A slump in the US economy and loss of expertise with Baby Boomers retiring, is indirectly to blame for the nearly $7 billion in IRS civil penalties US businesses accumulated in 2013 due to incorrectly reporting business income and employment values.
This is revealed in a study by Bloomberg BNA Software to explore the top mistakes plaguing corporate tax and accounting departments.
Diane Tinney, senior product manager of Bloomberg BNA, says a slump in the economy led to a knee-jerk reaction amongst CPA firms and at corporate tax departments to do more with less. “Budgets were cut and tax departments were not high on the list from a budget money standpoint. The result was that people were working long days and late nights and weekends, and that caused people to be less engaged. Disengaged employees pay less attention to details of their work, and they care less about it, so they make more mistakes. As they become disengaged, they start to leave to find employment elsewhere.”
Retiring Baby Boomers also contributed to a lack of expertise, Tinney observed. “With Baby Boomers retiring, the knowledgebase diminished. That leads to mistakes, in that folks don’t know who to go to in order to ask questions. The more experienced persons are not there.”
“One of the most widely cited problems has little to do with technology or the Tax Code at all, but instead involves human resources,” she said. “It’s easy for organizations to write off the occasionally erroneous spreadsheet cell or employee turnover as inevitable costs of doing business. But human capital plays an outsized role in a firm’s tax operations. Nearly a fifth of respondents indicated that their firm has experienced an inability to recruit or retain qualified tax personnel—which increases the likelihood of oversights and misjudgement.”
The study of 200 in-house tax and accounting professionals also revealed that firms with revenues over $1 billion are more likely to struggle with talent, audits, and their tax and accounting system functionality. That’s from, with half representing firms with revenues above $1 billion. Mainly midmarket firms comprise the other
In addition, the study found:
- More than a quarter (27.5 percent) of professionals struggle with manual, incorrect tax data entry;
- Firms are much more likely to grapple with tax and accounting personnel hiring and retention problems than actual subject matter or rules;
- Firms in the manufacturing sector are most likely to contend with tax and accounting procedural errors, such as incorrect asset depreciation; and
- 18 percent of tax and accounting professionals report that employees have saved files with corporate financial or tax data to their potentially unsecured personal devices.