Accounting and Tax Predictions for 2017
While accounting standards remain fairly consistent, how we provide accounting services is changing rapidly. Complicating the matter, tax regulations are continuously being altered, adjusted and updated. Together, these shifts make it increasingly difficult for businesses – and our clients – to understand the right strategies to implement. I don’t know what the future holds, but I have provided predictions for both accounting and tax for 2017:
1. Professional Services: Outsourcing and Niche Expertise
In the last year, I have been a part of discussions with multiple clients and other accountants about how we provide our services, and it has become clear that many business owners are looking to outsource a growing number of business functions. Furthermore, they are looking for industry expertise and technical ability from those service providers. I predict that businesses will be continuing to look for areas of their business to outsource, including human resources, payroll, information technology, sales and marketing, security, invoicing, data entry, and accounting, and will expect great levels of expertise from providers. In order to serve this growing demand, professional services firms of all varieties will need to consider focusing on specific industries and clients that are the best fit for their own business.
2. Client Involvement: Use of Technology
As a result of outsourcing, I also predict that client involvement will continue to evolve, and our clients and business owners will demand better communication and access to their data, including timeliness, remote access, method of delivery, analytics and integration with other data sources. Reporting tools built into the accounting software, or add-on technology, will give owners the ability to be involved in the details and better understand the key performance indicators of the business, thus increasing their speed for decision making.
The balance between the increased use of technology in accounting and greater security of that data, specifically cyber security, will be a primary focus that we will all want to consider. The key will be making progress towards implementing and using the technology available, while understanding and implementing ways to safeguard the data. Becoming educated in the threats that exist and ways to mitigate those risks will become a growing part of our conversations with clients.
In light of the shifting political environment, changes in the tax code are definitely expected, although it is still very unclear to what level, and what the priorities and focus of those changes, will be. Also, it is important to understand that any changes will likely happen long after Jan. 21.
For businesses, there is some speculation that corporate tax rates will be reduced, but also that some business credits and deductions will be eliminated. As more decisions are made on these tax reduction strategies, business owners and accountants will need to understand how the changes affect their own taxable income, so that they can come up with the best strategies to manage it.
For individuals, a cap on itemized expenses, such as charitable and interest expense, or limitations on the types of expenses, is predicted. The future of the Affordable Care Act, and when and how that program might change, is another major area that potentially impacts small business owners. For example, we may see the 3.8 percent Medicare Surtax eliminated as part of the proposed overhaul of the Affordable Care Act.
5. Specialty Tax
Depending on specific changes to business credits and deductions, I predict a greater need for specialty tax services, such as cost segregation and research and development studies, as ways to potentially offset taxable income. Additionally, as businesses change how and where they do business, including the potential for multiple entities and international transactions, the need for state and local and international tax expertise (ex: transfer pricing) may be on the rise.
No one has a crystal ball and can see with certainty into the future. However, in looking at the trends and what has been proposed in recent months, I expect we will see a continued need for business function outsourcing, greater demand for data and reporting, an increased focus on security and cyber threats, and tax expertise, in order to navigate the changing rates and regulations.