Your Biggest Tax Problem May Be a CPA Shortage

Now that the Internal Revenue Service (IRS) has determined that special funds issued by 21 states last year are not subject to federal tax – you may be searching for a good accountant to help file your tax return. Good luck. There is a growing CPA shortage.

Certified Public Accountants (CPAs) have been falling out of the job market like apples falling on Issac Newton. As the talent pool continues to shrink, many taxpayers and businesses are asking are accountants in demand. The answer is clearly yes. Fewer licensed professionals combined with rising regulatory complexity has made qualified accountants more essential—and harder to find—than ever before.

CPA Shortage Has Been Growing

The number of CPAs, like almost every profession, dwindled during the pandemic.

A 2020 survey by The CPA Journal found that 20 percent of respondents said they had been let go, furloughed, or had their hours reduced to part-time.

That trend has continued with over 300,000 accountants and auditors quitting their jobs over the past two years. To make matters worse, there are not enough accountants graduating from college to plug the gap.

Students graduating with an accounting degree decreased by nine percent in 2020 to about 52,500, according to the Association of International Certified Accountants. However, a bachelor’s degree (120 hours of coursework) is not enough to be a CPA. To earn that designation, students must complete 150 hours of college coursework, pass an exam, and get licensed in the state(s) where they will practice.

The number of candidates sitting for the Uniform CPA Examination peaked at 50,000 in 2010. Subsequently, that number dropped to just over 32,000 in 2021.

Impact on You

You may not think a CPA shortage has an effect on you. After all, there are many options for preparing a simple tax return. You may be able to get away with using only a calculator and a pen with erasable ink. In addition, there are many online and software offerings as well as free services.

However, if you engaged in a new financial venture last year, such as starting a business or a side gig, your taxes will be more complicated than before. As a result, a good CPA can help you stay in good standing with the IRS and may get you a larger return.

Impact on Investments

The CPA shortage may also impact your portfolio.

Accountants and auditors play a vital role in supplying accurate information for regulators, such as the Securities and Exchange Commission (SEC), and investors.

If a company files its audits late or includes errors in its reporting, that can raise red flags for the SEC. In addition, such actions undermine the faith of investors.

CPA Shortage Swamps Small Firms

However, CPAs are swimming against a rising tide. Each year new taxes and regulations add to an accountant’s workload. The CPA shortage just makes things even more difficult.

Those struggles were highlighted in a commentary by Racheal Kats, communications coordinator for the Minnesota Society of Certified Public Accountants (MSCPA). Reporting on a survey of tax practitioners, Kats cited comments from two respondents.

The head of one firm stated their greatest challenge is “juggling the increasing demand from clients and new clients while not having enough staff”.

Another respondent touched on the problem of a workforce that is getting older with fewer successors in sight. That member said, “I am aging, and keeping up with the complexity is an increasing challenge.”

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Max Erkiletian

Max K. Erkiletian is a seasoned journalist and analytical reporter with nearly 40 years of experience. He has been nominated for several honors and was part of a team that won the Missouri Press Association’s Community Service Award.

His experience has included covering a wide range of topics, from crime reporting to politics and music. His interview subjects have included U.S. Senators, such as Tom Eagleton; economists, such as Arthur Laffer; former Fed Chair Paul Volcker; and musicians, such as Muddy Waters and B. B. King.

Today, he focuses on personal finance, consumer protection, economic shifts, and investment trends. His reporting aims to make complex issues understood and show how events impact consumers’ wallets.