Is the accounting pipeline broken? What was once a coveted profession now faces a trifecta of complications that appear to be worsening with time: a graying workforce, fewer graduates, and those abandoning the industry.
Taxpayers may have noticed the shortage of accountants in recent years. For some, it’s been harder to find a reliable CPA in their area. Most glaring, the IRS has spent the past few years digging out of backlogs partly due to staffing-related problems.
Though the tax agency announced plans to bring on 30,000 employees by 2026, it has struggled to meet those goals.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What does that mean for you? If you're a CPA, a shrinking pool of candidates could lead to heavier workloads and more aggressive recruiting. But for taxpayers, the talent crunch could mean reduced capacity at the IRS leading to longer processing times for tax-related matters.
Here are some reasons why the accounting industry, and even the IRS, is struggling to hire.
CPA requirements
“Nobody wants to go into accounting anymore,” Romeo Razi, CPA and founder of TaxedRight.com in Las Vegas, Nevada told Kiplinger.
Whether or not you’re in the industry, it’s a phrase you may have heard thrown around. To some, it may ring true.
“Accounting normally looked at as a safe profession, is no longer enticing for Gen Z and Generation Alpha,” the former IRS revenue agent and tax examiner in the Individual, Business and Employment Tax Division said. “Safe is not fun.”
Not only are fewer students pursuing accountancy, but among those who do, fewer want to stick around. Just over 67,000 candidates sat for the CPA exam in 2022. That's down from roughly 72,000 the year prior and below its forecast of 74,000, according to the American Institute of CPAs (AICPA) annual trends report.
Overall, the share of those taking the CPA exam that year was the lowest in 17 years.
So why are accounting students calling it quits? The answer is two-fold.
According to several industry experts, today’s budding accountants need some serious convincing to stay in the industry:
1. Students don't think there's enough return on their invesment
2. The 150-credit hour requireement isn't attractive
To qualify for a CPA license, you’ll need 150 credit hours and to pass the CPA Exam. However, the specific coursework and requirements to take the exam can vary depending on your location.
For instance, in Nevada, you’ll need a bachelor’s or higher degree from an accredited institution. Candidates must also complete 120 credit hours and 18 credit hours of accounting.
To get your CPA license, the Nevada State Board of Accountancy requires candidates to complete an additional 150 semester hours, including:
- 24 semester hours of accounting
- 24 semester hours of business
- 3 semester hours of business law
- 1 year of relevant work experience
Those requirements can be jarring and a barrier for many prospective professionals.
“The CPA designation requires a 2-year apprenticeship, which is prohibitive to a lot of people,” Rus Garofalo, founder of BrassTaxes.com told Kiplinger. “I think there aren’t a lot of people going into this industry because it’s considered boring and people don’t know how to get started.”
‘It doesn’t pay to be a CPA’
Whether it pays off to pursue accounting can also depend on your market. According to the Bureau of Labor Statistics (BLS), experienced accountants and auditors could earn a median salary of $79,880 as of May 2023.
But many entry-level accountants start even lower, making about $33,099 a year, data from Indeed show. For women accountants and auditors, the payoff can be slightly less.
Women accountants and auditors who worked full-time made 91 cents to the dollar men earned last year, the BLS revealed. That’s $140 out of a weekly paycheck, meaning women were paid $7,280 less doing the same job.
Whether you go into private or public accounting also impacts your salary. According to Franklin University, a public accountant can expect to earn just over $125,000 after 10 years in the profession. Meanwhile, private accountants often start lower and can climb to $103,000 after a decade.
After adding in the extra costs tied to the coursework and licensure of a CPA, it might not be worth it.
“Simply put, it doesn't pay to become a CPA,” Razi said. “At least, not in today's economic climate.”
Burnout generation
If there’s one thing about this generation of CPAs and accountants, it’s that they are establishing barriers. And let’s face it, accounting jobs can be highly demanding.
In the days leading up to the tax deadline earlier this spring, the IRS expected at least a million returns every hour. During peak season, accountants can easily work well over 40 hours a week.
“We also hear stories about new graduates leaving the accounting profession soon after entry, which further exacerbates the problem,” Dean Sonderegger, SVP and general manager, Canada and research and learning of Wolters Kluwer Tax and Accounting North America told Kiplinger.
According to experts we spoke to, some causes driving burnout in the accounting profession include:
- Demanding hours and tight deadlines
- Changing tax codes
- Less flexibility than other jobs
- Outdated technology
According to Sonderegger, his clients often struggle with Gen Z employees who carry different workplace expectations from their Baby Boomer or even Gen X management counterparts. These budding accountants or CPAs prefer seeking purpose in work, expect flexibility, and as digital natives value how they leverage technology.
More room for error.
Tech has been a major hurdle for the IRS. The agency’s outdated processing systems were one reason why IRS agents were drowning in paperwork during the pandemic.
Although IRA funding helped the IRS improve its service last tax season due to 5,000 new telephone assisters, expanded in-person hours, and faster refunds thanks to paperless processing. However, the agency missed the mark on other factors.
For instance, the IRS revealed that its contractors and employees failed a back taxes audit this year. Staffing shortfalls and fast onboarding processes can also contribute to compliance mistakes. For example, IRS Commissioner Danny Werfel told TaxNotes (paywall) that IRS employees had delivered improper ERC denials last month.
Though the IRS has been working hard to improve its resources, most of its technology dates back to the Reagan era. That’s a problem many prospective employees may not want to deal with.
“We find that progressive firms that invest in next-generation software — software that’s cloud-based and that leverages artificial intelligence to automate repetitive or mundane tasks — have a much higher retention (and attraction rate) with new entrants into the job market,” Sonderegger noted.
A graying workforce
One of the most critical problems the industry is facing is imminent: an aging workforce.
The AICPA reported that 75% of today’s public accounting CPAs will retire within the next 15 years. Census data show at least 10,000 people turn 65 each day in the U.S. through 2029. Most employees hope to retire by the age of 59 ½.
“There’s a graying of the labor force that simply cannot be ignored,” Sonderegger said. “We see our customers typically move more gradually into retirement by slowing down while continuing to work, but it’s still a staggering statistic.”
At the IRS, a sizeable portion of its workforce is entering retirement years, data from the Taxpayer Advocate Service (TAS) found.
- About 18% of IRS employees are currently retirement eligible and can leave at anytime
- At least 37% of the tax agency’s employees are expected to be of retirement-eligible age within the next five years
“The IRS must move quickly and efficiently to not fall further behind in its rate against attrition and to fill the void of future managers and leaders,” the TAS wrote as part of its annual report to Congress last year.
Another worrisome number: 130,800. That’s the amount of job openings for accountants and auditors projected each year, on average, over the next decade, per the BLS. Many of those openings are expected to be a direct result of the retiring labor force.
“There’s a graying of the profession because the lack of pipeline has been longer than we probably want to admit,” Francine Lipman, an expert in tax law and professor at William S. Boyd School of Law said. “Suddenly those that decide to retire and want to sell their business have no buyers… and so clients are similarly frustrated as they are being challenged to find somebody.”
IRS hiring
It’s no secret the IRS has been on a hiring spree.
As Kiplinger reported, the Inflation Reduction Act (IRA) federal funding boost aimed to improve IRS tax compliance, tech, and staffing levels. Originally, the U.S. Treasury estimated that the tax agency needed to increase its agents to 87,000 to maintain efficiency levels. That was before budget setbacks.
So far, the IRS hopes to recruit as many as 30,000 new agents by 2026.
Former President Trump briefly revived discussions about 87,000 or 88,000 new IRS agents targeting waitresses and their tips. (As Kiplinger has reported, both presidential candidates have floated a “no tax on tips” policy as part of their 2024 election campaigns.)
Still, the agency's hiring efforts haven’t been totally successful.
“The external applications that have been received are far below the IRS targeted goal and there is an overall shortage of individuals with desired background and experience, which has created further challenges in hiring,” the Treasury Inspector General for Tax Administration (TIGTA) said in a report this spring.
Other than hosting hiring events and updating its careers website, the IRS has leveraged a series of recruiting strategies by promoting its employee benefits, such as:
- $5,000 annually for childcare
- 12 weeks of paid parental leave
- $60,0000 in student loan repayment
- $3,600 in commuting, as well as healthcare
Even so, those benefits alone may not entice as many younger people as they hope for.
“I’m not as sympathetic to the IRS poaching local talent because it’s a seller’s market and local folks can offer more of an entrepreneurial opportunity in the long run,” Lipman said, after noting that some of her students have been recruited by the IRS. “At the IRS, you’re not going to be able to own a business or run your practice, and the IRS doesn’t pay that great.”
“As for poaching tax folks, I don’t think so,” Garofalo agreed.
Bottom line: A lack of labor
As we prepare for the upcoming tax season, some taxpayers are still waiting on refunds or errors to be corrected by the IRS from former tax years.
Though the number of delays isn’t as dire as in past years, there’s no denying that there are a number of reasons why the accounting industry isn’t bouncing back quite as quickly.
1. Fewer graduates entering the accounting profession
2. High CPA licensure requirements
3. Workforce aging out
4. New recruits dealing with outdated tech
5. Complicated or shifting tax codes
Potential solutions are still in the works. Some academics and industry experts have argued that the 150-credit hour requirement to qualify for the CPA license is too high, and hope some states will lower the threshold to close the gap.
In California, for example, you can sit for the CPA exam after completing 120 credit hours as long as you meet subject-matter requirements, but need 150 credit hours to get your CPA license.
Within the IRS, the agency has modernized some of its equipment and online systems. Most recently, the agency created a new, now permanent and expanded, IRS Direct File program. That program, which allows eligible taxpayers to file returns directly with the IRS for free, could potentially help simplify tax season for employees and public tax professionals alike.
Still, the road to rebuilding the accounting workforce could be uphill. It will take more action at the industry and academic level to help bolster the career path.
Related Content:
- Certified Financial Planner vs. CPA
- Are 87,000 New IRS Agents Coming for Your Tax Dollars?
- Some States Won't Joint IRS Direct File Next Tax Season
- IRS Has No Set Plan To Replace Old Tech
-
It’s Back. The Target Thanksgiving Day Meal is $5 Less Than Last YearThanksgiving is just around the corner, but it’s never too early to start planning. Here’s a $20 deal to get you started.
-
Are Election Jitters Shaking Up Your Investing Strategy?Many investors are retreating to safer investments until after the election, but doing so could result in missed opportunities. Here's what to do instead.
-
Sometimes It Pays to 'Blow the Whistle' on IRS Tax EvadersTax Fraud The IRS recently awarded three IRS whistleblowers $74 million. Here's why.
-
IRS Skirts TikTok Ban to Sniff Out Tax ScammersTax Scams Social media scams caused thousands to file inaccurate returns. What does that have to do with TikTok?
-
Who Does the IRS Audit the Most?Audits The IRS has a $400K audit directive problem. Here’s what you need to know.
-
IRS Hauls Back $1.3 Billion From High-Income EarnersTax Filing Certain income and wealth levels can trigger an IRS audit. Here's what you need to know.
-
Incorrect ERC? IRS Points to Five New Red FlagsTax Credits These signs could mean there’s an error in your Employee Retention Credit claim.
-
IRS Has No Set Plan to Replace Old TechIRS What could old IRS technology mean for your federal tax return and cybersecurity?
-
IRS Urges Employers to Participate in ERC Voluntary Disclosure ProgramTax Credits Businesses can fix ERC claims with the IRS at a lower cost, but only for a limited time.
-
Double Standard? IRS Audit Reveals Its Employees Owe $50 Million in Unpaid TaxesIRS IRS employees are required to pay their taxes on time, but thousands slipped through the cracks.
