The tax accounting industry has undergone a profound transformation in recent years. Brought on by several of factors, among them a heightened regulatory environment, a new political administration, a spike in M&A activity and a global economic crisis, its effects can be seen not only in the form of government policy changes and revisions to longstanding tax laws, but also in the broader accounting profession’s consolidation and subsequent adoption of a multidisciplinary approach.
For a snapshot of the complex challenges facing tax accountants, consider the results of KPMG’s 2007 “Rising Tide: Regulation and Stakeholder Pressure on Tax Departments Worldwide” report. Three quarters of surveyed tax professionals reported increased workloads as a result of regulatory compliance requirements, and nearly half said they believed shareholders expected to receive more information on their company’s tax policy than they had in the past. Simultaneous with these increasing demands was respondents’ realization that their tax departments struggled with inefficient practices and systems.
Two years after that survey, in the wake of the global economic collapse and the inauguration of a new political leadership, tax accounting professionals face even more regulation. The epic falls from grace, brought on by scandals within the bluest of blue chip firms on down to Ponzi scheme ringleaders like Bernie Madoff, have put the entire financial industry under the microscope. Likewise, efforts to jumpstart flat-lining market sectors, collectively addressed by the American Recovery and Reinvestment Act of 2009, closed doors on some accounting issues and opened windows for others.
Specifically in regards to tax accounting, the Act stipulated that 37% of the overall stimulus package be devoted to tax cuts equaling $288 billion, with the housing, education and healthcare sectors among those affected. Then, the Obama administration added its own list of game-changing proposals surrounding issues of estate tax, R&D credit, small business capital gains, limitations on itemized deductions and repeals to “last in, first out” (LIFO). The combined forces of these events have introduced a critical need for professionals across the tax sector who can ensure compliance among all affected parties, from government agencies to multinational corporations.
WHERE THE ACTION IS
Despite the scandals and political power plays, the most compelling factor to affect tax accounting is something else entirely: the movement toward International Financial Reporting Standards (IFRS), a single set of globally accepted accounting standards that will merge with -- and ultimately replace -- the U.S. generally accepted accounting practices (GAAP) as of 2011. The convergence of IFRS and U.S. GAAP will affect multinational and domestic organizations alike, and tax directors must assess its impact on tax accounting methods, deferred tax balances and after-tax cash flows, in addition to existing tax compliance processes.
Refuting widespread doubts of the SEC’s intention to actually move forward with the convergence, the agency’s acting chief accountant, James Kroeker, made a formal statement in September 2009 that “convergence of accounting standards and the proposed road map will be a priority for us in the weeks and months to follow.”
The bottom line for tax accountants, according to Deloitte’s 2009 report, International Financial Reporting Standards for U.S. Companies: “Tax departments should begin planning now to fully understand the computational and disclosure changes that will accompany the seemingly inevitable adoption of a new, converged tax accounting standard.”
Alongside this move toward convergence is another trend whose trajectory continues to reshape the accounting industry as a whole: the diversification of capabilities, with many firms expanding their portfolios to include professional and consultative services. This, coupled with the diminishing need for traditional tax preparation services (thanks to user-friendly software such as TurboTax), has elevated tax accountants’ role to that of a strategic advisor with sharp analytical skills.
The profession’s enhanced stature as a result of this trend can be seen in its relative stability against the backdrop of a severe economic downturn. While the effects of the financial crisis did prompt the end to a four-year run of double-digit growth, the country’s top 100 accounting firms still recorded a 7.13% average growth rate, according to The Platt Group’s 2009 “INSIDE Public Accounting Top 100” report. Specific to tax accounting, “New tax regulations and heightened emphasis on potential tax-derived cost savings have led to strong demand for tax accountants in both private industry and public accounting. A growing focus on international tax issues has also contributed to demand outpacing supply for tax accountants” -- this according to the 2009 Salary Guide released by Robert Half International.
In anticipation of economic recovery and the adoption of an international reporting standard, the tax accounting industry is poised for significant growth. With more and more professionals needed to manage the nuanced relationship between taxpayers and tax authorities, to increase tax efficiencies, to ensure tax and statutory compliance, and to manage changing reporting obligations and market volatility, many organizations are restructuring to accommodate versatile demands, thus expanding the scope of available opportunities.
Indeed, while client issues that demand huge amounts of time and manpower keep the likes of the Big Four -- PricewaterhouseCoopers, KPMG, Ernst & Young and Deloitte Touche Tohmatsu -- entrenched as industry leaders, necessary budget cuts and staff reductions have opened the door for small- and mid-sized firms to become more competitive.
Regardless of firm size, careers in tax accounting usually follow similar paths, beginning with an entry-level job. A bachelor’s degree in accounting or finance is the first barrier to entry, with first-time applicants usually landing positions as assistant tax accountants. Typical duties include helping maintain tax records, managing a tax compliance calendar, and assisting with tax preparation and research, all of which require proficiency with Microsoft Excel and Enterprise Resource Planning (ERP). Individuals with one-to-three years of experience begin to assume more responsibilities, including researching tax laws and regulations, providing assistance during tax audits and responding to notices from tax authorities.
At this point, professionals looking to advance to the higher rungs of tax accounting should consider getting a certified public accountant (CPA) or a certified management accountant (CMA) degree, both of which can open doors to senior-level accounting positions. To reach the pinnacle of the profession, expertise in IFRS is particularly marketable given the impending shift from the U.S. GAAP to an international standard.
GETTING THE JOB
Professionals eyeing on the senior-most tax positions -- manager and director-- can enhance their upward mobility by obtaining a CPA designation. Another résumé builder that’s sure to pique the interest of tax recruiters: A Master of Business Administration (MBA), topped off with a concentration in accounting or -- better yet, and -- finance.