33:04] The small firms are hit the hardest. Um, larger firms with 51 to 200 employees scored noticeably better than firms with 6 to 15. And that's got to be because you know, more people, more systems, more processes, spreads that out, reduces the damage of busy season. So it's interesting because normally we associate larger firms with more stress and more hours. But in this case, when it comes to busy season, it's the small firms that are hit the hardest with stress and anxiety. David Leary: [00:33:30] Right? Different kind of work. Blake Oliver: [00:33:31] Yep. All right. Oh yeah. Audit versus tax. Good. Good point. Uh, here's another tax story that I just wanted to highlight real quick. Um, Governor Newsom of California is floating a software tax to raise billions of dollars. Newsom wants California to apply sales tax to cloud based software sold online, which is a category that the state currently does not tax. And this would have a major impact on software vendors such as Microsoft, Salesforce, Oracle, and basically every single startup that's based in California. Yep. Under the proposal, the transactions, the sales of software as a service would generally face the state's 7.25% sales tax, with higher rates possible where local taxes apply and it would generate. According to the administration, about 1.1 billion in state and local revenue in the next budget year and about 2 billion annually thereafter. David Leary: [00:34:32] Haven't a lot of SaaS companies, I noticed. In general, I never seem to get bills for the perfect 39.99 a month. I've been getting taxed for a while. Blake Oliver: [00:34:41] More and. David Leary: [00:34:42] More companies. Blake Oliver: [00:34:43] Yeah, well, they tend to grow. And then as soon as they get big enough, they realize that they're not compliant, right? And then they start charging the sales tax, collecting your address. Yeah. Okay. David, you had a story about like EIEEEIEY and AI hallucinations. Another big four got caught. David Leary: [00:35:02] Yeah. So e Canada had a cyber security report, um, on because on loyalty programs and they pulled it down because GPT zero, which is like a research company, discovered that this this had fake citations, fabricated data, and sources that didn't exist to support the claims. It cited a nonexistent McKinsey study. It's a typical stuff, you see seeing these hallucinations that happen in this AI stuff. Um, now here's what's crazy. They're using this to promote their own cybersecurity services and take a step back now. Deloitte, who also had their own hallucination issues, right. Twice now they had to pull back reports. They unknowingly created AI slop. Right. And had to pull it back and dial it back. So ey Deloitte, you know, the big four, they're spending billions, billions and billions of dollars to be the AI consultants of the fortune 500. But they keep shooting themselves in the foot. Like how how is this going to work? Blake Oliver: [00:36:10] I was going to work like. David Leary: [00:36:12] Like they're trying to create this big business model. Look, we're the A experts, fortune 500. We're going to show you how to use AI in your company, even though we can't successfully do it yet in our own. Blake Oliver: [00:36:25] Yeah, we're going to show you how to how to stay safe. David Leary: [00:36:28] Or maybe it's like. Blake Oliver: [00:36:28] The threat of hallucinations. And then it shows up in their research reports. David Leary: [00:36:32] Do as I say, not as I do right. Like maybe they're making this mistake. So now they can really go back to clients and like, look, we figured out all the possible mistakes and blunders you could make with AI. Well. Blake Oliver: [00:36:43] I think the consultants are starting to figure out that they're they might be in trouble. There was a recent Reddit discussion in r slash Big Four. And this user old head 52250. David Leary: [00:36:57] That. Blake Oliver: [00:36:58] Asks whether consultants are basically just becoming intermediaries for AI tools like Claude rather than true problem solvers. And an example is that on a large multi frame project, cloud is cloud. Clod is now being used for strategy configuration decisions, process design, workshop preparation options analysis and client recommendations. So the question is why wouldn't clients just go directly to cloud to do this stuff themselves. And I think that's a really legitimate point. If all you were doing as a consultant was synthesizing information like Claude is doing and then creating plans and recommendations, like, which is a lot of what consulting seems to be. David Leary: [00:37:40] And I think anything with a virtual in front of it virtual marketer, CMO, virtual CTO, uh, virtual, um, it, uh, virtual CFO, any of those virtual advisor type roles, those virtual team members, you totally could just have AI do. Blake Oliver: [00:37:58] Well, I think the junior roles for sure. And that's what the comments are talking about. Like these, these junior roles where it's like put together a slide deck or take all this information and make a report. I mean, AI does that really well, just taking information from one format and putting it into another. Like you don't need people to do that anymore, but a good consulting firm is doing more than just that. I mean, the joke is that consultants just, you know, take their templates and put your information into it and make PowerPoints and like, they don't actually, you know, they just give you justification for the decision that you already wanted to make. But I think good consultants do way more than that. They give you insights, right? And so like that is still going to be there because somebody has to like manage all this AI stuff. Somebody has to look at it and, and train it, not train it, point it in the right direction, right? Like edit it, like figure out what's right and what's not and keep it running on the rails and not off the rails. So. Because it gets things wrong, right? And then what? It gets wrong. Spirals. And so somebody has to be watching it all the time. And so, I don't know, going back to this question about like job disruption, I think you'll be able to have like a small consulting firm or just even a single person able to do work that used to take a whole team at McKinsey or a whole team at Deloitte. Now one person can do all of that. So what's the value of a firm like McKinsey or Deloitte anymore? I guess you've still got the brand right, but the value is not in the pyramid structure and the labor that you get as being part of that firm, that whole team that works under you, you don't need it. David Leary: [00:39:42] You're going to want to pay. You're not paying to get a team. You're paying to get the answer. Blake Oliver: [00:39:46] The one expert. David Leary: [00:39:47] The one expert. Blake Oliver: [00:39:48] The person who really knows what they're. Has the experience to to know whether or not this AI output is right and guide it. And that's the word I want to use. Guide it in the right direction because it has to be guided. It can't just go on its own. It gets lost. I want to show you a chart that I spotted from The Economist on Instagram. And the headline is, is AI putting Graduates out of Work already? And this is one of those bubble charts that can be a little bit difficult to read at first. So I'll kind of walk you through it. David. Basically, the size of the bubble represents the number of graduates in the degree. So you can see that like psychology is big. There's a lot of psychology grads. The up and down the y axis represents the percentage change in the employment of these graduates over 2022 to 2024. So if it's above the line, there's been a net gain in employment. And if it's below the line, there's been a drop in employment. And then left to right. That's the exposure to AI of that of the people who highest exposures this way. David Leary: [00:40:57] Gotcha. Blake Oliver: [00:40:58] Yeah. So highest exposure is to the right and lowest exposure is to the left. So there's some interesting data points in here. Uh. Not psychology. Philosophy is on the low end of the spectrum and has had a gain in employment. Even though it's a very small, uh, it's a small circle. There aren't that there aren't a lot of, of philosophy graduates. They're doing, they're doing better. Right. They're up, you know, 4%, it looks like. Um, I mentioned psychology. They're kind of in the middle and they're down a few points. Uh, civil engineering is over on the low end. They're kind of a tiny little bit down, but not much. Um, communications more exposed. It's dropped a lot like between 5 and 10%. That makes sense because AI is writing, doing a lot of writing. You don't need a lot of junior people doing a lot of drafting. The interesting part is accounting is on here. David Leary: [00:41:57] Yes, that's what I was going to say for the win. For the win. Blake Oliver: [00:42:00] So accounting, finance, computer science, information sciences are fairly big bubbles and they are on the high end of the spectrum. They are those are. David Leary: [00:42:11] The accounting is the bubble that's furthest to the right. Right. Blake Oliver: [00:42:14] The accounting is the furthest to the right, but it's also on the line. On the vertical line it's zero. There has been no change in employment of accountants. And from everything you hear you would think that it would be plummeting. But accountants are doing just fine. No change in employment. Finance is down a few points. Computer science is down almost 10%. Information sciences, which I take to mean like it kind of jobs. That's down 15%. But accounting we're we're we're doing great. And so then the question is, is this just something that's waiting to happen? Or is there something about accounting that is resistant to job loss from automation, even though a lot of the job can be automated. You can't seem to get rid of the entire job. David Leary: [00:43:09] Well, how much of this has to do with salary and things like that? Because I think we had that chart last week where five coding per hour per day, using AI to vibe code or to code is way more efficient than having a computer engineer. Computer science, right, as you have. But to have the bookkeeper data entry, it's like you're comparing 50 bucks a day in tokens versus $60 to pay the human or whatever it is, right? So is this have a lot to do with that? Accounting salaries, just like some magical point where the, the cost of AI just isn't going to offset that enough at this day and age. I don't know. Blake Oliver: [00:43:42] Yeah. Yeah. Really. It's it's it's interesting. It's just I don't have an answer. And I'm kind of surprised by that chart. Let's thank our last sponsor of this episode. And that is maxima. David do you want to give this one a read? David Leary: [00:43:56] It's the 15th day of the month in. Your accounting team is scrambling to close the books. Sound familiar? Controllers and accountants everywhere are stuck in this cycle. They're pulling data from dozens of systems, reconciling transactions line by line and racing against deadlines just to get accurate financials. While AI is transforming every other part of the business, accounting teams are still drowning in spreadsheets and manual work. That's where maxima comes in. Maxima is a platform built specifically for record to report operations. Their AI agents actually understand how accounting works. They pull data from your entire finance stack, apply your accounting policies, draft journal entries, reconcile accounts, everything prepped for human review. Companies like Rippling and Zendesk Desk already use maxima to cut their clothes time by up to 80%, while automating 95% of the repetitive work. Which, honestly, is kind of hard to believe until you actually see it. Imagine closing your books in days, not weeks, and having and actually having time to analyze the numbers instead of just assembling them. That's what it looks like when AI handles the prep work and your team handles the judgment calls to see why accounting leaders are making the switch to maxima. Head over to The Accounting Podcast dot ProAdvisor maxima, that is accounting podcast.io/max. I'm a. Blake Oliver: [00:45:10] Thank you maxima. And now let's pick a story from one of my dozens of app and tech news stories I. I have an app tech news. David Leary: [00:45:21] Funny story. Blake Oliver: [00:45:22] Okay, go for it. David Leary: [00:45:23] It's funny, but apparently x AI. So that's Elon Musk. Ai company. He paid the employees to give them their tax returns so he could train grok on the employee's tax returns. Blake Oliver: [00:45:36] No way. David Leary: [00:45:37] And you know what? He promised to pay each person for each return. Blake Oliver: [00:45:40] What? David Leary: [00:45:41] 420 bucks. That guy is obsessed, man. He's obsessed. Blake Oliver: [00:45:46] That's pretty funny. Did it work? David Leary: [00:45:47] He hasn't paid yet. Blake Oliver: [00:45:50] Oh, he hasn't paid them. David Leary: [00:45:51] Yeah. Blake Oliver: [00:45:54] Well, you. David Leary: [00:45:55] Know, he owes a bunch of employees $240. Nobody, not one person has been paid yet for this. Well, we're two months past the tax deadline. Blake Oliver: [00:46:03] You mentioned X AI Elon Musk's AI company. Right. Well, it's part of space and SpaceX is going for an IPO. They they they filed the paperwork with the SEC. We can now read it. And, um, you know, there's been a lot of discussion about it, obviously that, you know, I, I know like investing expert or whatever, like I haven't gone through all the, the filing, it's enormous, but I just wanted to highlight some interesting bits from it. They got a lot of revenue, 18.7 billion in revenue last year. That's up 33%. But they lost 4.9 billion. David Leary: [00:46:51] And which is that revenue of the whole thing like space X plus Twitter and Grok plus Tesla. Did he roll all that together yet, or no? Blake Oliver: [00:47:00] No, it's space X and I know X AI is in there and isn't like. David Leary: [00:47:05] The satellite thing he's got. Blake Oliver: [00:47:06] Yeah, yeah, the satellite company Starlink. Um, and so there's a bunch of these, like the reason this is complicated is because we've got these companies that are kind of related, but not, and some are doing really well and some are not or are losing money because of investments. So for example, um, I just want to highlight before we go on that the losses, right. So in the first three months of this year, SpaceX lost 4.3 billion. That was like almost, you know, we're almost in three months, lost almost as much money as all of 2025. Right. And why? It's because of these capital expenditures. Expenditures. So the capital expenditures were over $20 billion. And a lot of that is investment in AI development. Like I'm assuming data centers, that sort of thing. So this is the problem with like loving space, which I do, but then also wanting to, you know, invest in the IPO is that you're not just investing in the rocket company or Starlink, which you're brilliant. You're also investing basically in Elon Musk's AI speculation with all these heavy capital expenditures. And so you have to take them both. And it's actually kind of brilliant. What he did right is that he's managed to like lump them together. So now you have to he's like, he's figured out a way to take a AI company public that nobody would. I don't think anybody would would invest in if it was standalone. But Starlink is a is a money machine. David Leary: [00:48:47] It's like a Spac. It's a Spac, right? Blake Oliver: [00:48:49] Well, it's kind of it's it's a little bit of, you know, financial engineering or stock market engineering, right. Starlink had 10.3 million subscribers at the end of March. That's almost double the prior year. And it alone generated 4.4 billion in operating income, which also more than doubled year over year. And so I'm really bullish on that. Like the idea that you can just get internet anywhere in the world with a little panel that you put outside. I mean. David Leary: [00:49:15] That that business model, you can understand, okay, I'm people buy this device and they pay a monthly fee to get internet. It's very it's a business model. You can comprehend. Oh, the rocket company, they get huge government contracts like a defense contractor. We understand how that works. The AI business model is the one that nobody understands. But you're right, he rolled that into the other businesses like it's a it's a special. Blake Oliver: [00:49:38] Company itself too, right? It's like, yeah, yeah. So and you have to really like basically bet on Musk because he owns 50% of the shares outstanding and controls more than 85% of shareholder voting power through Supervoting shares. So this is like investing in in Facebook because Zuckerberg controlled the company, right? You are you're betting on this one guy. And if he doesn't want to change his mind, nobody's going to make him. So. David, that's all the time we got for this week. If our listeners want to earn CPE for listening to this episode, where do they go? David Leary: [00:50:20] They can just go to earmark.app in your browser. And if you're on your phone and you go to earmark.app, it'll push you to go to the app stores, you install the earmark app, go to the accounting podcast. Since you already listened to the episode or watched it, you could just take the quiz and get a CPE certificate. If you watched listened half of it. You can just rewind, listen again, then take the quiz. Blake Oliver: [00:50:41] Thank you to everyone who joined us live today. Great to have you in the chat. Uh, coffee doggy said everyone that wanted to get into space got the opportunity a long time ago. It's not worth the 2 trillion lol. S&p 500 is going to be a liquidity bag for the normies. Reconcile financials says probably been no change in accounting because we've had a shortage for so long. I mean that that that makes sense right? Like we've had a shortage and now AI is helping with the shortage, but it's not putting us out of work. I like that TC tax man says I mentor at university. And this year's accounting job market was terrible compared to recent years, 50% slower than last year. Giles Pearson joined us as well and said the true experts plus an EAR the new model. And we've got Heather Smith here and he's consulting. Great to see you, she says. Have you discussed how the president's children are exempt from future tax audits? Is this really possible? So it's it's for America. It's for I believe it's for current years, right? It's like it's all the past stuff, not necessarily the future stuff, right. I could be wrong. David Leary: [00:51:46] That's what I think they were trying to think. In other Congress, people are trying to get an answer on. It's not really clear, but it feels like it's a future pardon. Like you can't look at any of our tax returns forever. Blake Oliver: [00:51:58] Regarding your suggestion to just put everyone in extension, David, I had a feeling that would get some people. David Leary: [00:52:03] Fired. Blake Oliver: [00:52:04] Up. Well, because as clear as clutter says, extension filings are just as stressful as return filings because you have to if you're going to pay the estimated tax, you have to actually do most of the return to figure out the tax owed. There's no extension of the tax owed. So even though you can extend the filing, you still got to tell your clients what to pay. And that means you got. David Leary: [00:52:28] 110% of last year and just move on. That's the fastest way to do it. Blake Oliver: [00:52:32] Send your hate mail to David. Send it to both of us at The Accounting Podcast at earmark.me. That's The Accounting Podcast at earmark.me. And as always, great to see you boring accountant. Every episode, and we had Aaron Cohan join us. Thank you. Aaron, thanks for joining us live. Hey, Aaron, it was so great to be at the Wave conference in Seattle. I don't know if I mentioned that on any of our episodes, David, but Aaron. David Leary: [00:52:58] Aaron runs her own little like because she always had to travel everywhere else for conferences. She decided, I want a conference in the Pacific Northwest. So she created the Wave conference. And it's a it's a female conference, right? Blake Oliver: [00:53:10] It's a conference for women in accounting. David Leary: [00:53:11] Conference. Blake Oliver: [00:53:11] For women. It was like, I don't remember the exact numbers, but like, um, maybe 150, I think, uh, folks, and it. David Leary: [00:53:18] Was some photos. That sounds about right. Blake Oliver: [00:53:19] It was in this beautiful, uh, space co-working space in Seattle in near the, over near the Seattle Space Needle. And, uh, it was really fun to go there. Um, so thanks for having me, Aaron. All right. We will see you all around next week. Thanks for joining us, David. Have a good one. David Leary: [00:53:39] Bye, everybody.