AI Tax Prep Tools Promise to Cut Return Preparation Time From Hours to Minutes

There may be errors in spelling, grammar, and accuracy in this machine-generated transcript. Blake Oliver: [00:00:04] The US government agreed to permanently drop current tax claims against President Donald Trump. This is according to a document that was posted by the Justice Department. The government the IRS is barred from examining or prosecuting Trump, his sons and the Trump Organization over current tax examinations. And it also says that the government is restricted from investigating Trump's family, affiliates and others tied to the matter. David Leary: [00:00:31] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:36] Hey, everyone, and welcome back to the Accounting Podcast, your weekly roundup of news in the profession. I'm Blake Oliver. David Leary: [00:00:42] I'm David Leary, I'm Blake. We're back. It's very obvious based on the video, we're back home. Both of us are back in our normal recording environments. But where did you go last week? Blake Oliver: [00:00:50] I was in New York at the black or AI tax Summit. Black haw is one of those automated AI tax prep Companies. They invited me out there. It was at Nasdaq Tower in Manhattan. It was so cool to see the product and moderate a panel. And I want to talk all about that. But first, let's thank our sponsors. David Leary: [00:01:11] Yeah, our sponsors this week we have cloud accountants staffing the value builder system. That's a new sponsor on Pay and maxima. Are you tired of the endless search for qualified accounting talent? You're not alone. Growing accounting firms are struggling to find available and affordable team members when they need them. Cloud accountants staffing has a solution with their revolutionary candidate portal. Unlike traditional staffing agencies that waste your time with sales calls, paperwork deposits, the cloud accounting staffing portal gives you instant access to highly vetted, qualified accounting professionals. No waiting, no hassle, just top talent. Right now, what makes this different? Speed and simplicity? What other firms make you wait weeks or months with cloud account and staffing? You can interview someone as soon as tomorrow. The boutique support ensures you're getting high quality talent that's both available and affordable. Exactly what you're growing firm needs. The candidate portal puts you in control. You can browse live candidates, make selections on your timeline, and build your offshore team without the traditional headaches. To find, review book interviews with potential team members, all in less than ten minutes, head over to The Accounting Podcast dot promo that is The Accounting Podcast dot promo forward slash CAS. Blake Oliver: [00:02:22] All right, so this company, black Gore, they've been in stealth for years. I think they started in 2022 and they recently went live with their product and they've been working with big firms. Ey, PwC, KPMG, Deloitte, Withum, Eisneramper, SaaS, elevate, they were all there. Kelly Phillips Erb from Forbes moderated. She hosted the event. Uh, there was, uh, the Wall Street Journal was in the room. Accounting Today was there. And so it was really exciting to go out there and moderate a panel about AI and what is happening in firms now, like the the bigger firms. David Leary: [00:03:05] So what does this do? What does Blackbaud do? Blake Oliver: [00:03:07] So so Blackmore and here's the example from your keynote. He's the CEO of Blackmore. They have built an AI agent that can do a complicated high net worth return with dozens of k-1's that would normally take 40 hours of human labor. And it can do it in five minutes. So. David Leary: [00:03:29] So is this the reason Intuit's stock is getting destroyed so much because of these AI startups that that exist? Blake Oliver: [00:03:36] I think so, I mean, that's a great tie in to one of our top stories today, which is Intuit stock dropping. What was it like 20% in a single day? David Leary: [00:03:45] A single day? I think for the first quarter of this year, it's the largest dropping stock in the S&P 500 or something. It's it's getting brutalized. I mean so it's zero. I mean, everybody's gotten Sage has gotten hammered. They've all got hammered pretty much. Blake Oliver: [00:03:58] And I think that in this case, the street is. And you and I will debate this, I'm sure, David, but I think the street has it right when it comes to the threat to Intuit's TurboTax business, because these AI tax prep tools are crazy good. They're getting good so fast. And I know that might come as a surprise to anyone who's tried to do it with chat bots, but the latest iteration of AI agents, they can eliminate the hallucination, the probabilistic outcome, and they can make it deterministic. So, for example, Black Haw claims that they have over 99% accuracy in the prep of these complex returns. It can do 8,098% of the work. It's a 98% time savings. And even when you factor in the cost of their software, it's still like an 80% cost savings. The review is two times faster And they're claiming just like 50 times efficiency. Now, you know, maybe you dial that back a little bit, but still, even then, it's going to fundamentally change how accounting is done and the business model of accounting firms. They had Ryan Stevens, who's the director of applied science at Ramp. He was there. He did a fireside chat and he talked about how, according to ramps data, that businesses that are spending a lot on AI are growing revenue 6 to 7 times faster than those that aren't. Blake Oliver: [00:05:28] What's also interesting is that they're not seeing widespread layoffs from these companies that are adopting AI, and he thinks that where the layoffs will happen will be in the future, potentially if it happens. But it's not going to come like internally at bigger firms. It's going to be when small firms leverage AI to take work or beat out the bigger firms. And this goes to what we've been talking about in recent episodes, about how I think that small firms are going to benefit the most from AI, because now, as a small firm, you can do the kind of work that you could only do at a big firm with lots of people and lots of experts and lots of leverage. Jeff Wang, he's the former former global CIO at EY. He said that at EY last year, for every $1 they invested in AI, they generated $6.50 in revenue. So that's a six times return on investment from AI. But it's not like cutting costs. David Leary: [00:06:33] That's tied to that because that's we can talk about e AI issues in a little bit. Blake Oliver: [00:06:38] Well, I think I had another hallucination problem right. David Leary: [00:06:40] Yes. Blake Oliver: [00:06:41] Yeah. So okay. Save that one. Um, you know, and very few firms, right. There are very few firms are actually like deeply AI or what you call AI first, right? Like 7% of firms are AI first. That's according to David for Jerry. He's the chief AI officer at Eisner Amper. Only 1% are AI native and the other 90% are buying tools. And they're getting a small bump right now, but they're still struggling to implement them like we are at the very beginning of these AI agents permeating the larger firms, and especially when it comes to tax and audit. What was interesting was listening to the panel discussions where you have these tech experts at large firms like Jim Balk from Withum talking about how they're starting to get calls or complaints in meetings from tax partners who are now seeing billable hours drop what they call charge hours. The charge hours are dropping, and the tax partners are freaking out because they're selling time, and these tools are making them efficient. And now their efficiency is eating into their revenue. And this is exactly what we saw when CAS practices when accounting and bookkeeping practices started making the switch to cloud, they really, really quickly had to change how they build. They couldn't bill for time anymore. I had that experience. I switched to cloud my efficiency. My productivity went up so much that my charge hours, my billable hours went down 80%. And like the very next month, I fixed my fees and I stopped charging for time. So I think we're going to finally see the same thing happen in the big firms. And I think this is going to be Ron Baker's dream come true. The death of the billable hour will happen in the next. Who knows how many years? 5 or 10. David Leary: [00:08:27] Bill for one hour. Just a crazy high cost now. Blake Oliver: [00:08:30] Well, yeah, but except you know what? What client is going to put up with, you know, thousands of dollars per hour from their accountant, right. So I think it's just going to have to do it. And, um, one of my panelists, Becky Munson from Eisneramper, she, um, runs the SaaS practice there. She said that cloud took them 15 years, but she thinks that AI is going to be 15 months, so it's fast. Right. This is happening very, very fast. Yeah. So, um, I just one more thing I want to highlight. Alan Colton was there, the private equity expert in accounting, and he gave a talk and he had some crazy stats. He predicted that by 2030, in four years, accountants are no longer going to be preparing financial statements for tax returns. And that 80% of the current work value in accounting is going to drop to zero. But but the remaining 20% is going to grow thousands of times in value. So that's what we have to focus on. And so it's funny because he had those crazy stats, but also the message was, it's never been a better time to be an accountant because all of that work that is just crushing us is going away. And we can actually focus on the, the good stuff. You know what we call the advisory work. The other stuff. David Leary: [00:09:48] Is even better at. Yes. Blake Oliver: [00:09:50] Well, we can argue about that. But anyway, you know, that's. So anyway, I wanted to thank, you know, for bringing me out to that. That was a lot of fun. And, uh, it was great to great to s