Chairman of the AICPA Tax Section’s Tax Executive Committee, Troy Lewis, CPA, testified before the Small Business Committee of the U.S. House of Representatives in July of last year to advocate on behalf of the profession and the US taxpayer. As the most visible CPA tax advocate for the profession, CPA Magazine reached out to get his perspective on the state of today’s CPA tax firms.
Lewis is the sole proprietor of Lewis & Associates, CPAs, LLC and a VP and chief enterprise risk management officer at Heritage Bank in St. George, Utah. He acts on behalf of the Institute in tax matters. He manages 14 tax committees and technical resource panels of the Tax Section.
What do you foresee for the future of CPA tax practices?
Considering FASB ASC 740, accounting for income taxes, is the leading cause of restatement of financial statements the tax practice of the future is more reliant on technology and less dependent on human capital. Taxes practices are growing as clients use taxes for business decisions.
What was the most burdensome problem this year?
The inability for us to serve clients is burdensome. I waited for over an hour, was transferred and got a reset instead of a courtesy disconnect. It got to the point that regional firms hired seasonal workers to have people just call the IRS repeatedly, which says there is a problem with the IRS. The AICPA committee pleaded with Congress to study it. Congress believes there is waste at the IRS. Whoever is at fault, it impacts the front line CPA. The IRS is losing the battle for confidence in the IRS. It will take a generation to correct the perception.
The U.S. Government Accountability Office needs to come in and determine what the balance is between service and enforcement. The current output is unacceptable.
What do you see as the best and worst technology?
I think firms are making better utilization of cloud and document management to become the norm. You can’t be cost competitive if you are not using compliance tools. You map the General Ledger to the tax return once rather than every year. We still suffer from information overload to get the right information at the right time. It is a time drain; just finding it is a problem.
Do you have any comments on ACA’s affect on CPA firms’ tax practice?
In 2013, Section 1411 created a tax on Net Investment Income for more affluent taxpayers. There was not enough time to address it. It was painful for the CPA firm but not well known because it was considered a rich person problem. Implementing ACA is broad based, so each company has to ask each person to determine if they had insurance for each month. So the question came up in the CPA office and CPAs became administrators. The ACA website is good, but CPAs are stuck in the middle; we felt we were in the policing business. So now these 1095 forms are required for most but not all. Calculating the FTEs is not perfectly clear. Individuals will receive a 1095 and ask what to do with it. I felt like a junior deputy of the IRS to be compliant, and still remain professional. There is a dilemma for those who claimed credits for a decision made two years prior, and then getting a lower refund based on over-claiming credits. This leaves a gap. The ACA is a wide applicability issue. No one gets a pass. You have to determine if you are compliant.
Do you have any comments on DOL interpretation of the overtime affect on CPA firms?
The new rules would increase from $23,660 to $54,400 annual salary for employees that would be required to be paid overtime. The AICPA sent a letter to Mary Ziegler at the U.S. Department of Labor commenting on the proposed rules. The significant impact is on the smaller firm for the increased payroll cost. It could impact the overall impact of hiring. There is also an impact of complying with the rule. It would most affect the small firms and NFPs who are less likely to handle it.
Does your firm represent clients before the IRS? Do you have any comments on how to be effective in that area?
Just like the phone service, the correspondence audit is not timely. Clients don’t understand why it takes so long to solve it. Try explaining to them how we have to go back to the 70’s and can’t email. It’s like pull out the lava lamp and put a stamp on it and wait. Olsen (Taxpayer Advocate) said the IRS will never be loved but should be respected. It could take the IRS four to six months to handle a situation that could be solved in a few minutes over email.
What made you specialize in tax?
In college I had to make a decision like Yogi Berra. I noticed very smart people were struggling with taxes. It was saying to my soul, not religious, but it just felt right. We (CPAs) have to be credible and independent. In tax we can advocate with clients to become tax efficient to enable good business decisions.
What do you do in your free time?
Now it’s long distance running; I’m a reformed drummer from college.