Technology for Tax Compliance

No doubt, today’s college students enjoy using technology and usually bring some of their favorite devices—e.g., iPhones and iPads—to class. They also enjoy using social media such as Facebook, Twitter, and Reddit. And, in addition to their studies, students find time to send text messages to friends and family.

Students majoring in accounting, though, likely have not given a lot of thought to how technology is used by CPA firms and in completing audit engagements and tax returns. This missing connection provides a rich opportunity for further engaging accounting students in the study of taxation—by having them investigate uses of technology in tax compliance and some of the concerns that can be associated with those uses.

This column suggests ideas for helping tax students learn about technology used in the accounting profession, as well as some of the ethical concerns raised by its use. The AICPA’s 2013 North America Top Technology Initiatives survey results, summarized in this column, are a helpful and readily available resource for identifying types of technology issues to analyze.

Top Technology Priorities

Since 1990, the AICPA has conducted surveys of accounting professionals to identify the top 10 technology issues for the year. (Links to surveys conducted from 2001 to 2012 are available in the archive.) The 2013 survey involved more than 1,600 AICPA members and more than 200 respondents from the Chartered Professional Accountants of Canada. The mix of respondents included CPAs from firms, industry, government, and not-for-profit organizations. The survey also asked questions about member concerns about technology and information management.

The top 10 technology priorities of U.S. respondents for 2013, in order of importance, were:

1. Managing and retaining data;
2. Securing the information technology (IT) environment;
3. Managing IT risk and compliance;
4. Ensuring privacy;
5. Managing system implementations;
6. Preventing and responding to computer fraud;
7. Enabling decision support and analytics;
8. Governing and managing IT investment and spending;
9. Leveraging emerging technologies; and
10. Managing vendors and service providers.

Canadian respondents identified the same top 10 priorities, ranking them slightly differently but with the top two the same as for U.S. respondents.

Incorporating Technology Into the Tax Curriculum

Appropriate use of technology saves time and can increase accuracy. Thus, it is necessary in properly providing tax services to clients. Software can keep track of carryforward items (such as net operating losses), perform complex calculations, and store many years of tax rules to ensure that tax returns are prepared correctly. For example, consider the changes to Sec. 1202 (partially excluding gain from certain small business stock) by the American Recovery and Reinvestment Act of 2009, P.L. 111-5, and two subsequent acts. Software programmed with the gain exclusion percentage applicable to different periods is crucial to proper return preparation because individuals usually cannot remember all the changes and may not know to look for them.

Software is just one type of technology helpful in tax compliance and planning work. Other technologies, such as data storage, serve important purposes. In addition, tax practitioners should consider emerging technologies as tools for improving the efficiency of their work.

Described next are some of the benefits of incorporating discussion and assignments about technology into tax courses. Following the discussion of the benefits, a sampling of assignments is suggested to enable students to learn why various technologies are used by tax practitioners and considerations of their proper use.

Benefits

Discussion of tax rules and policies provides an important foundation for accounting students. Incorporating discussion of technologies used in tax compliance and planning provides an avenue for addressing the practical realities of tax practice. In addition, it ties to the students’ high interest in cloud computing, apps, text messaging, and data privacy and storage. Discussion of technology can also include presentations by accounting firms on what they use and why, as well as how to ensure the use of technology does not violate practitioner rules of conduct. A short module added to an introductory tax course can incorporate opportunities for research outside class, interviews of tax professionals, group work, and oral or written presentation of findings.

Suggestions

The top 10 technology priorities for 2013 (noted earlier) or any future year’s list are a good starting point for a classroom discussion. The lists tend to be comprehensive and, because they are tied to CPAs, are meaningful for an introductory tax course for accounting majors. The lists for the current year and prior 10 years are also easily accessible from the AICPA website. In addition, web search engines and library databases can be used to find examples of specific technologies represented by the top 10 list as well as articles on how firms use the technologies.

Exhibit 1 provides a sampling of individual or group activities enabling students to appreciate and understand technology used in tax compliance and planning, and issues that must be addressed. Exhibit 2 provides a list of resources to assist students in exploring the ethical implications of certain technologies in a tax practice.

Other Opportunities

Discussion of how technology is used by tax practitioners is a helpful addition to an introductory tax course. It offers students an opportunity to consider wider use of many of the types of technology they use daily, how firms and clients exchange information, tools to improve efficiency and accuracy in a tax practice, and rules of conduct and tax penalties. The topic also offers an opportunity for research outside class, group work, student presentations, and guest speakers from CPA firms or companies that create the technologies used by tax practitioners.