Accounting firms deepen benches for truncated tax season

HBJ PHOTO | John Stearns Hannah Phelan, a Central Connecticut State University junior majoring in accounting, is one of seven interns working at CohnReznick in Hartford this tax season.

Michael F. D’Addio, principal-tax and business services, in the New Haven office of Marcum LLP.

Brett McGrath, partner in the Hartford office of Marcum LLP and the partner-in-charge of Marcum’s Connecticut tax department.

Ed Kindelan, regional managing partner-New England region, CohnReznick LLP.

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By John Stearns

Tax season is always hectic for accounting firms — which for years have called in temporary reinforcements, from college interns to experienced freelance tax professionals to help manage the load — but the window for the work is getting more compressed, according to one tax veteran.

Last-minute legislative changes and additional reporting requirements from the Affordable Care Act, among other factors, are shortening the tax season, forcing accounting firms to scramble for extra help. Simultaneously, competition for interns and other temps is fierce, forcing firms to compete on their reputation, work and training environment, and compensation.

“The [tax season] has gone from like a three-month period to almost less than a two-month period,” said Brett McGrath, a partner in the Hartford office of Marcum LLP and partner-in-charge of the firm's Connecticut tax department. “We still have to get the same amount of work out, but we've got five to six weeks potentially of less time to do it.”

To deal with the truncated season, Marcum deploys a compression plan that starts before the new year, including filing early extensions for clients for which the firm has already done planning and tax projections but whose returns would be extended anyway; outsourcing some returns, with clients' approval (the firm outsourced about 1,000 1040s last year); hiring experienced flex staff, usually CPAs, through ads in professional publications; and hiring college interns, typically juniors who take the winter semester off from school to work full-time, learn the trade and, assuming they impress, punch their ticket for a job after graduation.

McGrath said he usually hires one to three interns each for Marcum's Hartford, New Haven and Greenwich offices in tax season. He doesn't have any flex staff in Hartford this season, but has two or three in New Haven and one in Greenwich.

UConn accounting students tapped

McGrath said he typically taps UConn accounting students and personally interviews candidates, which he thinks, as a partner, provides an edge in the competitive recruiting process, made even tougher by fewer students seeking winter internships. More seem to prefer summer internships and not give up a winter semester, he said.

But now is when firms need the help and students can fully experience the occupation, he said. Summer interns typically get hired for audit work.

“Six years ago there'd be 120 candidates in the [winter] pool for interns,” and even though the Big Four accounting firms (Deliotte, PwC, Ernst & Young and KPMG) would grab most, there was enough to go around for quality firms, McGrath said, estimating the pool this year in the neighborhood of 30, before the Big Four made their play.

His Hartford tax staff of about 14 comprises all ex-interns, he said.

More staff hired

CohnReznick LLP's Hartford office hired 25 seasonal staff this tax season, comprising 13 experienced professionals helping with tax preparation and reviews for individual and business clients, seven interns, and five people who supplement administrative support staff, said Ed Kindelan, the firm's regional managing partner-New England. That's up from 22 last year.

Firms have to jockey for quality interns, Kindelan said, so CohnReznick has a recruiter in Hartford who hunts for talent between roughly Boston and Stamford.

“So we put a lot of effort into investing time at the universities to be able to compete, to get the message out there,” Kindelan said. “A lot of our folks come in as referrals,” including two graduates this year from Clemson University in South Carolina, an area outside the office's typical recruiting zone.

“It's a competitive environment just for interns, for accounting grads, they're well-paid positions,” Kindelan said. “We always have to be competitive and evaluate what the market is doing. The competition has not been stagnant there.”

The internships are mutually beneficial, said Rose Swiatkiewicz, marketing director at CohnReznick.

“It's a great opportunity for students to come in because they're here for a number of weeks, to really see what the environment is like, what the culture is like to work here,” she said. “It also gives our team a really good chance to evaluate them not only from their technical skills, but are they a good fit.”

Central Connecticut State University student Hannah Phelan said the experience, guidance, support and training she's receiving as a CohnReznick intern is invaluable.

Affirming intern's career choice

“I absolutely love it,” she said from her 12th-floor cubicle on a busy mid-February Friday. “I don't know what more I could really ask for.”

The junior accounting intern said the experience is affirming her career choice.

CohnReznick has hired interns seasonally for 25 years, and other seasonal staff for about 15 years, Kindelan said. However, the number of people hired seasonally each year has increased significantly.

Richard Buggy, office managing partner and tax partner at Crowe Horwath LLP, which Buggy's former firm, Saslow, Lufkin & Buggy LLP in Simsbury, joined last July, underscored the tight competition for interns.

He has two this season, both seniors, and has good luck converting interns into full-time staffers. “It's a total battle for talent, at this point,” Buggy said. “There are just not enough people to go around.”

It's hard to compete against the Big Four accounting firms, which tend to get first choice at big schools like UConn, he said.

“I think joining Crowe, which is a much bigger firm than what we were … we've gotten some additional clout,” Buggy said. “Hopefully that will help us compete for some of those bodies.”

Tax trends

As firms deepen their benches, they're also facing new tax changes. There are new reporting requirements, for example, under the Affordable Care Act, forcing large employers to file 1095 C and 1094 C forms.

Congress in December also passed a tax extender bill. Provisions of note that were extended, said Michael D'Addio, principal of tax and business services in Marcum's New Haven office, include bonus depreciation remaining at 50 percent for 2015, which was retroactive, and staying at 50 percent for two more years before lowering to 40 percent and 30 percent the two years after that.

Significant IRA change

Another significant provision is the qualified charitable distribution from IRAs, he said.

People over 70 1/2 can give $100,000 directly from their IRAs to charity, so they don't have to pick that up in income and take a deduction. As a result, the direct transfer is not a taxable item, D'Addio said.

Also important this year are new rules from the IRS regarding Form 8971, dealing with beneficiaries acquiring property from a decedent, an issue affecting accounting and legal firms that do a lot of estates, he said.

CohnReznick's Kindelan said Congress's approval of the tax extenders, many through the next two years, was important for giving taxpayers predictability.

“The intent of having these programs is to provide incentive to invest … and if taxpayers didn't have certainty as far as whether a program was going to exist, they might be less apt to invest in a certain area,” he said.

CohnReznick has been focused on a number of areas for clients this year, including mitigating the 3.8 percent net investment income tax that is imposed on net investment income; unitary tax rules and how they apply to Connecticut corporations; and ensuring clients are aware of and taking advantage of appropriate tax incentives and credits, Kindelan said

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