Financial Wizards Wanted

Lots of exciting AI action this week in the world of accounting including how I’m seeking financial wizards (human or not).

Financial Wizards Wanted

Imagine having a personal AI assistant that can analyze 70,000 pages of tax code and uncover every possible deduction to save you money. As complex as taxes are, technology now allows us to turn this headache into smart savings. We stand on the edge of an AI revolution that will bring tremendous value to taxpayers and accountants alike.

Ready to see how? Let's dive in.

Unclaimed Billions and Your New Tax BFF

Hidden beneath the surface of routine tax returns and overpayments lies an untapped reservoir of wealth. In the U.S., roughly 70% of 150 million taxpayers receive refunds, averaging $2,725 each. This isn't just a drop in the ocean; it's a flood of capital, amounting to a colossal sum that’s practically left on the table.

If these taxpayers invested their average refund in the S&P 500 for a decade, assuming an average annual return of 7%. The collective investment value would skyrocket to an astronomical $562 billion.

But the reverse tax gap doesn't end here. For example, small businesses grappling with the complexities of the Alternative Minimum Tax (AMT). Over 2,000 small companies, caught in a web of confusion, overpaid their taxes by an average of $11,638. This collective overpayment of over $23 million, if redirected to the same S&P 500 investment, could have grown to about $45.8 million over ten years.

This doesn’t include taxpayers who overpay the IRS due to lack of tax strategy knowledge. There are thousands of possible tax strategies which I talked about in my newsletter a couple of weeks ago.

For accountants it's not merely about processing tax returns; it's about awakening a sleeping giant of collective wealth. Leveraging AI to unearth and optimize tax strategies can transform these annual occurrences into monumental financial events.

Accountants, armed with AI, have the opportunity to become architects of wealth, guiding clients to transform refunds and overpayments into smart, growth-fueling investments.

The Hidden Tax Burden

Now let's consider the human element in tax strategy, particularly the time and financial implications for accountants like Sara.

Sara's Story: A Deep Dive into the Real Cost of Tax Strategy Research

Sara, a seasoned CPA, embodies the diligence and expertise of a tax professional. Each week, she allocates approximately 5 hours to stay ahead in the ever-evolving world of tax laws and strategies. Annually, this adds up to 250 hours, considering she takes a couple of weeks off for holidays.

However, this dedication has a hidden cost. At her hourly rate of $40, the 250 hours spent in research translates to a personal revenue loss of $10,000 every year. It's not just the monetary loss; it's the potential client engagements, advisory roles, and business development opportunities that are missed.

Now, amplify Sara's scenario across the accounting landscape in the U.S. With around 656,000 accountants, the industry collectively invests a staggering 164 million hours in tax research annually. This monumental investment of time equates to a potential revenue loss of approximately $6.56 billion (164 million hours * $40/hour).

These numbers are not just statistics; they represent a significant opportunity cost in the accounting profession. Hours spent combing through the tax code could be redirected towards more strategic, client-focused activities. This is where AI steps in as a game-changer, offering a chance to reclaim these lost hours and revenue, transforming the role of accountants from researchers to strategic advisors and growth drivers.

The Tax Code Whisperer

AI isn't about diminishing the accountant's role; it's about enhancing it to unprecedented levels. AI's ability to process and analyze vast quantities of data, and stay current with the latest tax law changes, positions it as an invaluable asset in uncovering often overlooked tax-saving opportunities.

For professionals like Sara, AI represents a seismic shift in their operational landscape. Instead of allocating countless hours to tax code research, AI enables a more focused approach. Accountants can leverage AI to quickly identify potential tax strategies, turning what used to be a painstaking process into a streamlined, efficient one.

One of the most intriguing applications of AI in this realm is the development of a FICO-like tax score. This tax score concept, as discussed in my previous article, offers a quantifiable measure of a client's tax efficiency. It's a tool that can revolutionize how accountants assess and enhance their clients' fiscal health.

Imagine an AI system that not only sifts through the tax code but also provides a clear, numerical score indicating how well a client is leveraging tax strategies. It's a level of insight that was previously unattainable but is now within reach thanks to AI.

Flaunt Your Tax Scores

In an industry where staying ahead is key, the AI-driven FICO-like tax score is a metric that could quickly become an industry standard, distinguishing forward-thinking accountants from the competition. This score offers a tangible way for accountants to showcase their ability to optimize their clients' tax situations, making it a critical tool in an accountant's arsenal.

Back to Sara. She manages 100 clients, each boasting an impressively high “tax score”, a testament to her expertise in maximizing tax efficiency. This achievement not only enhances her reputation but also attracts more clients. They see the tangible benefits of her services through the high scores of her existing clientele, leading to an increase in her business. For her clients, this means substantial tax savings, and for Sara, it translates to increased revenue and a distinguished standing in the competitive field of accounting.

The FICO-like tax score isn't just a metric; it's a beacon of excellence in tax strategy, a way for accountants like Sara to differentiate themselves and redefine what it means to be a leader in the field of taxation.

Embrace the AI Tax Revolution

As we've journeyed through the landscape of tax overpayment and the challenges of traditional tax strategy, one thing is clear: the accounting profession is on the cusp of a major transformation, with AI at its core. The introduction of tools like the AI-driven FICO-like tax score is not just an innovation; it's a game-changer that promises to reshape how accountants interact with clients and stand out in a competitive market.

Imagine a future where accountants like Sara use AI not only to save billions in potential tax savings for their clients but also to showcase their proficiency through the FICO-like tax score. This score becomes a benchmark of excellence in tax strategy, a tool that differentiates the adept accountant from the rest.

This new era in accounting is about turning challenges into opportunities. It's about accountants harnessing AI to transform from traditional tax preparers into strategic advisors, maximizing client wealth and cementing their place as indispensable assets in the financial landscape.

As we anticipate the release of the FICO-like tax score (more on this next week), the message to accountants is clear: Embrace AI, and be part of this exciting journey towards a smarter, more efficient future in tax strategy.

PS - If you’re interested in learning more I will be accepting beta testers soon, and if you’re as passionate about innovation in tax as me, reachout if you want to be part of the team I’m building.

1. An AI that helps you stop underpricing your services [LINK]

2. The best business book I’ve read this year [LINK]
   

A roundup of the top new accounting “GPTs” (requires ChatGPT Plus subscription):