Tax and technology in 2024: Experts from Avalara make their predictions

2023 was a year of transformation for both tax and technology (and tax technology).

As usual, tax was in a state of flux throughout the past year, from Missouri becoming the final state to enforce their economic nexus laws to retail delivery and bag fees in two states to the widespread introduction of sales tax holidays. Businesses had to contend with plenty of tax changes. 

On the technology side, innovation was found in nearly every sector, but nothing held a candle to the discussion around artificial intelligence. 2023 was a banner year for AI due to the rise of generative AI following the release of ChatGPT in late 2022. In case you missed it, Avalara launched the first sales tax calculator plugin for ChatGPT.

Needless to say, a lot happened in 2023. While we know change to be constant, one may wonder what could possibly be in store for tax and technology in 2024. So, we’ve asked experts from Avalara and across the world of tax to provide their predictions for next year.

Automation and AI

In 2024, artificial intelligence will enable more tax answers for all businesses.

Vsu Subramanian, Avalara’s SVP of Content Engineering says, “AI interactions with data and knowledge will become even more commonplace in 2024. We will see the continued emergence of AI assistants in practice across the compliance space that analyze data, look for deductions, perform anomaly audits, and assist tax research and filing.”

Vsu added, “We’re at an inflection point early in the evolution of AI. Governments are already starting to roll out guidelines and regulations as a beginning point to regulate AI. Just like we have security scans, we will also eventually have AI scans to determine if things are true or fake. AI will also become more accessible and unleash the ability for people to do new jobs, especially roles like prompt engineering. In addition, no-code tools will become more widespread, and the average person without a technical background will be able to perform tasks across a variety of business areas, even possessing the ability to do something like creating iPhone apps without knowing how to code.”

Retail and manufacturing

Social commerce will emerge as an even bigger piece of retail.

George Trantas, Avalara’s Senior Director of Global Marketplaces says, “In 2024, we’ll see marketplaces continue to shift how they think about getting products in front of consumers. Some retailers won’t even need to run ads because they can sell directly to consumers through social media. As social media platforms evolve into vital retail spaces, advanced features like product tagging by influencers are reshaping how products can be advertised and sold. This shift is particularly the case in international markets, forcing retailers to adapt to maintain relevance and any competitive edge.”

Omnichannel commerce will need to become seamless across platforms

George added, “The growth of social media and ecommerce is now intricately linked with omnichannel strategies, which increasingly merge online and offline shopping experiences. This caters to consumer demands for convenience and enables retailers to reach audiences, including new online marketplaces. Importantly, this trend underscores the necessity for businesses to provide seamless shopping experiences across multiple platforms.”

Tax and accounting

2024 will be the year of audits.

Scott Peterson, Avalara’s VP of U.S. Tax Policy and Government Relations says, “As state budgets aren’t experiencing the same windfalls as in the immediate impacts of the pandemic, legislatures will encourage an increase in audits to make up for any lost revenue. Businesses and consumers should all prepare for an uptick in audits in 2024.”

Marketplace tax regulations will expand in 2024.

Scott added, “We’re also expecting new changes with rules and regulations for marketplaces. In the wake of the 2018 Wayfair decision, states didn’t realize just how broad marketplaces would get and the variety of buckets they would fall into. Even conflicts over areas like communications excise taxes are leading states to ask questions around what is and isn’t taxable. In 2024, we’ll start to see more and more marketplace regulations as new marketplaces emerge and goods and services that are sold on and through marketplaces continue to expand.”

Tax compliance and business processes will converge together into a single process with e-invoicing.

Alex Baulf, Avalara’s VP of E-Invoicing says, “While the trend remains that tax authorities are giving more time for businesses to be prepared, we’ll continue to see e-invoicing spread globally. As it does, the electronic invoicing document businesses share with the government will be the same that they share with their customers, resulting in one simplified business process.”

E-invoicing will grow in the U.S.

Alex added, “We’ll also see e-invoicing make its way to the United States. The federal e-invoicing pilot was the first major step to a more broad e-invoicing regime in the U.S., and in 2024, we’ll see that momentum continue. There’s even potential for the creation of a new way for states to create one record format. States are going to start using the e-invoicing pilot, which will reduce the time that states will spend on audits, so they’ll be able to conduct more audits. In 2024, we’ll see the launch of a live business-to-business network (DBNAlliance) in the U.S. It’s not the hand of government that will be the first driving force toward the adoption of e-invoicing in the U.S., but a push from businesses. This will lead to faster, more accurate, and more reliable payments, and we’re expecting more service providers and businesses to dive in on e-invoicing in 2024 as the network ramps up.”

 

In 2024, AI’s impact on the accounting industry will be profound.

Sona Akmakjian, Avalara’s Sr. Director Global Accounting Strategic Partnerships, says, “In 2024, AI’s impact on the accounting industry will also be profound, automating routine tasks and redefining roles with a focus on strategy and analysis. This shift is a game-changer, necessitating new skills and ethical awareness in the profession.”

Sona added, “As digital transformation initiatives unlock vast amounts of data, accountants are expected to increasingly harness the power of AI and data analytics. This shift will not only drive more informed decision-making but also significantly enhance the efficiency of accounting processes. Due to prevailing economic conditions, in 2024, the accounting industry will increasingly embrace AI-infused technology and data analytics, while also exploring cost-effective measures like outsourcing and offshoring.”

Look for further reform to existing IRS Form 1099 rules.

Kael Kelly, Avalara’s GM of Exemption Certificates, Tax Research and 1099, says, “In 2023, the IRS backed off dropping the 1099-K filing requirements for marketplace sellers and shared economy workers from the original $600 floor the American Rescue Plan Act of 2021 called for (down from $20k) to $5,000. In 2024, expect an announcement that this floor will drop further, likely to the $600 level as it was originally intended for as early as the 2025 filing season.”

Avalara’s Accounting Meta Influencers predict 2024, from PE influence to regulatory compliance.

Some of the brightest minds in tax and accounting participate in Avalara’s Accounting Meta Influencer quarterly roundtable, taking on the most pressing issues and challenges in accounting and providing actionable insights to the profession. Several of our influencers weighed in on areas to watch in the coming year:

Diane Yetter, Founder of Sales Tax Institute and owner of YETTER, predicts “sales tax laws will continue to get more complicated and states are going to be more aggressive. Businesses that don’t have sales tax under control will need to find resources to deal with compliance.”

Michelle River, President of Fore LLC, says “the trajectory of firms closing the gap between worth and time is accelerating, and I’m seeing this trend across firms of all sizes.”

Irfan Dossani, Partner in Charge of Client Accounting and Advisory Services at Whitley Penn, says in 2024 “we’re going to see a better understanding of compliance standards around every aspect of client accounting and advisory services (CAAS), in lock step with the growing respect for CAAS practices across the profession.”

Randy Johnston, Executive VP at K2 Enterprises and Founder of NMGI, predicts “regulatory compliance is going to be disruptive … (such as) new quality standards for audit, the new AI Act just passed in the EU, President Biden’s Executive Order on AI, privacy regulations now effective in five states and potentially effective in 18 more in 2024, and Beneficial Ownership Information reporting, which is completely upside down right now. These and other regulatory compliance measures are likely to have a derailing effect on the accounting profession.”

Gail Perry, Editor-in-Chief of CPA Practice Advisor, says “I see staffing shortages still being a huge problem going forward, especially as we see firms looking to add additional services and needing new skill sets to accomplish that. It’s a great opportunity for training non-CPAs coming into the market and wanting to find their place.”

Yvonne Scott, CEO of CIO Concierge LLC and former CIO of Crowe, looks to 2024 as the year when “consumers of traditional audit services will start to be more vocal about the inadequacy of current services and ask for assistance in assessing specific uses of backward-looking information. And with the prevalence of AI and other technologies, clients are going to start asking for help in seeing the future.”

Rick Telberg, Founder and CEO of CPA Trendlines Research, says “my big prediction is around acceleration. In 2023 we’ll see higher profits in most firms, and the staffing shortage will become an opportunity for firms that can grow, be profitable and provide the right culture. And significantly, this acceleration will be fueled not by PE takeovers, but by PE firm competition.”

Blake Oliver, Founder and CEO of Earmark, predicts “we have reached peak accounting due to AI, the number of accountants needed will decline every year from now on. Just like with the advent of electronic spreadsheets, we saw the number of bookkeepers cut in half each year. And with AI accelerating, the good news is that something new will come along, just as financial analyst positions grew following the introduction of Excel.”

Geni Whitehouse, Founder at The Impactful Advisor and President of ITA,  says “In 2024, clients will no longer allow accountants to get away with not providing advisory services, and the demand will force us to change.”

 

No crystal ball, even ones from our tax and technology experts, can fully prepare you for tax policy changes that impact your business. Fortunately, the Avalara Tax Changes 2024 report is now available and has the details on the changes coming your way in the new year. Learn more here

 

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