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What Is A Fair IRS Audit Rate? · The Accounting Podcast

• David Leary: [00:00:00] As a small business owner, I've had my share of accounting, tax, bank feed and app issues. Some could say I'm a mess, kind of like some of your clients. But as I reflect on the last three years of my business, the one app that I've had not any problems with is on pay. It's been set it and forget it payroll. Stay tuned to hear more from our sponsor on Pay later in the episode. And this goes back to the hammer I've been hitting, right? Like we as Accountants and bookkeepers can control the narrative for our clients. We can help formulate what they think about the IRS, what they think about taxes, what they think about accountants, what they think about, yes, we can educate them and accountants can change the world like it goes back to this like fundamental belief. Like we really can't agree. And frankly, this is a great example. I mean, he got attacked, but maybe all of Twitter should be going after all of mainstream media, letting them understand how the real world works. David Leary: [00:01:00] Coming to you weekly from the OnPay recording studio, this is the Cloud Accounting Podcast. Blake Oliver: [00:01:12] Welcome to the Cloud Accounting Podcast. I'm Blake Oliver. David Leary: [00:01:15] And I'm David Leary. Like, I just saw you in Phoenix yesterday. Blake Oliver: [00:01:19] It was great to see you in person. I posted a picture of us at a restaurant. We had some beers after we worked together for a while. I feel like meetings in real life are actually made better by remote work because when we do meet up in person, it's special. And that was my takeaway. David Leary: [00:01:38] From that topic. The more remote working will appreciate each other more and more in person. Blake Oliver: [00:01:43] Yeah, absence makes the heart grow fonder. David Leary: [00:01:47] And this is why I argue at conferences are more important than ever. Blake Oliver: [00:01:50] It is important to see people in person. I'm a big advocate for remote work, but I've never said we don't want to see each other in person. And so I think some of the best firms are leading the way when it comes to remote work. They're fully remote most of the time, but then they will use the money they use to spend on a physical office to bring their staff together throughout the year at different times, so at least annually, but hopefully more often. And you do a firmwide retreat. And it's not just for the partners, it's for everybody. And that that's a great way to build the camaraderie that continues throughout the year. David Leary: [00:02:23] And that's what we did. We had a five hour retreat yesterday. Blake Oliver: [00:02:25] We did, and we should do it every quarter. Now, David, I do want to pivot to a tweet that you sent out this morning. Sort of on a personal note, I know that you are getting you have ordered one of those electric mustangs and you've been having supply chain issues. As you tweeted out, you said, how come Amazon can do this with a $20 picture frame, but Ford can't do it with a 50 K automobile. How do you lose a mustang? Mach-e. I find it hard to believe that a company puts millions of automobiles on train cars or millions of dollars of automobiles and train cars and can't track them. And you put a picture of your Amazon order showing like every step of the way where it was. So what's going on? Is your where's your car? David Leary: [00:03:13] Some of it's supply chain. Right. So we had you have my wife ordered the car Christmas and preparation knowing I was going to have a daughter driving like we're going to need another car in like plan to head on. This finally goes into production in May, but we had to agree to not have a certain chip put in like the self parking chip because there's supply shortages. They don't have those, then they'll put that chip in later. So you had to agree like, Hey, we'll build your car one less feature. I'm like, Go you fine, build it. They built the car. Blake Oliver: [00:03:41] What is the feature that is missing? David Leary: [00:03:43] I think it's the Self-parking feature. Okay, so so it's an all electric vehicle, not your customized it, blah, blah, blah, put the deposit down and Ford kind of communicated a little bit. You got dates like, hey, you're we got your reservation successfully. Your car started production two weeks later. It was done. So May 23rd our car was done and that's this shipping expected date, July 12th, 2017. We were out of. Blake Oliver: [00:04:08] Town like a little more than a month. That's not bad. David Leary: [00:04:10] Yeah, five, six weeks delivery. But then you have to work with your dealer. So even though you order it directly from Ford, you still have to work with the local dealer. That's where they're going to deliver the car to. But nobody can tell us where the car is. And so it's just it's all like management of expectations, right? It's just a bad experience. Like I can order a $10 charger on Amazon and track it every little step of the way. But where are these cars like? Nobody knows where the cars are. And the best I can do is, you know, the Internet, the power of the Internet together. Right. People figured out like apparently there's an embargo in the trains going east to west into California. So all the trains are just stopped on tracks throughout the rest of the Midwest. Blake Oliver: [00:04:50] Why? David Leary: [00:04:51] Because California doesn't have enough room on the tracks right now in California. So they're limiting how much cargo is getting delivered to California. It's really straight. Blake Oliver: [00:05:01] To the ports. The ports are all back. David Leary: [00:05:02] Yeah, everything's backed up well. Blake Oliver: [00:05:04] So this is interesting because, you know, it's it's a classic customer experience screw up. David Leary: [00:05:09] Well, my wife's like to just forget the whole thing. Yeah. Blake Oliver: [00:05:14] So let's tie this back to accounting. I think that customer experience is the great frontier for accounting firms. If you can create an awesome customer experience, you can dominate and you can win business and you can succeed. You don't even have to be an advisor. You don't have to do this advisory services stuff. You don't have to like go out and add new services. If you just do what you do really well and deliver a great customer experience, you have a lot of opportunity. What's the parallel? To me, it's the status of a tax return. A lot of times in a firm, you sign the engagement letter, you send in your stuff as a customer, as I have experienced and you have experienced recently, David, being on the other side and then you don't hear anything for a really long time. And that's kind of similar to what you're experiencing right now. You don't know when this car is ever going to come. A lot of times, you know, a tax return. You don't know when that returns ever come in. David Leary: [00:06:02] They always don't know, right? Nobody. Even though it's just it's very hard to believe. Just figure out like, oh, your car is here and. Well, okay, that makes sense. It's there. It's stopped because of. This, but there's no explanations, right? So you have to just you just get really frustrated, like, where is this at? You know, is it. Blake Oliver: [00:06:18] And this is, you know. Right. And so I think the reason it doesn't happen is because it's a very manual thing. Somebody has to go in and look up stuff or they have to like dig into systems to find out where it is. Whereas Amazon has built this whole system where every package is tracked and all the inventory is tracked, everything is tracked automatically by computer systems, and that data is transparently delivered to the customers at all times. And we could do that. There's ways to do that in a firm. You can build systems that will automatically notify your clients every time their return moves to a different stage in the process. Unfortunately, like none of the major providers of practice management software have done this themselves. Like, I'm really surprised that that it's not a more common thing, and maybe it is, and I just haven't heard about it, but I feel like it's not all that stuff's geared toward like internal notifications, internal dashboards. The status of the return could be like waiting for information from client. And then once you have all the information, it's ready to start. David Leary: [00:07:12] It's the Domino's Pizza model. You can see the pizza Domino's track, you can see it. Blake Oliver: [00:07:16] Yeah, yeah. David Leary: [00:07:18] It's a better experience. It's just a better experience. And the crazy thing is, I think all these new electric cars have like five g cellphone technology built in them. They're constantly communicating with the cloud and I'm pretty sure you can't. The batteries can never be 100% zero. So these cars have power and they're probably going by cell towers. They know where the cars are like like this is what's crazy. But no, no employees at Ford, including Ford social media, including people at the dealership, nobody can tell you where the car is like. That's just bananas. Blake Oliver: [00:07:49] Amazing. David Leary: [00:07:50] I think somebody somewhere knows with the cars. Blake Oliver: [00:07:53] Well, you know what else is bananas, David? The response to the Inflation Reduction Act this week. We talked about it in our last episode in the context coming. David Leary: [00:08:04] So coming. Blake Oliver: [00:08:05] Yeah, well because it had just the news had just dropped we record on Fridays now and the news had just dropped on Friday that the Senate was going to pass this. I think they did it over the weekend. And so this week has been the whole political news cycle about what's in the act because we fully expect it to pass the House once the House decides to like stop being on vacation. I don't know why it's taking them time. I guess they're in no rush. David Leary: [00:08:31] Right. Blake Oliver: [00:08:32] And so so there's been discussion about like what's in the act. And we talked specifically about one provision, which is that 15% minimum tax on corporations making over is it over $1,000,000,000 a year in revenue and it's based on book income. So that's going to have a big impact potentially on Gap and faseb because now suddenly taxes for big corporations are going to be based on their book income, which has never happened before. So that was just one small provision. David Leary: [00:08:57] And then the piece we've also we've tracked a lot nobody is yeah is new funding for the IRS like that got rolled up into this bill. Blake Oliver: [00:09:04] So that was the big story in the bill that got mainstream coverage this week was that the IRS is finally getting the $80 billion that they need to both modernize. But also and this is the part that started to freak everybody out, step up enforcement, something like more than half of that 80 billion, maybe it was like 46 is for enforcement. And what does enforcement mean? Well, one of the things that means is more IRS agents and more after this. David Leary: [00:09:36] First, like, was it a mistake or like somewhere along somebody said there's going to be and it might have been Biden, I don't even know who actually said this first, but there's number 87,000 IRS agents got started getting tossed around everywhere. Blake Oliver: [00:09:50] Yeah. Yeah. So that number that number was pulled from a Treasury report released in May 2021 about how the administration hoped to address the tax gap. And the tax gap is the difference between what taxpayers legally owed to the government and what is actually paid due to tax fraud. And that figure was believed to be at least $381 billion a year, so 381 billion a year in taxes that don't get collected because the IRS doesn't have the resources to audit. And so people underreport their income, they lie on their taxes. Right. And so the administration had said previously, we're going to hire we're going to use the money to hire, or one of the things they could do is hire 87,000 agents. Now, is that really going to happen? The answer is how that could it happen? Where are they going to find 87,000 IRS agents? It's doubtful. David Leary: [00:10:44] Right? Yeah. But the talent shortage, last week's episode, if you read, where are they going to make these? It's not like stormtroopers. How are they clone them, right? They just bloop. Blake Oliver: [00:10:52] Yeah. Although, although if they did it, though, it's like another. It's another, like steak in the coffin of traditional CPA firms, because now you're competing with the IRS, hiring away these fresh college grads potentially, you know, like it's going to make the accounting talent shortage even worse. But I think the point is that. That number was plucked from that report and it was used as a fear mongering tactic to get clicks and to to get people riled up on social. David Leary: [00:11:19] In the tweets were crazy cable news but then some people would leave out the number and they're like, there's going to be one person, one agent for every American auditing them. Like the tweets were crazy, like. Yeah, it got really crazy people. Blake Oliver: [00:11:32] I mean, look, let's be fair. Like, getting audited is not fun, and the IRS can really mess you up big time. And sometimes they like the government overreach, like they will go to ridiculous lengths to, like, get the money and they will crush you. And there's no compassion. You know, like that really does happen. And that's where people get riled up because they hear these stories that really exist. Like if you ask me, like, that's one thing they should probably figure out is the PR of these audits of small businesses, often people who made mistakes or got tricked by a business partner who made all these mistakes and didn't pay the payroll taxes and all that stuff, and now their whole financial personal life is ruined. David Leary: [00:12:14] Yes. If the IRS would like to hire the David and Blake Consulting firm, we could help you with this image management problem you're having with these things. Blake Oliver: [00:12:21] You have a big event management problem because that's why people hate the IRS and why they're opposed to increasing the IRS is enforcement powers. Right. They would rather have no audits and have massive tax fraud than have the potential of being audited. David Leary: [00:12:40] This episode of The Cloud Accounting Podcast is sponsored by FreshBooks. I was in the FreshBooks website this week and saw this blog post. Five FreshBooks features accountants love. So I figured let's share it with The Cloud Accounting Podcast audience. So without further ado. Number one In-App estimates and proposals. With deep customization, you can create bespoke proposals for clients and even capture their e-signatures. Number two Pre-populated chart of accounts help you cut down on your setup times, and it helps clients feel confident when classifying their expenses. Three App Integrations Square Dropbox, HubSpot, G Suite, Gusto and Zoom. Time tracking allows your clients to take charge of their own time tracking payroll and make invoicing a breeze. Check out links you can require and collect payments up front to eliminate the need to chase clients that owe you money. If you want to learn about the benefits of working better together with FreshBooks, head over to Cloudaccountingpodcast.com promo FreshBooks. That is Cloudaccountingpodcast.com promo for Freeze HBO case. Blake Oliver: [00:13:45] I think we should put in context, like we like to talk about the numbers. David We should put in context like what exactly is going to happen and where we are now like with the number of audits, right? So oh, I was curious. David Leary: [00:13:57] Fact check segment like the epic check on this iris. Blake Oliver: [00:14:01] Test, you know, what percentage of individual tax returns are audited? There was some threads going around on Twitter like actual tax experts, preparers saying, you know, I've I've prepared tens of thousands of tax returns over the years and only a few dozen have ever been audited. You know, like, that seems crazy. Like that's really, really low, but it's actually possible. So according to the GAO, the government agency that puts together these numbers from tax years, 2010 to 2019, audit rates of individual income tax returns decreased for all income levels. On average, the audit rate for these returns decreased from 0.9% to 0.25%. I mean, that's really low. I feel let's just think about this, David. If you had a 0.25% chance of getting audited, I feel like a lot of people knowing that would cheat on their taxes. David Leary: [00:14:57] And the percentage is even lower for a higher income you make as ratios. Right. Most people are audited and we've talked about this before in the past are low income workers because those are easy to audit. It's it's the same, actually. Right. Blake Oliver: [00:15:11] I want to clarify that. That's not quite correct. So it's true that if you make very little income and you do this, you know, if you get these credits, you do have a higher audit rate than people who make more than you for tax year 2019, if you had from $1 to less than $25,000 of income, you had a 0.4% chance of being audited. And a lot of times it's because your return is really simple and you're claiming that what do you call it, earned income credit. Earned income tax credit, right. So they audit those because that's easy. And you can do that with relatively low skilled iris auditors, which is all they've been able to hire recently. Right. You go up and then it actually drops down from 25 K to 200 K, it's only 0.17%. And then from 200 K to less than 500 K, it's also 0.17%. And then you go up now, then it starts to go up. Once you hit 500 K, you go to half a percent and then it's a percent. If you're over a million and then it's 2.35% if you're 5 million or more. Oh, and actually they break out here. If you have the earned income tax credit only, you have a 0.77% chance of being audited. Blake Oliver: [00:16:20] But it's crazy. You could file 100 false earned income tax credit returns and only the IRS would only catch one or zero between one and zero of them. Right. So anyway, my point is that like, I don't know what the audit rate should be, but like, why is nobody talking about what is an appropriate audit rate? It seems like we have on the political spectrum, we have people saying like we need to audit more or the IRS is horrible. No. And there's even people are like, abolish the IRS like no audits. Right. But that doesn't seem reasonable. And so I wonder, like, why is there nobody out there saying like a position of authority, like some some organization that represents all accountants. Right. That could actually speak authoritatively on this and say, like, oh, you know, if we want to minimize tax fraud and we want to minimize the burden to taxpayers, we want to keep the audit rate as low as possible because it's expensive to audit people and it's an inconvenience. Right. But we also want to minimize tax fraud because we don't want honest taxpayers paying for people who are skipping their taxes. I think we can all agree on that. Right. That's the goal. So what should the audit rate be? David Leary: [00:17:27] But if you put out real numbers that are not sensationalized, it's boring. Nobody clicks it. Nobody's going to donate to your campaigns. So you're better off putting out tweets the way. What's your Taylor Green? What's your first name? Blake Oliver: [00:17:42] Marjorie. David Leary: [00:17:42] Marjorie Taylor GREENE. So you're better off doing tweets like Marjorie Taylor GREENE where talks about how 70,000 of these new IRS agents are all going to have guns like that. This is what gets people really scared and crazy. You start saying how they're all going to carry guns. Blake Oliver: [00:17:58] So the way the IRS responded to this fearmongering was because think about it, even if they hired 87,000 agents, what do you think the audit rate's going to go up to? I doubt they could increase it to half a percent on average or even a percent. David Leary: [00:18:11] Isn't it like even if you're still all those aches and downs, it's still like what each person has to handle. 4000 returns. Like the ratios are still insane. Blake Oliver: [00:18:19] Yeah, the phone calls they have, you know, something like 15,000 agents answering the phone calls and they each have to have 15,000 calls between them, which is why they only answer like, you know, less than like 10 to 20% of the phone calls. So so like even if if all they did was like answer the phone anyway. David Leary: [00:18:36] So perspective on the numbers. So let's say you're a tech shop and your best employee who's just a machine. What is your best employee burning through the number of tax returns a year? 150, 200, 304 hundred. Blake Oliver: [00:18:50] It could be I don't know, actually. I really hate how fast. David Leary: [00:18:52] I don't know. You do? We don't know this number. Blake Oliver: [00:18:54] You can do it. Well, I mean, I know of individuals who do hundreds or even thousands. David Leary: [00:19:00] Oh, you can't. Okay. Blake Oliver: [00:19:01] Yeah. I mean, it depends right. On the complexity. David Leary: [00:19:04] So, so so. Blake Oliver: [00:19:04] One can do. David Leary: [00:19:05] A lot. One agent could possibly review 4000 returns in a year. Blake Oliver: [00:19:09] I mean, but you couldn't audit them. Yeah. Like to actually audit. It's like that's in person. That's an in-person thing a lot of the time. Like all the audits we're talking about, you have to like meet with somebody, you know, the way they do it now, they wouldn't be able to do that many more. But anyway, I want to get back to what the IRS said. So the IRS had to come out and say, like, okay, none of this enforcement money, the 40 billion something dollars of enforcement money is going to be for anyone making less than $400,000 a year, which is also absurd and ridiculous because we know there's a ton of tax fraud that happens below 400,000 a year. But they always say like it's never going to impact anyone less than this amount. And of course it does. Right. So the AICPA, you know, they came out with a statement on the Inflation Reduction Act. And to me that seems like they could have an opportunity to like influence the discussion and make it higher quality to say something about what would be an appropriate use of the enforcement funds but they- they didn't. David Leary: [00:20:08] And give them a chance. It's an article because the comments they released this week were based on a proposed bill from July 27th. It's almost like they're two weeks behind again to think so. So maybe in two weeks the AICPA will address this craziness that's happening out there. Blake Oliver: [00:20:24] Well, here's what they said. They said that they believe that the corporate alternative minimum tax proposal violates a number of elements of good tax policy and could lead to unintended unintended consequences. It should be carefully considered. They also mention the enforcement efforts on the subject of IRS funding. The AICPA would like to see more of the money going to taxpayer service rather than enforcement efforts. Quote The AICPA believes that the Internal Revenue Service should be funded at necessary levels to allow it to handle all the duties required of it by Congress, including properly administering and enforcing our nation's tax laws, as well as providing needed assistance to taxpayers and their advisors in a timely and professional manner. However, the AICPA also believes that enforcement actions must be in balance with the services the IRS provides to taxpayers. Given the historic low levels of IRS taxpayer services, the AICPA is concerned about a possible imbalance between the funding for taxpayer services and enforcement. In its letter, the AICPA urged Congress to commit on a bipartisan basis to determine the appropriate level of service necessary for the IRS and provide adequate resources for the agency to meet those goals, either as part of a reconciliation package or in a separate vehicle. So their message is Congress needs to figure it out. But the AICPA, like we as a profession, could say, Hey, here's what the IRS audit rates should be at each level of income to in to ensure integrity of our tax system. Like who's better positioned than us to say that? But I think they're afraid to do it. Like they're afraid to take a stand. And so they say they say just like we're concerned. David Leary: [00:21:58] You know, if you don't take a stand, if there's not somebody with authority who should have the authority taking a stand, it leaves everybody else just to interpret things the way they want to and just stoke the fire. Right. Blake Oliver: [00:22:10] Exactly. And that's why, you know, make the discussion better. Say, like, you know, we believe that if we increased enforcement to this percentage, it would reduce tax fraud while minimizing the burden on taxpayers. Right. Like like that is what we should be doing as a profession is is bringing reason like making a compromise. And just by by avoiding it, we don't help at all. Nobody cares. Nobody cares. So it's interesting on Twitter, I asked I said, hey, tax writer, what percentage of individual income tax returns should the Internal Revenue Service audit? And I gave people four options. So 0 to 25, 0 to 25 basis points, right. Or 0.25%. That got about a quarter of the votes. So a quarter of people would say at the current or less interestingly, 26 to 50 points got almost no response. Like, I think like one person and then 50 to 1% so point half percent to a percent got a quarter of the votes. But half of the people who responded say greater than 1%. So tax Twitter, at least the people that are following me seem to think that we should be auditing more than 1% of returns when we're only auditing a quarter of a percent. I just think that like 1%. Is not it's still not that bad, like if you have a 1% chance of getting audited. I guess if you multiply it every year, right, you will have a a you'll have a bigger chance of getting audited in your lifetime, but it's still pretty low. I don't want to. David Leary: [00:23:42] Call the jury duty. Blake Oliver: [00:23:42] You know, if you. David Leary: [00:23:43] Paid before you ever get audited, you'll be. Blake Oliver: [00:23:46] Yeah. You know, if you get if you if you have a 99% chance every year of not getting audited and you multiply that by, you know, 20 years of paying taxes or whatever it is or 40 years. Right. Eventually you'll you have a pretty good chance of getting audited, but it's like only one time. And I think that's important. Like psychologically people need to know that they will at some point in their life get audited. If they feel like there's no chance of that, then you could just commit tax fraud your whole life and never pay any consequences. Like it's just kind of. David Leary: [00:24:19] And there's a misunderstanding that an audit is right that gets made out to this, like, fearing thing. Because what, what gets coverage are when criminals get caught and criminals get audited. That's right. I imagine there's tens of thousands of audits happen every year where there's a misunderstanding, a mistake, it gets resolved so people pay their fair share, everybody moves on and that's the end of it. But that's not good media. It's not good TV if you want, for lack of a better term. Right. Blake Oliver: [00:24:44] I assisted in an audit of a client. I had a client when I had my practice got audited, and I wasn't the CPA doing the audit defense or representation. So my job was to provide the records. And I was a little nervous when that happened because I'm like, okay, I hope that what I did as the bookkeeper can can hold up under an IRS audit. It was sort of a test of my abilities. We provided everything I had to spend some time exporting, explaining, pulling docs, and the audit came back after several months and was clean. It was fine. So, you know, it was it wasn't that bad. If you are honest. Yeah, it's a little work and there's a cost to it, but it's not that bad. It's not what people make it out to be online. And I think that was what Adam Markowitz was trying to say on Twitter for free. David Leary: [00:25:41] Jump into that before you jump into Adam yet going back to what you're saying about the it's not sensationalized, right? It's boring, right. Intuit came out. Intuit does, what, 48 million tax returns. Right. For TurboTax, where they do. If they came out and said only this, many got audited, it would set some perspectives for people. But that doesn't. Blake Oliver: [00:25:58] I think people think that. David Leary: [00:26:00] Right? Blake Oliver: [00:26:00] Yeah, I think people think that audits are way more frequent than they are like the public. I actually wonder if you went out to the public and said, you know, what do you think the audit percentages are for different levels of income? It would be vastly incorrect. David Leary: [00:26:13] Yeah, and you probably don't even know people that have been audited. And if you start asking around, you may not even know anybody that's been audited. So Ford Fish. Blake Oliver: [00:26:20] Well, but the people who get audited are very vocal about it. Yeah. David Leary: [00:26:27] This episode of The Cloud Accounting Podcast is sponsored by an app on pay, is built for accountants, and with 30 plus years of payroll experience, they can be the payroll partner you can always rely on. They offer a dashboard to manage all your clients in one place. When I say manage, I probably should say balance. 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David Leary: [00:27:29] Head over to Cloudaccountingpodcast.com promo slash n pay that is cloudaccountingpodcast.com promo forego and P a y on pay. Switch to better payroll. So I found there was an article on the National Review, which I think is a very conservative magazine. Right, the National Review. And the headline was IRS Deletes Job Postings Seeking Seeking Applicants Willing to Use Deadly Force. This is the title of the article and it stems from there's a tweet from Ford Fisher. So Ford Fisher is a documentarian filmmaker. Apparently, he's won an Oscar and Emmy and Golden Globes. I don't know what he's done, but this guy exists. He took a screenshot from a job posting on the IRS website and tweets it out, and I'm visually looking at it on Twitter. It talks about working a minimum of 50 hours a week, including your regular hours, and be on call 24 seven, including holidays and weekends, maintaining a level of fitness necessary to effectively respond to life threatening situations on the job, carry a firearm, and be willing to use deadly force if necessary. Be willing to assist in arrest, execution, search warrants and other dangerous assignments. Now, this is a position at the IRS is not all the agents, but it's not framed that way. Right. And so this. Blake Oliver: [00:28:46] It's you're not. David Leary: [00:28:48] Thousands and thousands of likes and retweets in quotes. This probably got exposed millions and millions of millions of times. Blake Oliver: [00:28:54] That's the criminal division that goes after people like Al Capone and they carry guns because they're at actual risk. David Leary: [00:29:01] I think we all should carry guns now because people are so stoked. It would be secure. If I'm an auditor and I go to audit somebody, I'd be a little scared now, even if it's not a criminal audit type situation that the person's all stoked and they're going to come after him. Somebody is going to shoot me if I'm an auditor now. Well, it's just. It's just. Just the stoke. The stoke. The stoke. And it gets to really where you're going without them now. So I'll let you continue on. Blake Oliver: [00:29:26] Well, yeah. Let's talk about the guy who took it for the team this week, the tax expert, the enrolled agent who became famous on cable news, Adam Markowitz, who I follow and I love seeing his stuff. He tweeted, All of my GOP friends who are worried about 87,000 IRS enforcement agents coming after the little guy. How about just don't cheat on tax returns? A fully truthful and accurate tax return is bulletproof in an audit. I never understood the fear of an IRS audit. Don't lie, period. And that tweet got 1000 retweets, 3000 tweets, close to 7000 likes and got picked up on Fox News. And Markowitz became the target of GUTFELD. David Leary: [00:30:18] Well, even before he got even before he the Twitter thread of Fox News, he was already the target. Right. He got really attacked in this tweet. Yeah. Blake Oliver: [00:30:26] Yeah. And it was and it wasn't just, you know, crazy people on Twitter. It was like people, other tax preparers, CPAs who are on the conservative side of this argument, which I don't even think there is a liberal or conservative side of this argument. There shouldn't be anyway, but it is broken into a political divide. So I just I just want to play this segment for you from GUTFELD Show on Fox News where he really goes after Markowitz. And it kind of just illustrates it very well illustrates the insanity of the discussion around this. Here we go. Gutfeld: [00:31:03] To how does this help you? Well, first, there's crime, inflation. Your kids are in crappy schools. Gas prices are eating into your beer budget. Blake Oliver: [00:31:11] I think he was talking about like the Inflation Reduction Act or whatever. Inflation, right. Gutfeld: [00:31:15] Luckily, the government's working to make sure you have nothing, so then you have nothing to hide. Here's IRS agent Adam Markowitz justifying this new army. He says, quote, All of my GOP friends who are worried about these new IRS agents coming after the little guy, how about just don't cheat on tax returns? A fully truthful and accurate tax return is bulletproof. I never understood the fear of an IRS audit, but I like how it's just his imaginary GOP friends who fear this new IRS army, and he never understood the fear. Well, it's always tantamount of charging you with a crime, and it's up to you to clear yourself of the charge. That's what people fear, you schmuck. Bottom line, a person can actually go to jail if they just aren't that organized. Gutfeld: [00:32:03] Like that. But then this agent admits in a later tweet, I get that it's a headache to go through an audit. All right. So you when you get finished being audited by the IRS, it's not your head that's aching, pal. You're at the wrong end of the horse and he's an ass comparing the IRS to the feeling I get from ice cream. Then he adds, And I get that it's costly to go through an audit and nobody ever wins. Well, wait a second, jackass. You just said no one should fear an audit. Then you say exactly why they should fear it. It disrupts your life and nobody ever wins. I've got a question for you. What are the property taxes in Fantasy Island where you live? But. But if you have an IQ higher than an artichoke, you must see that by now this country is heading towards a police state where the police state, they want your money now. And if you don't see that now, do me a favor and change the channel. I think Fallon is playing beer pong with Harry Connick, Jr. Right now. Blake Oliver: [00:33:10] So that is the level of debate in this country when it comes to additional IRS enforcement. It's a police state. Crazy. And so that's why we need our leaders to step up and get into this fray. I know it's scary. I know nobody wants to be the target of a Fox News attack. But if reasonable people don't step up and stand up and say what needs to be said, then the discussion will just. Get worse and more polarizing. You can't get away from it. You can't hide from it. Yeah. So we're doing our small part to help, I think, on this show. That's our goal. David Leary: [00:33:47] What's my goal? What's the name? Gutfeld. Gutfeld Whatever his name, it doesn't matter. Blake Oliver: [00:33:51] Gutfeld It looks like he looks like. Garfield It's like he's even leaning into that kind of like. David Leary: [00:33:56] Yeah, the logo is a little of that, too. It's it's a logo. Blake Oliver: [00:33:58] It looks like it's funny. David Leary: [00:34:00] But he he's just stoking the fire for his his viewers, right. If you feed the audience that you want in government. Blake Oliver: [00:34:08] Government evil. Right. David Leary: [00:34:09] Government bad. And he's calling you always. It's an army government bad and all this. But the bigger part of this and this is the beauty of like or maybe our listeners should realize, like, this is the reason that you hate all the news channels. They're all wrong, they're all bad, they're all fake. The fact that he kept calling an IRS agent shows there was no research at Fox News to verify who the hell Adam actually is. He's an enrolled agent, which is not an IRS agent. And then the other bullshit thing that Fox pulled and you can leave this in. They represented him as having one of those blue checkmarks on. Blake Oliver: [00:34:45] The verified account. David Leary: [00:34:45] Verified account. But Adam does not have that. So. So Fox misconstrued who he was fully. Blake Oliver: [00:34:52] They got wrong what he does, who he is. Who's he? He's not an IRS agent. He's an enrolled agent. Yeah, he's a tax preparer. He helps small businesses and they're going after him. It's just it's. David Leary: [00:35:04] In going back to, like what you said wrong. He took one for the team this week. Well, for all of tax Twitter, for all of us. He got attacked. Yes, he got really attacked. This episode of The Cloud Accounting Podcast is sponsored by Canopy. As you've heard in previous ads, Canopy brings together all of your firm's mission critical functions in one place client management, document management, workflow, time and billing and payments to keep your team organized. And having your team organized is great, but having your team spend less time on mundane tasks is even better. Did you know that Canopy has automation built in? Sure. You can still use an app like Zapier with Canopy, but for most firms, the built in automation in Canopy's workflow module is plenty sophisticated enough. Your team can create trigger automations based on status, task and subtasks as well as dates, be it upcoming, reached or past. Then Canopy can complete the mundane tasks for your team, like automatically ascending client requests or automatically assigning the next task or subtasks to a member of your team as they complete work for each client. Or how about a really nice email to the client? After all, the work's been completed. To get a demo of Canopy and to receive a $40 Amazon gift card, head over to Cloudaccountingpodcast.com promo slash canopy. That is Cloudaccountingpodcast.com promo forward slash canopy by. But I have even better news for you. I dunno if it's better news, but we were able to get Adam Markowitz to come on the show. Adam, welcome to the show. Adam Markowitz: [00:36:39] It's a pleasure to be here, David. I appreciate it. David Leary: [00:36:41] So we just built up. We've been talking about how there's no level headedness in this inflation act, the rhetoric, the tweets, there's guns with the IRS and things got really, really crazy. And then the peak of this was you like you put out kind of a level headed tweet and then it really went viral. You really got attacked and then you went up on Fox News. So I just want to like, what was this like from your perspective? I mean, you might have had the most famous tax Twitter tweet ever, I think possibly in history. Adam Markowitz: [00:37:10] Boy, that's sad, isn't it? So, you know, it's it started as as funny and quickly got disgusting. Some of the some of the hate really just downright hateful things that come out of people's mouths and off of the keyboards are are the types of things you just don't forget. Now, I'm also enough, levelheaded enough to realize that idiots are going to be idiots. Right? What it boils down to, what really stung me the most about the whole thing is when people started going to my website and started sending me feedback through my website and my admin had to send me some of these checks. And some of this stuff is not exactly suitable for a PG rated podcast, let's put it that way. And having to explain to her who is a 30 year old woman who is by and large lived a relatively naive life because she she can understanding where certain specific Jewish slurs are coming from and why they're being directed at me was a very difficult part of the conversation. That said, after going through some of that and finally to saying, you know what, I'm just going to kind of turn it off and just say, forget about it. It made life a little bit. It made it made it kind of fun. Again, to tell you the truth, I will say there is a lot of reasonable discourse that does disagree with me. Adam Markowitz: [00:38:36] And I will say I really did enjoy a lot of that reasonable discourse. Unfortunately, harder to find that among some of the people who had a lot of things to say that were rooted in, let's just say, hatred and evil as opposed to actual discourse. And then we saw it on Fox. Right. It's it blows my mind that stuff like that could happen on major news networks. You know, I get it that that that. Gutfeld is a kind of alt comedy answer to Fallon and Kimmel and all those people. But it's like, you know, I'm just a guy. I have 600 clients. I'm I'm in winter mere Florida. He's not coming to visit me any time in the near future. I don't have any real national poll. I have 11,000 Twitter followers. I don't even know how I have that many for Christ sake. But, you know, it's like. I wish both sides of the aisle would just be so much more reasonable about what it actually means to bring in more people to the IRS. And and that discourse just can't happen because everything that comes out of Washington right now has to be way politically left or way politically right. And either you agree with it or it's awful. And there's just no middle ground anymore on anything like that. David Leary: [00:39:50] So the numbers are really, for me, like it was retweeted a thousand times. Like, can you see the total impressions that it had? Adam Markowitz: [00:39:58] Yeah, over 4 million. David Leary: [00:40:00] 4 million. Wow. You actually got more impressions on Twitter than you did. And these network news channels, they only get, like, a million viewers, like. So so really, the the the retweets and the exposure on Twitter was actually bigger than the Fox News thing, but it was like, how do you feel? Like as far as for me, I was like, they're calling you out as an IRS agent, which is just insane. And then they put the blue checkmark. Do you feel like you were misconstrued and misrepresented? Adam Markowitz: [00:40:25] Of course. Yeah, absolutely. You know, in in another in another setting in life, if I really had any real damages for this, would I have some maybe legal ground to stand? But I don't know. But certainly I'm not an IRS agent. I don't work for the IRS. Probably never will work for the IRS. And I don't have a blue checkmark next to my name and I can't imagine a circumstance where I will. It's just when you hear about fake news, right? The proverbial fake news that you that Trump kind of started this and now both sides of the aisle have taken it. I look at that and go, I am now a real life example. That's a blatant, blatant lie. Like there's not even anything remotely truthful about saying, I'm an I.R.S., I don't work for the IRS. And that's exactly how he portrayed me. David Leary: [00:41:12] Yeah. And and they're not going to issue a correction, right? Of course not. There's not going to be a correction like, oh, we've learned that there's a difference between an E and an IRS agent, maybe for for not so much our audience, but maybe we can clip this out and we can post it on. Can you define the difference between an enrolled agent and an IRS agent? Adam Markowitz: [00:41:32] Yeah. I mean, this is basically like asking me the difference between apples and apple pie. Right. So, you know, an IRS agent is somebody who works for the IRS. Typically, you know, whether it be in the customer service department and the audit department and the Criminal Investigations Department, those are IRS agents. Enrolled agents do the exact opposite of that. Right. I fight against those guys. You know, it's my job to represent taxpayers. I'm licensed by the IRS to to kind of represent them in tax matters. And if that means I have to take adversarial positions against the IRS, that that's exactly what I'm licensed to do. So to kind of just be like, oh, this is an IRS agent that you said two or three or whatever times it was. It's just like it couldn't be further from the truth as to what it is. So, I mean, I work alongside the IRS for, say, just from the standpoint of we have the same interest of getting taxpayers tax returns filed properly. But that's it. That's literally all I have in common with IRS agents. David Leary: [00:42:32] It's I don't know and I've kind of talked about this like accountants change in the world. And I think you're out there doing it right. And now you really have leveled this up. Like now nobody's had this kind of volume and like, so how do you do you continue to go for this? Like, is this the next steps? Do you continue to tag and call out and try to be that lightning rod or is this like, well, that was enough. I had the ride. I'm fine. Adam Markowitz: [00:42:56] Yeah. I mean, it's not like I tweeted that on Saturday or whatever day it was thinking that anybody, aside from a bunch of tax Twitterers were going to read. It happens to be that some blue check on Breitbart picked it up and that then it spread like wildfire. I mean, yeah, I, I, I do think there is a stance that we as a tax community could take because, you know, all of all of these years, as time goes by, especially as we become more polarized between big government and small government, left and right, you know, liberal, conservative, all of these different things. It seems like we're kind of caught in the middle, because if you look at like Elizabeth Warren, who says, oh, we need to make it so so it's ridiculous that how much people have to pay for tax preparation, we should make it easier. And then, of course, you look on the on the right side of the aisle and you hear Marsha Blackburn going, well, now you have an auditor for every American now and some of the crazy stuff, it's like we're made out to be the bad guys. Adam Markowitz: [00:43:55] And I still constantly look at that and go, you go to a licensed professional to get your haircut. You go to a licensed professional to get your legal stuff done. You go to a licensed professional to get your medical stuff done. What's wrong with going to a licensed professional to get your taxes done at in most cases less than like, I don't know, a cup of coffee once a month or maybe a couple of times a month. And that's what you're paying to get the peace of mind of knowing that your most important financial document is done at a professional level. I don't see why. Why? You're the butt of seemingly every joke that comes out of Washington at this point, and it becomes really frustrating and it really does trickle down, at least in the my practice. I don't know if you have a similar that you go through, but people all the time, why do I have to pay you that much money? And I'm cheap, I think, you know, comparatively speaking. David Leary: [00:44:45] And it's interesting just how mainstream. I feel like the text Twitter conversations stories have been covering The Cloud Accounting Podcast the last three or four weeks have become the shortage of accountants was on NPR last week right. The now you're on Fox News and it's kind of amazing like how much and the IRS funding that that was the number one topic out of this bill that got the most attention and it's just amazing how like mainstream we're all becoming like in a way, the thing our conversations are becoming very mainstream. It's just that the more mainstream they go, the more polarizing they go. Adam Markowitz: [00:45:24] Right. And that's part of the problem. You know, the unfortunate part about the Inflation Reduction Act is the the IRS portion of this was not I mean, this was literally just a pay for there's this is not the main portion of the bill. Of course, it didn't help them that they put it in the early portions of the bill. I don't know why they didn't put it buried somewhere on page 300. But, you know, there are lots of really important things in this bill that America should be focused on. We should be focused on the manufacturing of, you know, alt energy vehicles and clean sources of renewable energy in our plants and our businesses and our vehicles. We drive all of these things. And yet what are we worried about? We're worried about 87,000 IRS agents over ten years, 50,000 of which are going to be used to replace the ones that are retiring. When you look at the levels and Pete O'Reilly did a really, really I had a great conversation with him after this started to spread and he put out a really great level headed piece about this that basically started with we're all we're doing by hiring all these new agents is taking us back to where we were with the IRS in the mid nineties. In the mid nineties, we're now at the same apportionment or proportion rather of IRS agents to tax returns filed. We will be if we get there. Right. God knows if we're going to hire this many people. But if we did for the IRS, we did that to the same apportionment of agents working with the IRS to tax returns that are being filed. That seems reasonable to me. And just the fact that it just gets looked at is, oh, you know, everybody's going to get audited now. You're still going to have way less than a 1% chance of getting audited at any given year. Way, way less than that. David Leary: [00:47:12] So if how are you recommending or how do you think just the community, your tax Twitter should proceed? Like, how should they proceed with their clients? How should they proceed publicly? Like what's kind of your $0.02? How are you handling this with your clients? Adam Markowitz: [00:47:26] Yeah. So with my clients, I'm generally leaving it alone. And part of it is my client base, just where my office is based is mostly right leaning, if not way far right. And I know if I start to engage in that conversation, I'm going to be met with more of the you know, I'm going to have an IRS agent at my door with an AR 15 because I didn't because I claimed an extra $14 in meal expenses for the year. One of the conversations that I had with with a local media guy, one of our local news stations about this, because he asked me he saw it and he goes, listen, what's reason what's really going on here? And I wish as a community that we could have those discussions where there's what the left says, there's where the right says, and there's what really is actually probably going to happen. And I wish as a community that we could all recognize that what is going to happen, the average Joe is not going to know any better. They're just not you know, if the IRS picks up 10% more agents, the average Joe is not going to know that. And if we really got down to with these extra auditors, if we can deal with more things like customer service for CP, 2000 notices for just kind of general picking up the phone when something goes wrong with the IRS, if we could educate people that those notices, it's not that they're going to get worse with more people. Adam Markowitz: [00:48:52] The more infrastructure we get to the IRS, the more functioning it should be. Now, how will it play out in practice? We'll see. Because, frankly, I think you and I both know you could give the IRS $8.7 trillion and it isn't going to fix all of their problems. But, you know, I wish we would have more conversations that were around the reality of what it all means and maybe said shed some light back on Congress and go, hey, Congress, we know what this was. This was a political game that was a play for to get your social agenda passed. So I wish we could have more discussions like that. And I'm also not so naive to realize that those of us in the tax community are the significant minority of tax preparers. So we only have so much reach we can do. But I would love to get more words out there that are really the the truth about what's happening. It's just a matter of what's truth anymore. It's really hard to believe that, you know, no matter because everybody's going to spin something, it's going to. Spin to whatever they were best suits them. David Leary: [00:49:53] Yeah, at the time. Adam Markowitz: [00:49:53] That narrative and that that's a really unfortunate part about it is the narrative is more important than the reality. David Leary: [00:49:59] So, Adam, thank you for joining us. I appreciate this taking time joining us. My pleasure. We're not going to give you the attention you ever got from Fox News or anybody else. Adam Markowitz: [00:50:10] I'm good. David Leary: [00:50:11] But those are the listeners that do not know who you are are not following you. What is the best way for them to get a hold of you? Adam Markowitz: [00:50:18] Yeah. So, I mean, I'm pretty active on Twitter in the tax community at, you know, Adam Markowitz here. You know, I'm I would be I would start handing out email addresses and all that, but I'm about to rebrand. So all the information that I would hand out is about to be no good anymore in the next couple of weeks. But my Twitter handle, I'm not going. David Leary: [00:50:36] Now is the rebrand plan before. Was this because of all this attention that you get, new website, new emails, everything else? Adam Markowitz: [00:50:43] So right now, I'm a 49% shareholder in a company called Howard L. Markowitz, CPA. My dad, Howard, CPA, he's getting ready to retire. And when he retires, which is coming up very soon, I'm going to buy out his share of the business. And when we do that, obviously being Howard Markowitz, CPA as an enrolled agent doesn't fly. Yeah. So we're going to be rebranding to a new name that I'm hoping to introduce here in the next couple of weeks. David Leary: [00:51:08] Is the new company called- Adam Markowitz: [00:51:09] Very much so looking forward to that. David Leary: [00:51:10] We're not IRS agents, but we'll do your taxes... But we'll do your taxes. Adam Markowitz: [00:51:15] But we'll do your taxes, right? There's a lot of things that it probably should be. I do find it a little funny that the timing of this happens to be what it is, because we were going forward with this one way or the other, and it just happens to be that the timing is going to be approximately September one, which we do. This just happens to correspond perfectly with all these negative Google reviews that I've gotten over the course of the last few weeks or the last week or so, for people who have never interacted with me in their life and never will. So it's it's a little it's it's a little ironic. And timing is everything in life, right? David Leary: [00:51:45] Yeah. Beautiful. I'll let you get back to it. You've got audits to do and. Adam Markowitz: [00:51:51] Right, exactly. David Leary: [00:51:52] On that note, awesome. Adam Markowitz: [00:51:53] I got to do my gun training and get ready for my audits, right? David Leary: [00:51:56] Yes. Thanks, Adam. Adam Markowitz: [00:51:57] Always a pleasure, David. Any time. Blake Oliver: [00:51:59] So he stood up and he had an opinion, right. And he got demolished for it or attacked for it. And our our leaders are not standing up. Yeah. It was nice, actually. Somebody Bloomberg did a little feature on him. They featured him and but but like mentioned nothing about what happened this week. It was sort of like I think they were just trying to, like, you know, do something nice. But still, it's not like anybody stood up and said, Hey, guys. He's just saying, don't cheat on your taxes. You know, like. Back this guy up and this. David Leary: [00:52:33] Goes back to the hammer I've been hitting. Right? Like we as Accountants and bookkeepers can control the narrative for our clients. We can help formulate what they think about the IRS, what they think about taxes, what they think about accountants, what they think about IAS. We can educate them and accountants can change the world like it goes back to this like fundamental belief. Like we really can't agree. And frankly, this is a great example. I mean, he got attacked, but maybe all of tax Twitter should be going after all the mainstream media, letting them understand how the real world works. Like what's going on? Yeah, what the audit rates are. Blake Oliver: [00:53:09] Or explaining what the IRS funding levels are and what this is going to mean realistically. Like, I feel like most Americans who are on the conservative side have no idea that the IRS funding has been cut year after year after year for 20 years, and that their current staffing levels are at 1973 levels. And so when the IRS service is bad, it's not because government bureaucrats are lazy, which sometimes they are, but in this case it's because they literally do not have enough people to answer the phone calls and like their technology is horribly outdated. Oh, I've got another story about that. David Washington Post, one of the reporters went on a tour, actually went to an IRS facility and got permission to take pictures. And they put it online as a slide show article tour and the link will be in the show notes. I recommend you take a look. Why does the IRS need 80 billion? Just look at its cafeteria and it has that famous picture of the cafeteria that is filled with tax returns. So like the IRS agents can't even eat lunch in their own cafeteria because it's just filled with 10 million tax returns. So there's documentary evidence of the pipeline, as they call it. The pipeline is how a tax return goes in to the IRS. And there's this machine called scamps. Scamps that opens and sorts tax returns that have arrived by mail. Blake Oliver: [00:54:33] It runs on Windows XP and it was updated in the nineties to make it Y2K compliant. So it still works. If the machine breaks down, there's no parts manufactured for it. So an IRS employee has to manufacture them on site to replace them. Well, apparently only one guy knows how to fix it. So if that guy goes missing, we're in trouble because the IRS won't be able to open the mail. They have pictures of this giant floor where agents sit at these desks with semi-circular. They look like little cubbies, a semi-circular cubby that that they sit in front of and they organize the actual paper into different sections of the Cubbies to, I think, move them around. So the checks go here, the 1040 return goes here, and they go into these batches. And that's technology, quote unquote, that was created in the seventies to manually sort these returns. They do canoodling where they hold envelopes up to a bright light to make sure they didn't miss anything like a check, a separate document. Perfection team combs through every single paper return with a red pen to make sure nothing is missing from the document, such as a signature or a W-2. And then they correct them or they fix them, and then they go to data entry. And we've talked about that where people manually key in there's there's stamps being used, physical stamps employees with those rubber fingerguards on. Error resolution. Oh, there's a picture of a green screen. Apparently the system runs on COBOL. Cobol, COBOL. An antiquated programing language few coders still know. David Leary: [00:56:15] Oh, you mean like an old micro green and black micro screen? Not not a green screen, like, hey, I'm doing YouTube movies and I get a green screen, you mean? Blake Oliver: [00:56:24] Yeah. All right. So the IRS, you know, they're being demonized. But like, just look at look at what it is. It hasn't been modernized. And now they're getting the $80 billion to, I hope, modernize it, hire some people, modernize it, make it better. Look, why can't we get behind making this an agency? That's a pleasure to work with. That should be the mission here. Instead, you just got people complaining. Everybody's just crapping on the IRS all day long and there's tens of thousands of people that work there. By the way, why why don't our associations, like, represent them too? Like stand up for them as well, right? Like everybody's always crapping on the IRS. Well, they're accountants, too. They're part of our profession. And a lot of them move into being tax preparers after they work there. David Leary: [00:57:09] And arguably, our partners right there are all of our partners. And it's just people thinking about this, like the state of the IRS, like they're just getting kicked when they're already down. But what if they were national transportation? What would our highways look like if they were treated like the IRS? Would we even have highways? We have bridges at all. I don't know. Blake Oliver: [00:57:28] They'd be degrading into dirt roads and the bridges would. Have fallen into the river. David Leary: [00:57:32] We would not have had been repaved since 1970. All the roads would not be have any new pavement or. Blake Oliver: [00:57:38] Yeah. Or they'd be using the same technology to build bridges. Anyway, you know, there was one other thing I wanted to talk about with the Inflation Reduction Act, which is something else that was in it that's related to taxes and that's the private equity loophole. David Leary: [00:57:53] Ken, before. Blake Oliver: [00:57:53] We jump to. David Leary: [00:57:54] That, can I close the door on the SB IRS thing? Blake Oliver: [00:57:57] Yeah, absolutely. David Leary: [00:57:57] So with the state of the IRS in the way it is, right, there's a kind of a clutching headline that was in accounting today and it said The AICPA demands the IRS answer calls on plummeting practitioner priority line. But then if you read it. Yeah. Does this sound like a demand to you? Can I read the actual quote? The recommendations we've provided the IRS are important adjustments that could drastically improve service for countless practitioners in their clients. They would also serve to empower customer service representatives, enable them to perform their duties more efficiently, said AICPA, vice president of Tax Policy and advocacy Edward Kahl in a statement Wednesday. We strongly urge the IRS to consider implementing these recommendations as part of their plan to reduce the backlog and improve services and believe that doing so will have a significant positive impact on the services provided by the IRS. I don't see any demanding like there's no demanding here. Blake Oliver: [00:58:52] There's no demands and there's no there's no actual actionable suggestion there. They're just saying get better. David Leary: [00:58:58] But couldn't the demand be like, hey, we're going to tell our members not to file any returns for any clients until you improve X or change X or make something better, or we're only going. Blake Oliver: [00:59:09] To or give them something to shoot for. Like we want the IRS to answer X percentage of calls by next year. That's a demand. Use this money to answer x percentage of calls. Right? Like that's actionable. You can achieve that. David Leary: [00:59:24] Yeah. Blake Oliver: [00:59:25] I asked Ed Kahl in an interview last year. I asked, what should the IRS service levels be? And his answer was that they don't know. Like the AICPA doesn't actually take a stance on that. They say Congress has to work with the IRS to figure it and the administration to figure it out, like, well, why don't we give them our take? How much money does the IRS need? That's also a question that you wouldn't answer. David Leary: [00:59:54] That's it, right? We have nothing more about the IRS and the level of service or anything like that. Right. Blake Oliver: [00:59:59] But the not the IRS. But I do have more on the Inflation Reduction Act. So one of the sticking points at the very end was our senator, Senator Krysten Sinema. She was the last holdout after Joe Manchin on this act. And she demanded and got something taken out of the bill, which was a provision that would have eliminated the private equity carried interest tax loophole. It's this rule that allows the managers of private equity funds to get capital gains treatment of their compensation, essentially. So they work for the private equity company, they manage the fund, they make the investments, and they are allowed to treat their compensation as the same as if they'd invested money in the private equity firm is like a passive investor. That's my understanding of it anyway. Correct me if I'm wrong, dear listeners. And that's something that Democrats have been targeting for a long time because it's very popular with their base. Right? Like here's these rich private equity fund managers that are getting lower taxes than almost everybody else in this country. Right. David Leary: [01:01:07] So so just it just seems compared paraphrasing. So I'm a manager at one of these private equity companies or these funds, and I get a salary, a yearly salary of whatever it might be. And instead of me paying normal federal withholding taxes on my normal salary the way I would for every other working American. Yeah, I'm going to pay long term capital gains on my money if you. Blake Oliver: [01:01:30] Yeah. If you hold it. If the fun holds the investments for a long enough time frame period. Yeah. You basically get that, you get to pretend you're an investor in the fund when it comes to that. And so it just seems unfair and it's very popular to eliminate that. And so Democrats have been trying to do it for a while, and I don't want to take a position on whether that's good or bad. I think I've staked enough positions in this episode, but what I do want to point out is that it got pulled out and it's a victory. It's been in the news report is a big victory for lobbying by private equity firms. And essentially it looks like they lobbied Kristen Sinema. They give her a lot of money, right. Like something like $2 million to her campaign or something like that. And she got it taken out. So it still shows you there's a lot of power in lobbying and money in the world. The given that they were able to protect such an unpopular tax rule loophole. I wanted to put this in context in terms of like numbers, like how much money we're talking about. So PE firms in 2004, they spent $15 million on campaign contributions in independent political ads. Private equity firms spent $222 million in 2020. So they went from 15 million to $222 million in spending on lobbying. And how much money is this going to save them? Well, one guy, Blackstone CEO Steven Schwarzman, personally received 150 million of carried interest in incentive fee compensation in 2021 alone. So he would have had to pay a lot more in tax. Right, if he didn't have this exemption. And I don't know what the total amount is, but it's it's actually not that huge in like the context of like our entire economy, you know, private equity. Like it won't actually change, like. Tax revenue significantly. It's just one of those things where it's like, here's this group that has this sweet deal and they've managed to protect. David Leary: [01:03:27] It and it must be worth a few billion because you're not going to spend. Private equity is not going to spend $200 million to save $201 million. Blake Oliver: [01:03:36] So now it's worth billions. David Leary: [01:03:38] To those billions. And then not only that, it's I think correctly them, it's not even like their companies. Right? It's their personal wallets. Blake Oliver: [01:03:45] The. David Leary: [01:03:45] Individuals. Individuals. Blake Oliver: [01:03:46] Yeah. So I think that is it on the Inflation Reduction Act and we may be out of time for this episode. David, in terms of any other news, is there anything burning that you want to cover before we get to the listener mail? David Leary: [01:03:59] Just you just talked about private equity. I don't know if you saw it. This is like the one app news. Avalere is going to get purchased by private equity company now. So they're going to go private equity. Blake Oliver: [01:04:10] Yeah, it's huge. Like $8 billion. They're going to take Avalere, Private 90. I don't have in front of me, I want to say like 90 something dollars per share so it's less than their high, right? They went up to way over 100 like I want to say, like close to 180 at one point and then drop down. So I think clearly the board thinks that they're getting a good deal right now. This is going to be interesting to see, like what impact private equity does have on Avalere. Does it turbocharge their growth or does it, you know, will it help them? We'll see. David Leary: [01:04:43] My initial reaction to this was we've talked to over the last 18 months, Apple is making all these acquisitions of these companies in all different parts of your business compliance journey and business formation and compliance. And and I imagine a lot of these things are not profitable today. And it's probably very hard if you're being judged by the street quarter after quarter after quarter. You can't grow your business like that. You can't like it's like they're making moves to make money five years from now, ten years from now, and they're structuring that. But when you're reporting the street each quarter, they just want to know what you did last quarter and probably thinking, hey, we can actually build our company the way we want if we get the pressure of the street off our back. That's my initial. Blake Oliver: [01:05:25] And that's the good thing about it, right, being a private company? Yes, absolutely. And they've been doing some really interesting acquisitions. They've been making some great moves. David Leary: [01:05:32] So maybe you and I comprehend. But the street probably doesn't if it makes it right. Blake Oliver: [01:05:37] Oh, yeah. Well. David Leary: [01:05:40] The only other thing that I had, which is the most hypocritical thing this week, is MailChimp is banning crypto companies from using its service to send out emails, which MailChimp is owned by. Blake Oliver: [01:05:50] Why is that? Why is that hypocritical? David Leary: [01:05:52] Mailchimp is owned by Intuit. Intuit owns TurboTax. Didn't we talk about a few months back? Turbotax was pushing people to get their tax return into crypto, and they're messaging people about that. It's like that is like. Speaker2: [01:06:05] I don't know. Well. Blake Oliver: [01:06:06] I think this is a good thing, you know, because why was MailChimp being used by these crypto companies for scams, for frauds, right? Like that's what's going on. They're creating a MailChimp account, importing all these emails, spamming people. Some people fall for it, they buy the token and the rug gets pulled out from under them. So I think it's a good move. But yeah, it is funny how their parent company was all in on crypto, but so were a lot of people. I actually got a story on that for you, David. This one involves Mark Cuban and the Dallas Mavericks of all people. So they're being sued in relation to the Voyager, quote unquote, Ponzi scheme. This was, as reported in TechCrunch, a group of Voyager digital customers filed a class action suit in a Florida federal court against Cuban, as well as the basketball team he owns. The Dallas Mavericks, alleging their promotion of the crypto platform resulted in an over 3.5 million investors losing 5 billion collectively. Voyager is a crypto firm that filed for bankruptcy in July following a crash in crypto prices that instigated a liquidity crunch on the platform. Essentially, Voyager was another one of those crypto banks that had a run on the bank and they had to freeze assets and now they're done right. And everybody who was invested in there or had money in there, lost is going to lose all their money. Blake Oliver: [01:07:27] And so I'm wondering, you know, what kind of promotion was Mark Cuban doing? The Dallas Mavericks were doing so the Mavericks launched an exclusive five year partnership with Voyager in October of 2021, giving fans cash rewards for making trades on the platform. The announcement said the cryptocurrencies were, quote, an attractive investment for novice investors who might only have $100 to start, unquote. Apparently, Cuban also promoted the company. This is according to the lawsuit as a Voyager customer himself in a ploy to dupe investors into believing that Voyager was a safe platform. So he's talking about how I'm an investor in Voyager. This is the problem with crypto being unregulated. It's the Wild West, the wildcat banking period happening all over. And dear listeners, if you don't know what the wildcat banking period is, go search that up. Search wildcat banking, United States history. And you will find a whole fascinating several decade period in the United States, in the Wild West, in which banks were unregulated, essentially. And this sort of stuff happened. But it was with stagecoaches and paper money and robbers and people running into the bank to try to get their money out. All right. So that's all the time we got this week. We're going to have to save everything for next week. But we did get some listener mail. And so this is the time in the episode when we keep on going. Blake Oliver: [01:08:49] And we get to your messages. This is from Tom Herbert, technology editor at Accounting Web. Awesome to get a letter from a fellow journalist here. Hi, Blake. Tom Herbert, calling technology editor over at Accounting Web. Hope all is well. I'm getting in touch off the back of the comments made in a previous episode about the lack of fact checking in your podcasts. I started as a journalist in 2008 and have worked for accountancy publications since 2015, so hopefully have something to contribute to this debate. Accurate reporting is important. Absolutely. As the old saying goes, facts are sacred, but comment is free. But it's also important to look at content to purpose. Does the article, podcast or video do what it sets out to do? I definitely don't listen to your podcast to hear you and David regurgitating press releases verbatim, and I'm sure that's the same for the majority of your listeners. The accountancy press, both here in the UK and the US, is littered with low rent publications, copy pasting, PR puff pieces, but all of them are missing a crucial element. What does any of this actually mean for accountants? Do correct me if I'm wrong, but what yourself, David, and special guests set out to do is try and put the news in context for listeners, most of whom are CPAs or financial professionals. Blake Oliver: [01:10:00] Sure, it might not tally exactly with what everyone's thinking or experience. This is my truth. Tell me yours. Right. But in my view, it fulfills the brief of experts in their field discussing the news in an analytical way. I certainly learn something new with every episode. Keep up the good work. Sorry to miss you in the press room at Suite World this year it's my colleague Jon Stewart turned to take the golden ticket, but hopefully I'll get an invite next time. All the best, Tom. I think it's Stoke Dick. Sorry, John. Stoke Dick. Thank you, Tom, for that letter. It's awesome that you're listening. We appreciate you. Here's one from. Eileen. Hi, you guys are hilarious. Thanks for the podcast on. Join us in Italy. I feel so much better knowing that I'm not the only one who fell for it. This is the expensive con email. I was dumb enough to actually complete their questionnaire and what really irked me was that after submitting my very thoughtful reply about why I wanted to come, I got an email that said, quote, We're excited. You're interested. Now schedule a call with our team to discuss in more detail how you might earn your way to Italy unquote. Ger I was surprised this didn't get mentioned in your show, but maybe you didn't actually submit the form to see this. I don't remember. David Leary: [01:11:15] I did a reply to the email and I got that same email back. Okay. I have to mention that's how. Yeah, kind of. Blake Oliver: [01:11:23] So we're not the only ones. I'm not the only one who got fooled. Go listen to the Join US in Italy episode if you want to hear an amazing story about an email from expensify and what not to do if you are ever going to run a sweepstakes in your app or firm. I actually finally we have one more message. David Leary: [01:11:42] I listen to the episode. I was driving home last night back from Phenix and I actually learned a lot more listening to it than when we recorded it. It is like a little miniature law, one on one class, like shoved together for like contract law. I thought it was cool. Blake Oliver: [01:11:58] That that was the point. This is from Brian. Brian says, Hi, Blake and David. I recently left public accounting and joined an affordable housing, not for profit. As an accounting manager, this is my first time leading a team of four staff in accounting for over 100 separate housing projects slash legal entities. We're the largest community land trust in the country, which is kind of cool. I have quite a hard time finding equivalent resources like I had in the CPA and QuickBooks Online World. I was previously in a few questions and he has three questions. David So I'm going to ask each one and then we'll I'll let you respond or we'll discuss. So question one, there's too much content out there with podcasts for me to navigate. Are there any podcasts in the earmark network elsewhere that would be helpful for accounting managers in industry that are not self employed slash entrepreneurs? I'm not looking to start a bookkeeping firm, just want to grow in leading and retaining my for corporate not for profit staff accountants who are all really green for CPAs, professional development was really clear. You take a technical CPE and get assigned a more advanced tax return or audit for folks whose job it is to do the same tasks every month in industry and may not be as driven or technically skilled. How can I provide them growth opportunities so I can retain them and eventually replace myself? So David Podcast recommendations for industry accountants and not for profits if they exist. And I know, David, you subscribe to like every accounting podcast in the world. So you got to know something, and maybe it's not out there. Maybe it needs to be created. David Leary: [01:13:31] Give me a second here. There is one. I've air conditioned. I'd get out my phone and look in my podcasts here and find this. It's actually from eBay. So they have a podcast called Ebb and Flow e b the sine flow. And in a way it is kind of geared towards internal controllers. Like the episode I had started, it was like riding the current data way of selecting ERCP. So it's at that type of level. You might want to give that one a shot. So it's ebb and flow. We'll put that in the show notes. Blake Oliver: [01:14:02] And my recommendation is a show on the earmark CPE apps. You can download earmark CPE go to your app store, download earmark CPE and go to the channels page and scroll all the way to the bottom. Look for your part time controller and they have a channel on earmark and they have a podcast and it's excellent and they specialize in not for profits. So for anyone who's working in industry, working specifically with not for profits, go ahead and check it out. The latest one is called Follow the Leader Succession Planning in a Post-Pandemic World. And it's about how not for profit executives are leaving their organizations in record numbers. What do you need to do to get ready? So this is a way that we as accountants can learn about the difficulties that not for profits have and helpfully advise them on succession planning. So I think that's a great starting point I would recommend for anyone working in Not for profits and you can get credit for it. Question number two from Brian. We use RealPage for our ERP slash general ledger slash tenant and property management interface. Blake Oliver: [01:15:08] Apparently RealPage Accounting is just a white labeled Sage Intacct ERP, though they hide it well. The included support in training is atrocious coming from a local CPA firm being the QBO guy. I'm really grieving not having a free tutorial network that is developed like QuickBooks has. Do you guys know of any Hector Garcias of the Sage Intacct world? We're using a cloud accounting product, but are doing most everything manually. There's got to be some automation to reduce our 15 day rush to month and close for our 100 plus sets of books and 350 bank accounts. So specifically on this, I actually surveyed folks on Twitter and I asked like, who's the Hector Garcia of Sage Intacct? And for those who don't know Hector, he's like the QuickBooks guru on YouTube. And there's an interview with him on my earmark podcast. Go check that out. It's a really good one about the future of QuickBooks, but back to intact, right? There really aren't any of those influencers or thought leaders when it comes to that product that I'm aware of. Do you know, David? David Leary: [01:16:05] Not in the same like YouTube way. I think there were there at the conferences. I think they attend the conferences. I think they're there. I think they're probably private consultants in private. That that channel is open. Right. If that makes any sense. It's not as accessible. Blake Oliver: [01:16:22] So it's close. It's it's the content is gated. You've got to pay. You've got to be a client, that sort of thing. That's just the general way it works. I hope that changes, though. I feel like there's an opportunity for a firm like a consultancy that specializes into intact to like put that training out there because people are searching like like this is what software companies don't understand I think in the mid-market space like intact and that suite when people have a problem they don't go into your help center to look they go on Google and they Google the problem. So if your help center is closed, is there negative, you're going to find it. Right. And it's a huge, I think, organic marketing opportunity for firms that specialize in the software. And there's lots of them. There's lots of Sage Intacct partners and vars like put that stuff out there, make videos on YouTube. Heck, earmark will help you do it. Get in touch with me. We'll help you. I think there needs to be more of that stuff. Email me, Blake@blakeoliver.com. Actually, no blanket earmark is better for that. Question three and then we're done. I know you guys have a small business bookkeeping following. Blake Oliver: [01:17:28] Any plans to include more mid-market cloud software news regularly into the podcast? I'm assuming that as intact rolls out new features, RealPage eventually implements it into our software, but it would be nice to know what's coming down the pike. I'm also new to the Sage ecosystem, but since we're not direct customers of Sage, we don't have any access to their resources. So that's funny to me, right? Like they don't have access to the sage resource intact resources because they're using a modified version of intact or something like just weird. Anyway, we do cover the mid-market. Not as much as we do the small business world, but we are going to Oracle Suite World in September. We've been invited as media. Apparently Oracle thinks that we're media. David, which is fantastic. Yeah, they're paying for us to go there and we're going to be covering the conference and the developments will be at the keynotes. We'll give you a summary. We're going to talk to the CEO. I think Evan Goldberg is on our list to talk to again this year. Talk to him last year. So that's exciting. But so far, like I don't think we're not going to the Sage Intacct conference this year. David Leary: [01:18:33] Not that we know of, but. Blake Oliver: [01:18:33] We really should. David Leary: [01:18:35] We should. Blake Oliver: [01:18:35] When is. David Leary: [01:18:35] It? It is the week of October 7th or eighth transform. Yeah, I think it's a. Blake Oliver: [01:18:44] Week of October, October 10th to 14th. And you can find this at Accountingconferences.com, which is David's public service to the accounting profession. So if I go to Accountingconferences.com, is it up to date? Speaker2: [01:18:57] David Yes. David Leary: [01:18:59] Always up to date. Blake Oliver: [01:18:59] So if I screw up, so if I scroll down, oh my God, you've got everything in here. This is like stuff I've never heard of. David Leary: [01:19:05] I think this should be there. Blake Oliver: [01:19:07] It is a. David Leary: [01:19:07] Featured event, actually, in the first part. Blake Oliver: [01:19:11] So actually I recommend Brian go to Sage Transform, which is the Sage Intacct conference. I went there when I was working at Locust. That was a big event for us, and so I got to know it there. It's fantastic. It's got all the sessions, all the resources. You know, these companies, they're still learning how to be online in a lot of cases. And you're going to find most of the people who are like the Hector Garcia of Sage Intacct is going to be at that conference. David Leary: [01:19:41] I think, addressing the coverage. It's not that we're not covering them. They just don't make a lot of news. And what I mean by that is- Blake Oliver: [01:19:49] The don't, yeah. David Leary: [01:19:49] They just change a little bit slower. And a lot of times they save them all up and just announce it to their conference. So. So maybe QuickBooks or Xero are putting out a little aggressive quarterly updates to every eight weeks. They're pumping out some features and they announce the new features, even though Sage Intacct might be on an eight week release cycle and they have new features coming out, they really don't just push those out because it's just a different market, right? A lot of people need to adopt their changes versus them just being pushed out to their ERP level like you can't you just don't want to take a new, new way of doing something if you have systems tied to the ERP. So there's just the they do announcements and we do cover it, but also sometimes they're doing isn't even newsworthy like we did cover when they finally added bank feeds, if they started adding things the rest of us had in the cloud accounting world. But they just they don't have the same kind of cycle there. In all our feeds, I cover the news, we watch them, but they just don't have as much coming out. Blake Oliver: [01:20:48] David That's all the time we have this week. If people want to connect with you online, where should they do that? David Leary: [01:20:53] I'm on all the socials. @davidleary. Blake Oliver: [01:20:55] I am at Blake t oliver. Send us your emails. Send me your voicemails to Blake@blakeoliver.com. We love getting those. We read them, we listen to them. We play them on the air. David, I'll see you here next week. David Leary: [01:21:07] All right. Time for the classifieds. Blake Oliver: [01:21:13] Hey, podcast listeners, it's Blake, and I wanted to let you know about a new show I'm working on with CPA slash comedian Greg Kite and blogger slash former CPA Caleb Nyquist. It's called Oh My Fraud. And it's a podcast all about financial crimes. That's right. A true crime podcast for accountants by accountants. Caleb and Greg are going to come together every couple of weeks to unpack their favorite frauds and explore the circumstances, psychology and interpersonal dynamics involved. They also fully indulge in victim blaming the defrauded widows, orphans, infirm and feeble minded. Because who can resist if you fancy yourself a trusted advisor or prefer your true crime with spreadsheets instead of corpses? Listen to this show to learn what to watch out for and to keep your clients, your firm, and even yourself safe. To subscribe, go to Oh my fraud or search. Oh my fraud on Apple Podcasts, Spotify or wherever you get your podcasts. David Leary: [01:22:11] Want to get the word out about your newsletter, webinar party, Facebook, group, podcast, e-book, job posting, or that fancy Excel macro you just created? Why not let the listeners The Cloud Accounting Podcast know by running a classified ad if the show notes for the link to get more info?