WEBVTT
00:00:00.644 --> 00:00:08.003
Welcome to the Accounting for Innovation podcast, where we explore cutting edge strategies and insights into the world of accounting and finance.
00:00:08.464 --> 00:00:14.544
Presented by Decimal and the Radical CPA, each episode dives deep into industry trends.
00:00:14.884 --> 00:00:23.164
Whether you're a seasoned professional or a budding entrepreneur, join us as we unpack key concepts and share practical tips to drive success.
00:00:24.597 --> 00:00:31.678
Welcome to today's episode of Accounting for Innovation with your co-host myself, Matt Tate and Jody Padar.
00:00:32.008 --> 00:00:40.768
Today I am excited because I have very little contextual information to be able to help this discussion, but Jody is an expert.
00:00:41.357 --> 00:00:51.078
So today we're gonna talk about AI for tax because to me and, and our teams are doing this at decimal AI is reducing the burden of tax season.
00:00:51.417 --> 00:00:51.718
Prep.
00:00:52.107 --> 00:00:54.148
It's enabling more strategic planning.
00:00:54.658 --> 00:00:56.427
It's making the work easier.
00:00:56.817 --> 00:01:05.218
And one of the craziest things I've always thought about the profession is in other jobs, people measure your time by how many years you've been at a company.
00:01:05.847 --> 00:01:08.727
In an accounting firm, it's how many tax seasons.
00:01:08.998 --> 00:01:12.028
So Jody, how are we gonna use AI to make that?
00:01:12.322 --> 00:01:13.403
Less impactful.
00:01:14.483 --> 00:01:17.003
Oh, I love AI in tech.
00:01:17.003 --> 00:01:30.022
So, uh, to give people a little bit of background, if they haven't, you know, been around me for a while is my last full-time position was with April Tech Software and April Tech software built.
00:01:30.373 --> 00:01:33.822
Um, tax software to compete with, um, TurboTax.
00:01:33.822 --> 00:01:43.063
So on the consumer side, I was employing number one and I worked, um, hand in hand with the engineers to use AI to build tax software from scratch.
00:01:43.393 --> 00:01:55.183
Now, the way we used AI is we used the language models to read the forms instructions and to code forms faster, and we were able to get from, uh.
00:01:55.783 --> 00:02:02.503
Nothing or zero, zero federal in all no states to have complete federal coverage.
00:02:02.503 --> 00:02:09.103
Now granted there was a limited form set to it in three years, which is unheard of, right?
00:02:09.103 --> 00:02:09.193
Oh yeah.
00:02:09.193 --> 00:02:22.663
When you think of like, and we had, I don't wanna say a handful of engineers'cause we, we did have a team, but we had nowhere near the team that any of the other legacy providers have to develop software.
00:02:22.902 --> 00:02:24.492
So that's how fast.
00:02:25.108 --> 00:02:30.328
Um, the compliance based software is going now and using AI to develop it.
00:02:30.777 --> 00:02:41.187
And now, and that was even before like kind of chat GPT because that began in the end of 21 and the models are that much smarter now.
00:02:41.247 --> 00:02:51.207
So, but now when you think about it in the professional side, because we built it in the consumer side and professionals are always a little bit more, you know, um.
00:02:51.837 --> 00:02:59.427
Uh, picky about, um, now when you look at it on the professional side.
00:03:00.673 --> 00:03:03.013
I can honestly say, guess what?
00:03:03.013 --> 00:03:04.752
It was done on the consumer side.
00:03:04.782 --> 00:03:06.703
It can be done on the professional side.
00:03:06.943 --> 00:03:12.193
So it's now a question of who and how fast are they gonna get there.
00:03:12.643 --> 00:03:21.133
And when you look at all the pieces of tax software, it's not just the filing side, which is what I did at April.
00:03:21.427 --> 00:03:23.467
It's the gathering of documents.
00:03:23.497 --> 00:03:31.777
It's the kind of pulling it all in the, I'll call it the pre-tax work in a cas, they call it pre accounting, which is all the bookkeeping in the receipts.
00:03:31.957 --> 00:03:34.957
So how do you get all that pre-tax work done?
00:03:35.258 --> 00:03:36.002
And there are already.
00:03:36.987 --> 00:03:41.907
Tools on the market that are starting to kind of redefine what that organizer is like.
00:03:41.907 --> 00:03:44.068
An organizer on steroids, right?
00:03:44.608 --> 00:03:44.668
Yeah.
00:03:44.668 --> 00:03:50.277
And I think that's what's exciting because that's like the first step.
00:03:50.337 --> 00:04:00.448
And then once you get all that data in, and again, we're going unstructured to structured data, now you can populate tax forms fairly easily and you can get to filing.
00:04:00.747 --> 00:04:01.918
And so I would.
00:04:03.062 --> 00:04:12.782
Guess in the next few years we will have complete software that will be able to file using AI significantly.
00:04:13.052 --> 00:04:23.673
And you know, in the professional side there's like black ore who, nobody really knows what they do, but they've raised like, I think$60 million or some crazy amount.
00:04:24.002 --> 00:04:24.632
And yet.
00:04:25.033 --> 00:04:28.663
Nobody has really seen them, their software work yet.
00:04:28.663 --> 00:04:30.492
But I think that's interesting.
00:04:30.492 --> 00:04:31.543
So I think there's, yeah, I do too.
00:04:31.543 --> 00:04:32.833
An opportunity there.
00:04:33.192 --> 00:04:46.872
Um, I also think that I've had, well I think, I know I've had three additional, um, uh, seed founded startups come to me directly asking for help with tax software.
00:04:47.322 --> 00:04:48.492
Um, also.
00:04:48.927 --> 00:04:55.288
I win, just acquire taxa and they're in, they're kind of exploring the space.
00:04:55.408 --> 00:05:01.918
So that's like five that I can say today that are gonna get there.
00:05:01.947 --> 00:05:07.228
Now whether they get there in one year or five years, I don't know, but it's coming and it's coming quick.
00:05:07.708 --> 00:05:16.648
And then you, again, you have the, the kind of the pre-tax softwares that are kind of on the cusp who are like starting it as well, and.
00:05:17.502 --> 00:05:21.252
And then there's the, um, the planning software, right?
00:05:21.252 --> 00:05:23.833
So we didn't even talk about like tax planning software, right?
00:05:23.833 --> 00:05:23.834
Yeah.
00:05:23.838 --> 00:05:26.682
So you have, I think, true prep ai.
00:05:27.012 --> 00:05:37.603
Um, you have, uh, other tax planning softwares that are like they're building to help us do tax planning, which I actually think is a little bit.
00:05:38.312 --> 00:05:41.463
Easier even than compliance to use AI to do it.
00:05:41.822 --> 00:05:43.083
So I agree.
00:05:43.083 --> 00:05:46.952
The, the opportunity and, and then last but not least, we got research, right?
00:05:47.312 --> 00:05:52.353
And we have um, blue Jay who is like killing it on the tax research slide.
00:05:52.353 --> 00:05:58.773
They're like everywhere now and they're at all the states and they really make tax research super simple.
00:05:58.923 --> 00:05:59.942
So, yep.
00:06:00.747 --> 00:06:06.838
Tax is actually, I think, one of the easier things to do with ai.
00:06:07.317 --> 00:06:10.077
Um, because it's based in language.
00:06:10.557 --> 00:06:12.718
Because it's law and it's language, right?
00:06:12.718 --> 00:06:15.478
And it's, it's yes or no.
00:06:15.507 --> 00:06:18.057
There's less gray in it.
00:06:18.057 --> 00:06:21.358
I mean, there's still gray, but there's, I'll say there's a little bit less gray.
00:06:21.658 --> 00:06:23.367
But anyways, I'm excited about it.
00:06:23.367 --> 00:06:24.538
Matt, what's your take on it?
00:06:24.538 --> 00:06:25.122
That was a lot.
00:06:26.442 --> 00:06:27.583
Oh no, I agree.
00:06:27.642 --> 00:06:29.202
Uh, not that it was a lot.
00:06:29.202 --> 00:06:30.463
It was a lot, but it was great.
00:06:31.002 --> 00:06:32.802
I think that it's awesome.
00:06:32.833 --> 00:06:38.502
I mean, what, I was talking to my team the other day and I said, you know what my ideal is?
00:06:38.773 --> 00:06:41.622
We get a last year's tax return from a client.
00:06:41.622 --> 00:06:41.682
I.
00:06:42.418 --> 00:06:50.127
Then we just watch software, reach out to them and tell them exactly what we need from them, uh, exactly what states they're gonna file in.
00:06:50.187 --> 00:06:53.668
It follows up with them in a good mannered, humanistic way.
00:06:54.028 --> 00:06:58.947
It compiles all the information, it fills out the forms, and you guys are just advising them on a few things.
00:06:59.307 --> 00:07:05.367
So that to me is, is the most amazing outcome for where I think we're gonna get to pretty quickly.
00:07:05.908 --> 00:07:07.677
And the reality is.
00:07:08.442 --> 00:07:09.132
I agree with you.
00:07:09.132 --> 00:07:09.642
It's easier.
00:07:09.702 --> 00:07:13.033
I think you're gonna see AI adopted fast.
00:07:14.098 --> 00:07:24.028
Through at least SMB tax than you will in Cass and bookkeeping because it is so legalistic in Cass and bookkeeping.
00:07:24.028 --> 00:07:27.807
It's a very flexible kind of program that you can do.
00:07:27.807 --> 00:07:28.887
Everybody's different.
00:07:28.887 --> 00:07:36.148
You have different charts of accounts, desires, wants, businesses, industries, but can tax is tax and it's pretty well regulated.
00:07:36.148 --> 00:07:38.517
You do have some gray areas and you know, I think.
00:07:38.822 --> 00:07:43.442
Those of us that pay taxes should always have a rule of trying to legally pay as few as possible.
00:07:43.833 --> 00:07:48.512
But I think as you really look at it, there's a lot of of opportunity out there.
00:07:48.512 --> 00:07:53.312
And you know, the tech stack that we look at is you want the Blue Jays for research.
00:07:53.923 --> 00:08:03.942
And we use tax dome and, and its capabilities and we're even looking at how do we maybe replace that with something newer and, and then your filing side.
00:08:03.942 --> 00:08:05.653
I think there's a lot of opportunity out there.
00:08:06.463 --> 00:08:08.742
Well, I think it's exciting.
00:08:08.742 --> 00:08:14.862
I think the hard part is, is the legacy vendors have owned the space for so long and are.
00:08:16.992 --> 00:08:22.002
You know, not so accepting of new players in the market.
00:08:22.512 --> 00:08:28.812
And I think the hard part about it is too, is that CPAs have to adopt.
00:08:29.187 --> 00:08:31.108
They have to kind of test it.
00:08:31.468 --> 00:08:40.197
And, and that's where that, that's the hard part because if these companies are VC backed and funded, they wanna show adoption.
00:08:40.557 --> 00:08:52.138
And if CPAs don't adopt the new software and they don't try it out because tax season is so busy and they don't have time for it and all of these things, then what could happen?
00:08:52.197 --> 00:08:55.528
And I'm gonna play like devil's advocate here, right?
00:08:56.128 --> 00:08:57.327
What happens if.
00:08:58.168 --> 00:09:11.187
These companies get all this money to change things and nothing changes because we have no adoption because the CPAs or the tax preparers have kept their heads down and not changed.
00:09:11.187 --> 00:09:18.268
And to me, that's the hard part because tax software is so complex and it does take a lot of money to get there.
00:09:18.268 --> 00:09:18.447
It does.
00:09:18.717 --> 00:09:22.528
And you have to show adoption for VC to continue the funding.
00:09:22.888 --> 00:09:23.727
And so.
00:09:24.062 --> 00:09:28.113
So anyway, so that's my, that's the other side of it that actually concerns me.
00:09:28.113 --> 00:09:31.863
Whereas bookkeeping, the adoption is already here.
00:09:31.863 --> 00:09:32.673
It's already moving.
00:09:32.852 --> 00:09:47.102
Like I don't, I, I think there's a huge opportunity for tax, but I also wonder is will it continue or will tax people like almost heard it and that that wouldn't be blue Jay.
00:09:47.133 --> 00:09:49.023
'cause Blue Jay I think is solid and already here.
00:09:49.023 --> 00:09:51.452
But I'm talking about truly from the tax prep side.
00:09:51.852 --> 00:09:54.342
Well, that's because Blue Jay solves a problem.
00:09:54.342 --> 00:09:58.842
That is the research side of things.
00:09:59.893 --> 00:10:02.802
It just makes that easier without liability, really.
00:10:02.832 --> 00:10:10.903
Like any other thing that the liability, the risk angle hits accountants and as somebody that comes from the tech industry a little bit.
00:10:11.743 --> 00:10:19.842
I think it's very hard to build technology and accounting because in in most technologies, you see the kinda hockey stick growth curve go like this.
00:10:19.842 --> 00:10:19.932
Mm-hmm.
00:10:20.557 --> 00:10:24.523
In accounting, it goes like this and it does have that.
00:10:24.523 --> 00:10:36.253
We saw bill.com is a great example in kind of relatively recent history and RAMP is another one, but the reality is you have a much longer period where the industry gets comfortable.
00:10:36.802 --> 00:10:41.783
The problem is, is that technology is changing and improving so fast.
00:10:42.418 --> 00:10:59.758
What I wonder is actually gonna happen is you're gonna have this, one of the dichotomies in tax that I think has always been fascinating is if you bring out new college grads and put them in a big firm, you effectively are telling them, Hey, we need to take your technology brain.
00:11:00.097 --> 00:11:06.998
Your experience with technology, put it in a box and dumb you down to now use the tax software that you're gonna use at this big firm.
00:11:07.927 --> 00:11:15.067
And I think what you're gonna start to see is these younger generations of accountants that are gonna hop out and say, I'm not doing that.
00:11:15.238 --> 00:11:17.607
I'm gonna start to use this and you'll see more.
00:11:17.788 --> 00:11:27.927
I wonder if we're gonna see more of a grassroots implication on tax, where you have the, uh, more the younger generations are saying, I'm not gonna do all of that.
00:11:28.288 --> 00:11:33.357
I'm gonna use this stuff, get paid similar wages, and just make a ton more money for a period of time.
00:11:34.792 --> 00:11:39.501
QuickBooks online and Microsoft 365 are essential tools for modern businesses.
00:11:39.501 --> 00:11:42.172
But what happens if your data is lost or compromised?
00:11:42.293 --> 00:11:57.057
SysCloud, a proud sponsor of the Accounting for Innovation podcast, provides advanced backup and recovery services, as well as ransomware protection and anomaly detection, ensuring your business can continue operating even in the face of disaster.
00:11:57.287 --> 00:11:57.996
SysCloud.
00:11:58.201 --> 00:12:00.609
Peace of mind for your businesses' critical data.
00:12:00.609 --> 00:12:03.068
Visit syscloud.com to learn more.
00:12:03.158 --> 00:12:05.899
That's syscloud.com.
00:12:05.931 --> 00:12:07.524
And now back to the show.
00:12:08.581 --> 00:12:25.201
Yeah, so the, the only hard part about that is tax is so big and so complex that it, you know, but the other thing is, I, I guess too, on the other side of it is the tech costs are coming down significantly and even like, so.
00:12:25.416 --> 00:12:31.206
What's the ability to develop tax software, faster professional tax software faster.
00:12:31.716 --> 00:12:34.686
And it's a seasonal business, so that's the other side of it too, right?
00:12:34.686 --> 00:12:38.885
Like you only have tax season once a year, so it's really hard to iterate through.
00:12:39.216 --> 00:12:39.696
So it.
00:12:40.005 --> 00:12:40.096
It's
00:12:41.086 --> 00:12:44.806
gonna be interesting that seasonality, does it provide an opportunity?
00:12:44.985 --> 00:12:54.796
I was actually asking our tax team this the other day, does it provide an opportunity to test on the fall tax season versus the spring tax season?
00:12:55.336 --> 00:13:04.096
You know, looking at all the extensions and using those as your opportunity to maybe test and run parallel processes versus trying to do it when everybody's so busy.
00:13:04.471 --> 00:13:06.301
So the yes and no.
00:13:06.301 --> 00:13:15.091
So the hard part is, is the development has to be approved by every state regulatory agency and all of that stuff happens at the beginning of the year.
00:13:15.301 --> 00:13:21.900
So if you haven't developed it to get approvals, then it doesn't matter'cause you can't continue to iterate.
00:13:22.140 --> 00:13:24.931
So, so again, that's why like.
00:13:25.416 --> 00:13:27.966
Tax software is so difficult to build.
00:13:27.966 --> 00:13:40.745
It's not just the software, it's the regulatory agencies, the IRS and every state Department of revenue, um, or revenue agency that creates the bottlenecks and the.
00:13:41.255 --> 00:13:45.456
The the rules that don't allow you to iterate fast enough.
00:13:45.666 --> 00:13:52.895
So not only do you have the CPAs who are holding you back, you have all the regulatory agencies who are holding you back.
00:13:53.135 --> 00:13:56.405
Hence why there's only three tech software providers.
00:13:56.956 --> 00:13:58.186
Like the big ones, right?
00:13:58.576 --> 00:13:59.326
You think they might
00:13:59.326 --> 00:14:00.436
all be in cahoots?
00:14:02.145 --> 00:14:04.096
It's, they were the early ones.
00:14:04.096 --> 00:14:11.235
They got in and they, they figured it out and that's why they've been able to kind of, you know, hold the market.
00:14:11.385 --> 00:14:18.436
So, but like I said, we have tax, well tax that got acquired by IWiN, so, but they're in it now.
00:14:18.735 --> 00:14:21.196
Um, you have Hub, hub Sync, I think.
00:14:21.615 --> 00:14:25.005
Um, they're in it at, again, at the bigger firm level.
00:14:25.341 --> 00:14:35.270
So like, and then there's the three new ones and like, it seems like every other day someone's calling me to say, Hey, I wanna build tax software, so
00:14:36.410 --> 00:14:37.046
go for it.
00:14:37.341 --> 00:14:43.041
So, so maybe it's come, maybe it's coming faster than we think, but again, I think it'll be interesting.
00:14:43.041 --> 00:14:44.600
But that, that's my word of warning.
00:14:44.600 --> 00:14:53.030
If you truly want tax software, we as a profession, we as tax preparers are gonna have to help iterate through and get.
00:14:53.235 --> 00:14:59.475
Let some of these softwares actually be viable, because if, if we're not, then guess what?
00:14:59.505 --> 00:15:04.066
The, the legacy providers are gonna continue to do what they do.
00:15:05.250 --> 00:15:10.860
So today you have, uh, a lot of people are thinking, where do I start with AI and tax?
00:15:11.071 --> 00:15:12.030
Where do you have them start?
00:15:12.900 --> 00:15:15.990
So I would start on the pre-tax work.
00:15:15.990 --> 00:15:22.380
So I think it's true prep.ai is there, I think, I think it's Sobon, right?
00:15:22.500 --> 00:15:30.360
Um, is one of, uh, I, and I think there's a couple others that are really on the pre-tax.
00:15:30.586 --> 00:15:31.125
Work.
00:15:31.515 --> 00:15:34.096
Um, and, and I think that's where you start.
00:15:34.096 --> 00:15:39.855
And then I think you start in research, um, and get used to like Blue Jay.
00:15:40.155 --> 00:15:45.706
Um, I think you can use things like, um, I think it's tax plan iq, right?
00:15:45.706 --> 00:15:49.666
For projections and, and things like that, right?
00:15:49.666 --> 00:15:53.385
So I, those are the ones that are like already like.
00:15:54.270 --> 00:15:55.770
Somewhat established, right?
00:15:55.770 --> 00:15:58.980
When you think of AI and tax, but they're not in compliance.
00:15:58.980 --> 00:16:00.780
They're in the surrounding area.
00:16:00.780 --> 00:16:03.660
So they're either in projections or you know, research.
00:16:04.321 --> 00:16:04.831
I would agree.
00:16:04.831 --> 00:16:11.490
Kind of break things up and take out the unregulated aspects that are hard to do and start putting stuff in there.
00:16:11.490 --> 00:16:12.811
Make your life easier.
00:16:12.870 --> 00:16:19.530
And when the regulated aspects start to provide opportunities, then see and test.
00:16:19.775 --> 00:16:35.826
And I think getting back to get your hands dirty and start trying things out, testing it out, and um, you know, I think the Blue Jays of the world provides so much opportunity for people that have not been able to have access to information in the ways that.
00:16:35.885 --> 00:16:39.456
Bigger firms have, and you're democratizing information.
00:16:39.456 --> 00:16:49.025
And you as a small firm or as a single accountant in a bigger firm now have access to look way smarter than you ever have in the past by leveraging ai.
00:16:49.025 --> 00:16:50.225
And I think that's really cool.
00:16:50.765 --> 00:16:54.005
And absolutely make sure you're pricing for it and you're charging for it, right?
00:16:54.005 --> 00:16:58.895
Just because it a hundred percent, two seconds to find the answer doesn't mean you shouldn't charge for it.
00:16:59.285 --> 00:17:04.776
And I think the other thing is, is even when we talk about accounting to get to, um.
00:17:05.861 --> 00:17:06.461
Tax.
00:17:06.730 --> 00:17:22.060
Think about if you aren't doing taxes and you wanna do some like quick writeup work, you could throw a bunch of bank statements into chat, bt, and you could get an Excel spreadsheet out and you can manipulate that data really quick to get to.
00:17:22.060 --> 00:17:25.330
I would call a quick and dirty tax return on a Schedule C, right?
00:17:25.330 --> 00:17:25.421
Oh yeah.
00:17:25.451 --> 00:17:25.925
So like.
00:17:26.330 --> 00:17:31.191
The way to manipulate data to get it into a tax return.
00:17:31.280 --> 00:17:35.121
Forget about even like the 10 90 nines and all that stuff you're collecting.
00:17:35.421 --> 00:17:41.871
Just think about, you know, someone who has a simple Schedule C with 12 bank statements that now you have the ability to.
00:17:42.361 --> 00:18:00.030
By using AI to turn that stuff into a simple trial balance that you can manipulate in Excel and have that take you, you know, 10 minutes as opposed to re-keying everything or trying to hunt down a bank login or doing something like that with it, right?
00:18:00.030 --> 00:18:05.310
Like you can now take a PDF and make it into, again, taking unstructured data.
00:18:05.601 --> 00:18:06.891
Making it structured
00:18:06.980 --> 00:18:07.490
a hundred percent
00:18:07.490 --> 00:18:12.980
and you can make it into a simple trial balance really quick to get into a Schedule C return.
00:18:13.340 --> 00:18:19.250
So, um, you know, I'll say that's the, the, the hack of ai right?
00:18:19.461 --> 00:18:22.250
Versus like kind of this big software stuff.
00:18:22.250 --> 00:18:35.060
But I, I think that's the stuff firms need to think about too is like, what are all the still trying facts that you can, you can use AI to do, you know, your job easier as these other tools continue to evolve.
00:18:36.270 --> 00:18:39.750
How do you find the hard parts of your job and make them easier?
00:18:39.961 --> 00:18:46.020
It's a, it's something we've all been trying to do for our entire lives, and now AI gives us more capability.
00:18:46.020 --> 00:18:47.881
So I think it's awesome.
00:18:47.911 --> 00:18:52.621
I think we're gonna see a lot of tax or AI and tax and cast and workflow.
00:18:53.266 --> 00:18:58.185
AI is, is coming for everything, and it's just gonna make our lives easier and better.
00:18:58.185 --> 00:19:06.165
And Jody, I'm excited to talk about more aspects of that, more areas where we're gonna see it, uh, in our episodes to come.
00:00:00.644 --> 00:00:08.003
Welcome to the Accounting for Innovation podcast, where we explore cutting edge strategies and insights into the world of accounting and finance.
00:00:08.464 --> 00:00:14.544
Presented by Decimal and the Radical CPA, each episode dives deep into industry trends.
00:00:14.884 --> 00:00:23.164
Whether you're a seasoned professional or a budding entrepreneur, join us as we unpack key concepts and share practical tips to drive success.
00:00:24.597 --> 00:00:31.678
Welcome to today's episode of Accounting for Innovation with your co-host myself, Matt Tate and Jody Padar.
00:00:32.008 --> 00:00:40.768
Today I am excited because I have very little contextual information to be able to help this discussion, but Jody is an expert.
00:00:41.357 --> 00:00:51.078
So today we're gonna talk about AI for tax because to me and, and our teams are doing this at decimal AI is reducing the burden of tax season.
00:00:51.417 --> 00:00:51.718
Prep.
00:00:52.107 --> 00:00:54.148
It's enabling more strategic planning.
00:00:54.658 --> 00:00:56.427
It's making the work easier.
00:00:56.817 --> 00:01:05.218
And one of the craziest things I've always thought about the profession is in other jobs, people measure your time by how many years you've been at a company.
00:01:05.847 --> 00:01:08.727
In an accounting firm, it's how many tax seasons.
00:01:08.998 --> 00:01:12.028
So Jody, how are we gonna use AI to make that?
00:01:12.322 --> 00:01:13.403
Less impactful.
00:01:14.483 --> 00:01:17.003
Oh, I love AI in tech.
00:01:17.003 --> 00:01:30.022
So, uh, to give people a little bit of background, if they haven't, you know, been around me for a while is my last full-time position was with April Tech Software and April Tech software built.
00:01:30.373 --> 00:01:33.822
Um, tax software to compete with, um, TurboTax.
00:01:33.822 --> 00:01:43.063
So on the consumer side, I was employing number one and I worked, um, hand in hand with the engineers to use AI to build tax software from scratch.
00:01:43.393 --> 00:01:55.183
Now, the way we used AI is we used the language models to read the forms instructions and to code forms faster, and we were able to get from, uh.
00:01:55.783 --> 00:02:02.503
Nothing or zero, zero federal in all no states to have complete federal coverage.
00:02:02.503 --> 00:02:09.103
Now granted there was a limited form set to it in three years, which is unheard of, right?
00:02:09.103 --> 00:02:09.193
Oh yeah.
00:02:09.193 --> 00:02:22.663
When you think of like, and we had, I don't wanna say a handful of engineers'cause we, we did have a team, but we had nowhere near the team that any of the other legacy providers have to develop software.
00:02:22.902 --> 00:02:24.492
So that's how fast.
00:02:25.108 --> 00:02:30.328
Um, the compliance based software is going now and using AI to develop it.
00:02:30.777 --> 00:02:41.187
And now, and that was even before like kind of chat GPT because that began in the end of 21 and the models are that much smarter now.
00:02:41.247 --> 00:02:51.207
So, but now when you think about it in the professional side, because we built it in the consumer side and professionals are always a little bit more, you know, um.
00:02:51.837 --> 00:02:59.427
Uh, picky about, um, now when you look at it on the professional side.
00:03:00.673 --> 00:03:03.013
I can honestly say, guess what?
00:03:03.013 --> 00:03:04.752
It was done on the consumer side.
00:03:04.782 --> 00:03:06.703
It can be done on the professional side.
00:03:06.943 --> 00:03:12.193
So it's now a question of who and how fast are they gonna get there.
00:03:12.643 --> 00:03:21.133
And when you look at all the pieces of tax software, it's not just the filing side, which is what I did at April.
00:03:21.427 --> 00:03:23.467
It's the gathering of documents.
00:03:23.497 --> 00:03:31.777
It's the kind of pulling it all in the, I'll call it the pre-tax work in a cas, they call it pre accounting, which is all the bookkeeping in the receipts.
00:03:31.957 --> 00:03:34.957
So how do you get all that pre-tax work done?
00:03:35.258 --> 00:03:36.002
And there are already.
00:03:36.987 --> 00:03:41.907
Tools on the market that are starting to kind of redefine what that organizer is like.
00:03:41.907 --> 00:03:44.068
An organizer on steroids, right?
00:03:44.608 --> 00:03:44.668
Yeah.
00:03:44.668 --> 00:03:50.277
And I think that's what's exciting because that's like the first step.
00:03:50.337 --> 00:04:00.448
And then once you get all that data in, and again, we're going unstructured to structured data, now you can populate tax forms fairly easily and you can get to filing.
00:04:00.747 --> 00:04:01.918
And so I would.
00:04:03.062 --> 00:04:12.782
Guess in the next few years we will have complete software that will be able to file using AI significantly.
00:04:13.052 --> 00:04:23.673
And you know, in the professional side there's like black ore who, nobody really knows what they do, but they've raised like, I think$60 million or some crazy amount.
00:04:24.002 --> 00:04:24.632
And yet.
00:04:25.033 --> 00:04:28.663
Nobody has really seen them, their software work yet.
00:04:28.663 --> 00:04:30.492
But I think that's interesting.
00:04:30.492 --> 00:04:31.543
So I think there's, yeah, I do too.
00:04:31.543 --> 00:04:32.833
An opportunity there.
00:04:33.192 --> 00:04:46.872
Um, I also think that I've had, well I think, I know I've had three additional, um, uh, seed founded startups come to me directly asking for help with tax software.
00:04:47.322 --> 00:04:48.492
Um, also.
00:04:48.927 --> 00:04:55.288
I win, just acquire taxa and they're in, they're kind of exploring the space.
00:04:55.408 --> 00:05:01.918
So that's like five that I can say today that are gonna get there.
00:05:01.947 --> 00:05:07.228
Now whether they get there in one year or five years, I don't know, but it's coming and it's coming quick.
00:05:07.708 --> 00:05:16.648
And then you, again, you have the, the kind of the pre-tax softwares that are kind of on the cusp who are like starting it as well, and.
00:05:17.502 --> 00:05:21.252
And then there's the, um, the planning software, right?
00:05:21.252 --> 00:05:23.833
So we didn't even talk about like tax planning software, right?
00:05:23.833 --> 00:05:23.834
Yeah.
00:05:23.838 --> 00:05:26.682
So you have, I think, true prep ai.
00:05:27.012 --> 00:05:37.603
Um, you have, uh, other tax planning softwares that are like they're building to help us do tax planning, which I actually think is a little bit.
00:05:38.312 --> 00:05:41.463
Easier even than compliance to use AI to do it.
00:05:41.822 --> 00:05:43.083
So I agree.
00:05:43.083 --> 00:05:46.952
The, the opportunity and, and then last but not least, we got research, right?
00:05:47.312 --> 00:05:52.353
And we have um, blue Jay who is like killing it on the tax research slide.
00:05:52.353 --> 00:05:58.773
They're like everywhere now and they're at all the states and they really make tax research super simple.
00:05:58.923 --> 00:05:59.942
So, yep.
00:06:00.747 --> 00:06:06.838
Tax is actually, I think, one of the easier things to do with ai.
00:06:07.317 --> 00:06:10.077
Um, because it's based in language.
00:06:10.557 --> 00:06:12.718
Because it's law and it's language, right?
00:06:12.718 --> 00:06:15.478
And it's, it's yes or no.
00:06:15.507 --> 00:06:18.057
There's less gray in it.
00:06:18.057 --> 00:06:21.358
I mean, there's still gray, but there's, I'll say there's a little bit less gray.
00:06:21.658 --> 00:06:23.367
But anyways, I'm excited about it.
00:06:23.367 --> 00:06:24.538
Matt, what's your take on it?
00:06:24.538 --> 00:06:25.122
That was a lot.
00:06:26.442 --> 00:06:27.583
Oh no, I agree.
00:06:27.642 --> 00:06:29.202
Uh, not that it was a lot.
00:06:29.202 --> 00:06:30.463
It was a lot, but it was great.
00:06:31.002 --> 00:06:32.802
I think that it's awesome.
00:06:32.833 --> 00:06:38.502
I mean, what, I was talking to my team the other day and I said, you know what my ideal is?
00:06:38.773 --> 00:06:41.622
We get a last year's tax return from a client.
00:06:41.622 --> 00:06:41.682
I.
00:06:42.418 --> 00:06:50.127
Then we just watch software, reach out to them and tell them exactly what we need from them, uh, exactly what states they're gonna file in.
00:06:50.187 --> 00:06:53.668
It follows up with them in a good mannered, humanistic way.
00:06:54.028 --> 00:06:58.947
It compiles all the information, it fills out the forms, and you guys are just advising them on a few things.
00:06:59.307 --> 00:07:05.367
So that to me is, is the most amazing outcome for where I think we're gonna get to pretty quickly.
00:07:05.908 --> 00:07:07.677
And the reality is.
00:07:08.442 --> 00:07:09.132
I agree with you.
00:07:09.132 --> 00:07:09.642
It's easier.
00:07:09.702 --> 00:07:13.033
I think you're gonna see AI adopted fast.
00:07:14.098 --> 00:07:24.028
Through at least SMB tax than you will in Cass and bookkeeping because it is so legalistic in Cass and bookkeeping.
00:07:24.028 --> 00:07:27.807
It's a very flexible kind of program that you can do.
00:07:27.807 --> 00:07:28.887
Everybody's different.
00:07:28.887 --> 00:07:36.148
You have different charts of accounts, desires, wants, businesses, industries, but can tax is tax and it's pretty well regulated.
00:07:36.148 --> 00:07:38.517
You do have some gray areas and you know, I think.
00:07:38.822 --> 00:07:43.442
Those of us that pay taxes should always have a rule of trying to legally pay as few as possible.
00:07:43.833 --> 00:07:48.512
But I think as you really look at it, there's a lot of of opportunity out there.
00:07:48.512 --> 00:07:53.312
And you know, the tech stack that we look at is you want the Blue Jays for research.
00:07:53.923 --> 00:08:03.942
And we use tax dome and, and its capabilities and we're even looking at how do we maybe replace that with something newer and, and then your filing side.
00:08:03.942 --> 00:08:05.653
I think there's a lot of opportunity out there.
00:08:06.463 --> 00:08:08.742
Well, I think it's exciting.
00:08:08.742 --> 00:08:14.862
I think the hard part is, is the legacy vendors have owned the space for so long and are.
00:08:16.992 --> 00:08:22.002
You know, not so accepting of new players in the market.
00:08:22.512 --> 00:08:28.812
And I think the hard part about it is too, is that CPAs have to adopt.
00:08:29.187 --> 00:08:31.108
They have to kind of test it.
00:08:31.468 --> 00:08:40.197
And, and that's where that, that's the hard part because if these companies are VC backed and funded, they wanna show adoption.
00:08:40.557 --> 00:08:52.138
And if CPAs don't adopt the new software and they don't try it out because tax season is so busy and they don't have time for it and all of these things, then what could happen?
00:08:52.197 --> 00:08:55.528
And I'm gonna play like devil's advocate here, right?
00:08:56.128 --> 00:08:57.327
What happens if.
00:08:58.168 --> 00:09:11.187
These companies get all this money to change things and nothing changes because we have no adoption because the CPAs or the tax preparers have kept their heads down and not changed.
00:09:11.187 --> 00:09:18.268
And to me, that's the hard part because tax software is so complex and it does take a lot of money to get there.
00:09:18.268 --> 00:09:18.447
It does.
00:09:18.717 --> 00:09:22.528
And you have to show adoption for VC to continue the funding.
00:09:22.888 --> 00:09:23.727
And so.
00:09:24.062 --> 00:09:28.113
So anyway, so that's my, that's the other side of it that actually concerns me.
00:09:28.113 --> 00:09:31.863
Whereas bookkeeping, the adoption is already here.
00:09:31.863 --> 00:09:32.673
It's already moving.
00:09:32.852 --> 00:09:47.102
Like I don't, I, I think there's a huge opportunity for tax, but I also wonder is will it continue or will tax people like almost heard it and that that wouldn't be blue Jay.
00:09:47.133 --> 00:09:49.023
'cause Blue Jay I think is solid and already here.
00:09:49.023 --> 00:09:51.452
But I'm talking about truly from the tax prep side.
00:09:51.852 --> 00:09:54.342
Well, that's because Blue Jay solves a problem.
00:09:54.342 --> 00:09:58.842
That is the research side of things.
00:09:59.893 --> 00:10:02.802
It just makes that easier without liability, really.
00:10:02.832 --> 00:10:10.903
Like any other thing that the liability, the risk angle hits accountants and as somebody that comes from the tech industry a little bit.
00:10:11.743 --> 00:10:19.842
I think it's very hard to build technology and accounting because in in most technologies, you see the kinda hockey stick growth curve go like this.
00:10:19.842 --> 00:10:19.932
Mm-hmm.
00:10:20.557 --> 00:10:24.523
In accounting, it goes like this and it does have that.
00:10:24.523 --> 00:10:36.253
We saw bill.com is a great example in kind of relatively recent history and RAMP is another one, but the reality is you have a much longer period where the industry gets comfortable.
00:10:36.802 --> 00:10:41.783
The problem is, is that technology is changing and improving so fast.
00:10:42.418 --> 00:10:59.758
What I wonder is actually gonna happen is you're gonna have this, one of the dichotomies in tax that I think has always been fascinating is if you bring out new college grads and put them in a big firm, you effectively are telling them, Hey, we need to take your technology brain.
00:11:00.097 --> 00:11:06.998
Your experience with technology, put it in a box and dumb you down to now use the tax software that you're gonna use at this big firm.
00:11:07.927 --> 00:11:15.067
And I think what you're gonna start to see is these younger generations of accountants that are gonna hop out and say, I'm not doing that.
00:11:15.238 --> 00:11:17.607
I'm gonna start to use this and you'll see more.
00:11:17.788 --> 00:11:27.927
I wonder if we're gonna see more of a grassroots implication on tax, where you have the, uh, more the younger generations are saying, I'm not gonna do all of that.
00:11:28.288 --> 00:11:33.357
I'm gonna use this stuff, get paid similar wages, and just make a ton more money for a period of time.
00:11:34.792 --> 00:11:39.501
QuickBooks online and Microsoft 365 are essential tools for modern businesses.
00:11:39.501 --> 00:11:42.172
But what happens if your data is lost or compromised?
00:11:42.293 --> 00:11:57.057
SysCloud, a proud sponsor of the Accounting for Innovation podcast, provides advanced backup and recovery services, as well as ransomware protection and anomaly detection, ensuring your business can continue operating even in the face of disaster.
00:11:57.287 --> 00:11:57.996
SysCloud.
00:11:58.201 --> 00:12:00.609
Peace of mind for your businesses' critical data.
00:12:00.609 --> 00:12:03.068
Visit syscloud.com to learn more.
00:12:03.158 --> 00:12:05.899
That's syscloud.com.
00:12:05.931 --> 00:12:07.524
And now back to the show.
00:12:08.581 --> 00:12:25.201
Yeah, so the, the only hard part about that is tax is so big and so complex that it, you know, but the other thing is, I, I guess too, on the other side of it is the tech costs are coming down significantly and even like, so.
00:12:25.416 --> 00:12:31.206
What's the ability to develop tax software, faster professional tax software faster.
00:12:31.716 --> 00:12:34.686
And it's a seasonal business, so that's the other side of it too, right?
00:12:34.686 --> 00:12:38.885
Like you only have tax season once a year, so it's really hard to iterate through.
00:12:39.216 --> 00:12:39.696
So it.
00:12:40.005 --> 00:12:40.096
It's
00:12:41.086 --> 00:12:44.806
gonna be interesting that seasonality, does it provide an opportunity?
00:12:44.985 --> 00:12:54.796
I was actually asking our tax team this the other day, does it provide an opportunity to test on the fall tax season versus the spring tax season?
00:12:55.336 --> 00:13:04.096
You know, looking at all the extensions and using those as your opportunity to maybe test and run parallel processes versus trying to do it when everybody's so busy.
00:13:04.471 --> 00:13:06.301
So the yes and no.
00:13:06.301 --> 00:13:15.091
So the hard part is, is the development has to be approved by every state regulatory agency and all of that stuff happens at the beginning of the year.
00:13:15.301 --> 00:13:21.900
So if you haven't developed it to get approvals, then it doesn't matter'cause you can't continue to iterate.
00:13:22.140 --> 00:13:24.931
So, so again, that's why like.
00:13:25.416 --> 00:13:27.966
Tax software is so difficult to build.
00:13:27.966 --> 00:13:40.745
It's not just the software, it's the regulatory agencies, the IRS and every state Department of revenue, um, or revenue agency that creates the bottlenecks and the.
00:13:41.255 --> 00:13:45.456
The the rules that don't allow you to iterate fast enough.
00:13:45.666 --> 00:13:52.895
So not only do you have the CPAs who are holding you back, you have all the regulatory agencies who are holding you back.
00:13:53.135 --> 00:13:56.405
Hence why there's only three tech software providers.
00:13:56.956 --> 00:13:58.186
Like the big ones, right?
00:13:58.576 --> 00:13:59.326
You think they might
00:13:59.326 --> 00:14:00.436
all be in cahoots?
00:14:02.145 --> 00:14:04.096
It's, they were the early ones.
00:14:04.096 --> 00:14:11.235
They got in and they, they figured it out and that's why they've been able to kind of, you know, hold the market.
00:14:11.385 --> 00:14:18.436
So, but like I said, we have tax, well tax that got acquired by IWiN, so, but they're in it now.
00:14:18.735 --> 00:14:21.196
Um, you have Hub, hub Sync, I think.
00:14:21.615 --> 00:14:25.005
Um, they're in it at, again, at the bigger firm level.
00:14:25.341 --> 00:14:35.270
So like, and then there's the three new ones and like, it seems like every other day someone's calling me to say, Hey, I wanna build tax software, so
00:14:36.410 --> 00:14:37.046
go for it.
00:14:37.341 --> 00:14:43.041
So, so maybe it's come, maybe it's coming faster than we think, but again, I think it'll be interesting.
00:14:43.041 --> 00:14:44.600
But that, that's my word of warning.
00:14:44.600 --> 00:14:53.030
If you truly want tax software, we as a profession, we as tax preparers are gonna have to help iterate through and get.
00:14:53.235 --> 00:14:59.475
Let some of these softwares actually be viable, because if, if we're not, then guess what?
00:14:59.505 --> 00:15:04.066
The, the legacy providers are gonna continue to do what they do.
00:15:05.250 --> 00:15:10.860
So today you have, uh, a lot of people are thinking, where do I start with AI and tax?
00:15:11.071 --> 00:15:12.030
Where do you have them start?
00:15:12.900 --> 00:15:15.990
So I would start on the pre-tax work.
00:15:15.990 --> 00:15:22.380
So I think it's true prep.ai is there, I think, I think it's Sobon, right?
00:15:22.500 --> 00:15:30.360
Um, is one of, uh, I, and I think there's a couple others that are really on the pre-tax.
00:15:30.586 --> 00:15:31.125
Work.
00:15:31.515 --> 00:15:34.096
Um, and, and I think that's where you start.
00:15:34.096 --> 00:15:39.855
And then I think you start in research, um, and get used to like Blue Jay.
00:15:40.155 --> 00:15:45.706
Um, I think you can use things like, um, I think it's tax plan iq, right?
00:15:45.706 --> 00:15:49.666
For projections and, and things like that, right?
00:15:49.666 --> 00:15:53.385
So I, those are the ones that are like already like.
00:15:54.270 --> 00:15:55.770
Somewhat established, right?
00:15:55.770 --> 00:15:58.980
When you think of AI and tax, but they're not in compliance.
00:15:58.980 --> 00:16:00.780
They're in the surrounding area.
00:16:00.780 --> 00:16:03.660
So they're either in projections or you know, research.
00:16:04.321 --> 00:16:04.831
I would agree.
00:16:04.831 --> 00:16:11.490
Kind of break things up and take out the unregulated aspects that are hard to do and start putting stuff in there.
00:16:11.490 --> 00:16:12.811
Make your life easier.
00:16:12.870 --> 00:16:19.530
And when the regulated aspects start to provide opportunities, then see and test.
00:16:19.775 --> 00:16:35.826
And I think getting back to get your hands dirty and start trying things out, testing it out, and um, you know, I think the Blue Jays of the world provides so much opportunity for people that have not been able to have access to information in the ways that.
00:16:35.885 --> 00:16:39.456
Bigger firms have, and you're democratizing information.
00:16:39.456 --> 00:16:49.025
And you as a small firm or as a single accountant in a bigger firm now have access to look way smarter than you ever have in the past by leveraging ai.
00:16:49.025 --> 00:16:50.225
And I think that's really cool.
00:16:50.765 --> 00:16:54.005
And absolutely make sure you're pricing for it and you're charging for it, right?
00:16:54.005 --> 00:16:58.895
Just because it a hundred percent, two seconds to find the answer doesn't mean you shouldn't charge for it.
00:16:59.285 --> 00:17:04.776
And I think the other thing is, is even when we talk about accounting to get to, um.
00:17:05.861 --> 00:17:06.461
Tax.
00:17:06.730 --> 00:17:22.060
Think about if you aren't doing taxes and you wanna do some like quick writeup work, you could throw a bunch of bank statements into chat, bt, and you could get an Excel spreadsheet out and you can manipulate that data really quick to get to.
00:17:22.060 --> 00:17:25.330
I would call a quick and dirty tax return on a Schedule C, right?
00:17:25.330 --> 00:17:25.421
Oh yeah.
00:17:25.451 --> 00:17:25.925
So like.
00:17:26.330 --> 00:17:31.191
The way to manipulate data to get it into a tax return.
00:17:31.280 --> 00:17:35.121
Forget about even like the 10 90 nines and all that stuff you're collecting.
00:17:35.421 --> 00:17:41.871
Just think about, you know, someone who has a simple Schedule C with 12 bank statements that now you have the ability to.
00:17:42.361 --> 00:18:00.030
By using AI to turn that stuff into a simple trial balance that you can manipulate in Excel and have that take you, you know, 10 minutes as opposed to re-keying everything or trying to hunt down a bank login or doing something like that with it, right?
00:18:00.030 --> 00:18:05.310
Like you can now take a PDF and make it into, again, taking unstructured data.
00:18:05.601 --> 00:18:06.891
Making it structured
00:18:06.980 --> 00:18:07.490
a hundred percent
00:18:07.490 --> 00:18:12.980
and you can make it into a simple trial balance really quick to get into a Schedule C return.
00:18:13.340 --> 00:18:19.250
So, um, you know, I'll say that's the, the, the hack of ai right?
00:18:19.461 --> 00:18:22.250
Versus like kind of this big software stuff.
00:18:22.250 --> 00:18:35.060
But I, I think that's the stuff firms need to think about too is like, what are all the still trying facts that you can, you can use AI to do, you know, your job easier as these other tools continue to evolve.
00:18:36.270 --> 00:18:39.750
How do you find the hard parts of your job and make them easier?
00:18:39.961 --> 00:18:46.020
It's a, it's something we've all been trying to do for our entire lives, and now AI gives us more capability.
00:18:46.020 --> 00:18:47.881
So I think it's awesome.
00:18:47.911 --> 00:18:52.621
I think we're gonna see a lot of tax or AI and tax and cast and workflow.
00:18:53.266 --> 00:18:58.185
AI is, is coming for everything, and it's just gonna make our lives easier and better.
00:18:58.185 --> 00:19:06.165
And Jody, I'm excited to talk about more aspects of that, more areas where we're gonna see it, uh, in our episodes to come.
