This past week, Wolters Kluwer's CCH tax software division suffered a malware attack. In response, the company took offline a number of CCH products for 3 to 4 days, causing significant disruption to accounting firms, especially midsize and large ones. In other news, a Firm of the Future finalist firm loses a client to QuickBooks Live, the Vermont House voted for a new "cloud tax" that would tax Software-as-a-Service (SaaS), the Los Angeles City Attorney dues Intuit and H&R Block, and more.
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This episode of The Cloud Accounting Podcast is sponsored by Xero. Atlanta, Denver, Houston, Los Angeles, New York City, San Francisco, Seattle - this May, the Xero Roadshow is coming to a city near you. As an accountant, when you join Xero, you'll not only have access to essential practice-management tools, but you'll be joining a collaborative community of accountants, and bookkeepers. At the Xero Roadshow, you'll meet this community, learn how your practice can benefit from the full power of the Xero platform, and even earn CPE credit. To register for free to the Xero Roadshow USA 2019 event nearest you, head over to CloudAccountingPodcast.promo/XeroRoadshow. That is Cloud Accounting Podcast dot promo forward slash X-E-R-O-R-O-A-D-S-H-O-W. If you can't make any of the live Roadshow events, be sure to sign up for the free online Roadshow events in June.
Blake Oliver: Welcome to The Cloud Accounting Podcast. [00:01:00] I'm Blake Oliver-
David Leary: And I'm David Leary.
Blake Oliver: David, are you safely back from New Orleans?
David Leary: I am. I just saw you; we were hanging out in New Orleans for three days, right?
Blake Oliver: Yeah, I feel like I didn't get to spend much time with you, though. You were so busy running the conference.
David Leary: Yeah, and now we're doing, I think, the fifth hour of recording of the podcast this week.
Blake Oliver: Yeah.
David Leary: Because we did four hours of interviews at the Accounting Salon on Monday.
Blake Oliver: That was awesome. So great to see so many of our friends, and colleagues, and new people. We'll be sharing out those interviews as bonus episodes [00:01:30] over the next month or so.
David Leary: You got your beignets while you were there?
Blake Oliver: I did get my beignets. I got to eat two of them.
David Leary: You got your Bourbon Street on.
Blake Oliver: Got my Bourbon Street on, briefly.
David Leary: We took a ghost tour, which was kind of interesting.
Blake Oliver: Yes, the ghost tour, That was kinda creepy.
David Leary: I do like how it was all tied back into Nicolas Cage. The IRS got involved in the ghost tour, because they repossessed one of Nicolas Cage's haunted houses, or something. I just thought that was funny, how a bunch of accountants are on a ghost tour, and it ties back into the IRS-
Blake Oliver: I love it.
David Leary: Any news [00:02:00] this week?
Blake Oliver: Well, believe it or not, Intuit is not my headline this week.
David Leary: Oh, wait, we almost forgot the review.
Blake Oliver: Oh, okay.
David Leary: I have a review to read. Sorry about that. I'm jumping right ahead.
Blake Oliver: No worries.
David Leary: We'll scratch the news; we have more important things. All right, I'm gonna read this review. It is from the UK. Unfortunately, I do not have the name.
Blake Oliver: Okay.
David Leary: "Informative and entertaining ..." but it's only four stars.
Blake Oliver: What can we do to be better? Let's find out.
David Leary: "As a UK-based accountant, and software advisor, I am limited as to the resources of information on [00:02:30] fin-tech, and specifically cloud-accounting tech ..." This is in parentheses, "(We really need a podcast over here.) I benefit greatly from the insights on this podcast, and I find the way it is delivered entertaining. I encourage anyone new to this field, or wanting to expand their knowledge to tune in, and subscribe. Four stars, purely, as you guys don't make me laugh as much as the blokes on From the Trenches."
Blake Oliver: Aww, man.
David Leary: And a little winky smiley face. I think we have to consciously be funnier, now, to earn that [00:03:00] fifth star, because we're entertaining, but only up to four stars.
Blake Oliver: Well, yeah, I'll take it. Thank you.
David Leary: Yes.
Blake Oliver: Thanks for the review.
David Leary: Yes, Anonymous Listener-
Blake Oliver: And to all of our listeners, if you would like to give us a review on iTunes, we will read it on the air.
David Leary: All right, so, that's the reviews. I think last week, we started out with a joke. We're like, "Oh, we should rename the podcast "Intuit News of the Week," but they're not the biggest story this week?
Blake Oliver: No! Thankfully, Wolters Kluwer, another giant tech company in the accounting world, decided [00:03:30] to step up, and become the headline story. They even made Journal of Accountancy. They were in Accounting Today. Krebs on Security. There's a whole Reddit thread about this. On Monday, CCH went down completely. Wolters Kluwer suffered a malware attack, and-
David Leary: Before you jump too further ... I think we might have a set of listeners that are just cloud accountants that are just doing small-business bookkeeping.
Blake Oliver: Oh, yeah.
David Leary: They might not be using any of this company's products. Even [00:04:00] myself, being in this space, I'm not super-familiar with what they do, or why would I use one of their products. What do I use it for?
Blake Oliver: Simply put - tax software; especially for medium, and large firms.
David Leary: Okay.
Blake Oliver: Wolters Kluwer suffered a malware attack, and they, according to The Journal of Accountancy, took down their applications on Monday as a preventative measure, because they didn't know how deeply the malware had gotten in. Which basically meant that if you're in tax, you cannot put [00:04:30] together tax returns. You can't use the software. You can't e-File anything. This was really freaking people out because there are deadlines coming up. There's a May 15 deadline, and some people had May 7 deadlines, and they couldn't work. Not only are you losing billable hours, but you've got deadlines to worry about, and everybody's freaking out, because, hey, was client information stolen in this malware attack? Everything was down from Monday, Tuesday, Wednesday ... They got the applications back up on Thursday.
David Leary: When you say everything [00:05:00] was down, I think I saw some tweets, like, yes, the platform was down, but it sounds like their tech-support phones were down ... Everything was down, when you say everything, right?
Blake Oliver: Yeah. We haven't even talked about the PR disaster of this whole thing.
David Leary: Oh, right.
Blake Oliver: I'm just talking about the actual apps, right?
David Leary: The apps, okay.
Blake Oliver: Yeah, the apps are down. People can't get in Monday, Tuesday, Wednesday. Thursday, it started coming up again for people. Various firms at different [00:05:30] times were getting access, but e-File still wasn't working. Now, I'm seeing on Twitter this morning - it's Friday, May 10 - and I'm seeing that e-File is not working for folks. Pretty much four days- three or four days, firms couldn't access their ... Imagine, if you're a QuickBooks Online bookkeeper, or accounting firm, and you do most your work in QuickBooks, imagine if QuickBooks was down for three or four days. This is a disaster [cross talk] because, you know, when QuickBooks goes out for like a morning, people are freaking out, right? [00:06:00]
I wanna talk about what happened, because that is one issue. Then, the second issue is the whole communications response to this thing, because part of the reason people are freaking out is that they were not getting updates from Wolters Kluwer as to what is happening. We don't know for sure, but we suspect that the malware actually not only took down the applications, but ... Well, Wolters Kluwer took down the applications proactively, like the customer-facing stuff, but also disabled their internal systems, so [00:06:30] they couldn't send out emails. It was almost radio silence from Wolters Kluwer.
People were speculating, on Reddit, as to what happened. There's a whole thread over in r/sysadmin, as to why CCH was down; talking about malware attacks. Actually, some employees, or people who are insiders - not necessarily employees, but people who know employees - were posting as to what happened, and then realizing that might not be such a good idea, and then deleting the comments. What [00:07:00] should we talk about first, David? Should we talk about what happened, or ..."
David Leary: Yeah, let's talk about what happened. When we see malware attack, is this kinda ... Was it something specifically directed at them, or was this one of those, like, somebody clicked a link in an email, and then, because of that, infected that machine. Then, it propagated from their virtual machines to all the other virtual machines - similar to, I think, Cloudnine had that happen last summer, maybe?
Blake Oliver: We don't know exactly how this happened; how the malware got in. There is an article on Krebs on Security. On [00:07:30] Friday, May 3, Krebs on Security notified Wolters Kluwer that they had apparently a server online, where file directories containing new versions of CCH's software were opened, and writable by any anonymous user. There were suspicious files in those directories, indicating some users abused that access.
Shortly after that report, the CCH file directory for tax-software downloads was taken offline. Then, as of the publication of that blog on Krebs [00:08:00] on Security, that's when users started reporting outages on the CCH websites, and apps, and all that stuff. Lack of security - having an open server that any anonymous user could write to that contains software updates ... We don't know the whole story, but that's scary. That's a big, big, big no-no, right?
David Leary: It's a major mistake..
Blake Oliver: We don't know if that's the reason but could be - lack of security.
David Leary: Just to rewind a little bit, we talked about Facebook having a [00:08:30] password file opened, but only Facebook employs could [cross talk]
Blake Oliver: It was internal, yeah.
David Leary: This is open to the entire world. If you had the know-how, and the programming chops, and the code chops, you could get access to this. Anybody in the world could.
Blake Oliver: There's some technical stuff they talk about in the article, about how they have PHP, and text files in there, and that's just not good security. That's a bad sign. We don't know exactly what caused the outage, but we suspect it was malware [00:09:00] got in, infected the corporate networks. CCH was concerned that it would also potentially infect the production environment, in which all the applications are hosted.
Here's the thing that I'm learning about how this all works - how CCH does cloud. It's not true cloud, as we think of it. It's not SaaS, like QuickBooks, or Xero, or any of the other - Expensify, Gusto - any these other tools that you access through your [00:09:30] browser [cross talk] The way CCH built their cloud was they took their old desktop product ... Listeners, correct me if I'm wrong, because I don't use the product, but it appears that they took their old desktop product, and they are hosting it in a shared-hosting environment for firms, and you access it through a virtual terminal. This is not what I consider ... I don't know about you, David, but, I don't consider this to be cloud - true cloud. This is just-.
David Leary: No, it's just desktop hosting.
Blake Oliver: Yeah. This is a hack. This is a way to make something that would normally be installed on a server [00:10:00] in your office accessible through the cloud, but it's still installed on a server somewhere; even if it's a virtual server. The reason this is a problem is because that's fundamentally less secure than true SaaS - true cloud software as a service - because you've got these applications running on Windows in a server, and it's shared ... It's hosted on a shared server; that server can get infected with malware in a way that it's very, very difficult to do, if it's a true SaaS solution. The [00:10:30] suspicion is also that, well, if the corporate network got infected ... If an employee at Wolters Kluwer, if their computer got infected, if they had proper security, then it should never infect the production environment with client data; but I guess they were concerned that it might. This is the problem. If you go cloud halfway, you've still got this huge security risk. Now, you're just outsourcing your risk to Wolters Kluwer.
David Leary: Yeah, because it's the same fundamental thing. If you have an office of 100 PCs, and somebody gets a virus, and it spreads to the other [00:11:00] 99 PCs ... What's crazy is the whole point of me using desktop hosting - if I want to use that - is so I don't have to do the admin or IT work, and ensure my machines are secure. Just like if I use ADP for payroll, I'm pushing my payroll risk on to ADP.
Blake Oliver: Right.
David Leary: I figure I'm pushing my hosting- because I'm gonna use a hosting provider, I'm pushing my IT risk, and security risk on them, but somehow or another - to me, I can't wrap my brain around - these [00:11:30] machines are infected. They're virtual machines, so it's like having 99 computers in your network. I don't understand how they're not siloed out, and how it gets from one machine, to the other machine, to the other machine. That is-.
Blake Oliver: Because they're shared hosting. You've got multiple firms on one virtual server; that lowers costs. To have your own is way more expensive.
David Leary: Yeah, I'm gonna have to go back and look at those data, but it was a similar scenario, where malware got on one machine, and it kind of just spread.
Blake Oliver: That's how this happened. That's [00:12:00] a big lesson, right? This doesn't work, and Wolters Kluwer ... Imagine if Intuit, instead of building QuickBooks Online, had just said, "Oh, we'll just take QuickBooks Desktop, and we'll host it for you in the cloud, and now it's cloud. Now that's QuickBooks Online." Wolter's Kluwer didn't make that investment in building a new product, which, hopefully they'll do that now. That's one issue. The second, and probably the ... I don't know if it's bigger, or equal, is just the lack of communication from Wolters Kluwer as this was happening. [00:12:30] Just to put this in perspective, they're over a $4 billion company. In 2016, they had €4.3 billion in revenue; 19,000 employees.
It was almost impossible to find updates from them anywhere but on their Facebook page. They started updating their Facebook page with information about the outage - very vague releases; very vague information. I didn't actually see an official Wolters Kluwer communications [00:13:00] person quoted anywhere online, until this CNBC article that was just published at 6:13 p.m. Eastern, on Wednesday, May 8. This whole thing started on Monday - Monday morning - and nobody from the company was out there saying anything in the press, until Wednesday. People weren't getting emailed. They didn't know where to go to find information. It's not like CCH's customers know to go to their Facebook page to find information. [00:13:30] I just find it mind-boggling that a company of this size could have such a absent emergency-response plan.
David Leary: Well, especially in 2019, because it's not like ... Let's go back ... I think Xero had an outage once, when they were in the middle of that transition to Amazon. I remember - I wanna go back to 2006-2007? Intuit had a big major ... In a two-week period, I think, had two major outages. One was something that somebody did on themselves; they made a mistake, and a bunch of servers had [00:14:00] to be restarted, and a bad router, or something like that. Then, literally two weeks later, somebody crashed a car into a major power transformer, half a mile away from the Intuit data center in San Diego. Then, that shut things down. Not communicating was a mistake companies made a decade ago, and now, people should know how to handle communications about an outage, but, you're right. It's 2019, and they failed at communicating about an outage.
Blake Oliver: Here's how bad it was. Here's the lack of communication - on May 6, that was- was that Monday? Yes, that was Monday ... On May 6, they [00:14:30] put a statement on their Facebook page, saying, "On May 6, 2019, Wolters Kluwer experienced network, and service interruptions, affecting certain Wolters Kluwer platforms, and applications. Out of an abundance of caution, we proactively took offline a number of our other applications, as we continue to investigate any impact. This prevented us from having adequate time to provide you advance notice, and for that, we sincerely apologize. We are working diligently around the clock to restore service as soon as possible. We apologize to our customers for the inconvenience and appreciate your patience. We will provide further updates [00:15:00] as they become available." That was at 7:00 p.m., after all their apps had been out for a day.
Blake Oliver: Then, they did another update on May 7, in the morning, saying pretty much the same thing - that they have begun their investigation, and they're using third-party consultants to help. "At this time, no indication that our customers' data has been compromised," but not much more information than that. No ETA. They did an update in the afternoon. Again, no ETA; pretty [00:15:30] much restating the same thing. It's basically one or two updates per day, and, at this point, you should probably be on Twitter. You should be issuing press releases. You should be giving people an ETA; giving them ... Just be transparent about this, right? They don't even have a status page; you can't even go to ... Like Xero, and doesn't QuickBooks have a status page now, where you can go to Status.Xero.com, and you can get updates, or whatever it is. Pretty much everybody who knows what they're doing, at this point, does [00:16:00] that, right? All the big companies, anyway.
David Leary: Obviously, accountants, and bookkeepers, it was a problem for them. They couldn't get in, like you said. They couldn't do the work. Is there any client-facing impacts that have happened, where people have missed deadlines, things like that?
Blake Oliver: I have not seen that, but I'm sure there will be issues. Just look at the firms that are on ... The firms that are on Wolters Kluwer products are probably mostly charging by the hour. Imagine how many billable hours [00:16:30] they just lost. That's the financial impact on the firms is they weren't able to work. They weren't able to bill for their time. Probably a good reason to move off of hourly billing ... Just setting that aside, I'm thinking Wolters Kluwer's official line is that "there is no evidence that client data has been impacted." That is not very reassuring to me, saying there is- that, "We don't know that anything has been stolen," is very different than saying, "Everything is good. Nothing was stolen." [00:17:00]
David Leary: There's an article on May 6, talking about this MegaCortex ransomware. The actual [cross talk].
Blake Oliver: I think that's what people are speculating is the malware that they got hit by.
David Leary: Apparently, this is ... I'll read a little quote on this. I'll just read this paragraph here: "MegaCortex now joins an ever-growing list of ransomware strains that cyber-criminal groups are using only in targeted attacks, rather than with spam, or other mass-deployment techniques." This was deliberately targeting-.
Blake Oliver: Deliberately targeting CCH-
David Leary: Yes. [00:17:30]
Blake Oliver: -is the idea. To me, I'm thinking if they were able to get the malware in there, isn't the whole point of the malware to either steal confidential information, or ransom information? The idea that it got in there, and didn't have an impact? I'm very skeptical about that. Anyway, hopefully, Elizabeth Queen, Vice President of Risk Management for Wolters Kluwer, will be more forthcoming. She is quoted in that CNBC article, [00:18:00] saying, "We're working around the clock to restore service, and we want to provide them [the accountants] the assurance that we can restore service safely. We've made very good progress so far," and reiterated a written statement, saying, "We have seen no evidence that customer data was taken, or that there was a breach of confidentiality of that data.".
David Leary: So ...
Blake Oliver: "Also, there is no reason to believe that our customers have been infected through our platforms, and applications. Our investigation is ongoing."
David Leary: I think, maybe to close it with this, because I think the lesson here is this really looks to [00:18:30] infect at a high level, and then deployed down to the machines. Sophos, which is a research company - security research company - they're recommending that all companies adopt two-factor authentication for internal networks, especially your central-management servers. That will help stop this.
Blake Oliver: Be in constant communication.
David Leary: That's the maddening part. That's what really gets people mad. I think that that's what really ticks people off is the non-visibility into it.
Blake Oliver: Yeah. Be on Twitter; have a team that's responding to every complaint, [00:19:00] saying, "Here's the information. This is what we're doing. We apologize." Don't let it get to the point, where people are going on Reddit, and just speculating.
David Leary: You have to. You've gotta be part of the conversation, or else, the conversation will happen without you. All right, so, that's out of the way. What else happened in the news this week?
Blake Oliver: Getting back to Intuit news, while we were at the Accounting Salon, having some great conversations, something very interesting happened. Michael Ly got an email. He announced [00:19:30] that he got an email from a client-
David Leary: Michael Ly, he runs a firm called Reconcile. They were the Firm of the Future finalist, I think, for Canada? I think ...
Blake Oliver: Well, they're not in Canada; they're in Vermont [cross talk]
David Leary: He was the US Firm of the Future-
Blake Oliver: Finalist.
David Leary: A Canadian firm won it again, but, he was ... Yes, the global ... He was the US Firm the Future winner for the US.
Blake Oliver: This is a firm that is one of Intuit's example firms, right? They highlight this firm to [00:20:00] everybody else: "This is what you should be doing." He got an email. He holds up his phone; he says, "I just got an email from a client saying that they are leaving my firm for QuickBooks with Live Bookkeeping." This is not a teeny client ... This one is not a huge one, but it's a not-for-profit. It's a good fee; it's a good client. and it's gonna hurt them. Everybody just paused for a second, and took that in, because this is exactly what is not supposed to be happening. [00:20:30]
David Leary: Yeah. I mean the problem is to partner with the ProAdvisors, right, and figure out how to balance that in between, and not- and really not market to them.
Blake Oliver: Right.
David Leary: When push comes to shove, small-business owners pay ... Let's say they're paying $50 a month to an accountant, or bookkeeper for a full stack of bookkeeping service. It's really tempting when you see an advertisement for $199, or $499, or $399, to go tiptoe into those waters.
Blake Oliver: Yeah, well, and you can't hide it from them. Even if you say, "We're not going to [00:21:00] market to customers of ProAdvisors," they're going to find out about it, especially since ... Isn't this going live next month, on their QuickBooks website?
David Leary: Yeah. We talked about that last week. Yes, June. In June, QuickBooks Live Bookkeeping will be on the QuickBooks website; the main QuickBooks.com website. That's when I think you're gonna see a big ripple from this, because I still argue, me and you, weekly, in the closet, talking about this ... Our listeners, our growing [00:21:30] listener base; and then, you take a lot of the active Facebook groups, you're probably only talking about 5,000 people that are aware that QuickBooks Live exists yet.
Blake Oliver: Yeah, definitely not more than 10,000, I would say.
David Leary: Yeah, so now, what happens when the other 80,000 ProAdvisors discover this, and 2 million small businesses know it exists?
Blake Oliver: It's gonna be fun.
David Leary: Yeah, June should be kind of interesting. I've been in ... Go ahead.
Blake Oliver: I was gonna say, speaking of Michael Ly, he forwarded us a story about his home state, Vermont. [00:22:00] The Vermont House voted 124 to 14, on Thursday evening, for legislation that would boost clean water funding by $7.7 million. The way it would do that is by taxing pre-written software access over the internet. It's a cloud tax.
David Leary: They're using the Wayfair v. South Dakota case for e-commerce sales, and basically, "Hey, we have to go ahead. That's okayed by the Supreme Court. We're gonna slap a [00:22:30] tax, then, on SaaS software that's not created here in Vermont, as well.
Blake Oliver: Yep, and nexus is going to be determined by where the buyer is, because of that ruling. If you are selling cloud software, pre-written software access, over the internet to anyone in Vermont, you're gonna have to collect sales tax now; it looks like it's six percent. It's the same as everything else in Vermont - their standard sales-tax rate. The argument, according to Ways and Means Chair Janet Ansel, is [00:23:00] that the state used to collect sales tax on software, such as TurboTax, and that was because Vermonters had to go to a store to buy software, in a CD, or DVD. When Vermonters buy software online, however, the state doesn't collect any tax. This bill is restoring that or aiming to restore that lost revenue.
David Leary: I think there's a game here, between the states, and municipalities, and the companies that sell things online. Ultimately, Amazon [00:23:30] tried to play that game, like, "Fine, we won't sell any ... We won't ship products to Vermont. We're just not gonna sell things to Vermont customers." Amazon really didn't have a lot of pull, because a Vermont customer could just go to Walmart, or just go to a brick-and-mortar and buy what they need.
Blake Oliver: Right.
David Leary: I think the SaaS software players could play hardball with Vermont, because they could just say, "Fine, we won't let anybody in Vermont buy our software."
Blake Oliver: Well, here, actually-
David Leary: What're you gonna do? There's no alternatives. There's no alternatives, unless you get a private VPN, and bypass it or something.
Blake Oliver: Actually Vermont decided- looked [00:24:00] into doing this years ago, and decided not to, because, at the time, that would happen. Vermont's too small; it doesn't have the leverage that a California, or a Texas does, but since they ... In the last few years, I believe 19 states have implemented this sort of tax, so now Vermont is not alone. If a company wanted to play hardball, like you said, that's a lot of people; a lot of residents that they're going to have to not [00:24:30] sell to. I think the pendulum has shifted, and we're gonna see more and more states start to tax online services.
David Leary: We had a referendum, here in Arizona, where ... It was about putting sales tax on services, across the board, and banning it forever; like you can never change ... They will not let the legislature ... This would be an amendment, and the legislature can never implement a tax like this [cross talk]
Blake Oliver: On services?
David Leary: Services.
Blake Oliver: Wow.
David Leary: Your daycare; your dentist; your Software [00:25:00] as a Service. That was a referendum item.
Blake Oliver: I think some states, the services lobby, or enough professionals would get together, and make that happen, but, I think in most states, they're so desperate for revenue, due to the loss of retail revenue - like sales tax, retail sales tax - that they're gonna be looking for ways to generate revenue. Taxing services is the most natural, and easy way to do that, especially as our service economy grows, and the other [00:25:30] parts of our economy shrink.
We are transitioning into a mostly services-type economy. If you don't tax services ... Also, what is the rationale for not taxing services? Why don't we tax services? Is it fair? Is it fair that we tax something that you buy at a store, versus something that is delivered to you online? A massage doesn't get taxed, but buying a massage chair gets taxed? I just think that it ... I'm [00:26:00] a CPA. I don't like getting- I don't want my services taxed, but I can't really justify it, other than my own self-interest.
David Leary: That's fair. I don't know the why ... We'll see where this goes next, because this is not ... This is just a tiptoe in the water, I think, with, say, Vermont. We'll see where this goes from here.
Blake Oliver: If we're making predictions, or taking bets right now, I would say buy stock in Avalara. If you have to collect tax on your software sales in all [00:26:30] 50 states, how are you gonna do it? You're gonna have to do an integration with something that does it automatically, and it's gonna be Avalara, or TaxJar, and I think ... You can't buy is stock in TaxJar, yet, right?
David Leary: Yeah, and there's all these SaaS-software apps that ... Chargify, Recurly ... There's apps out there that, if you have a SaaS app, you're gonna use these other apps to manage your billing processes. Those apps like that are gonna have to integrate, if they don't already with sales-tax tracking stuff, so people [cross talk]
Blake Oliver: I Think I have to disclose, I do not have a position in Avalara, currently, although [00:27:00] I may execute one in the future. Isn't that what they always say on all those investor blogs? All right, what else do we got?
David Leary: I have some Intuit news-
Blake Oliver: All right.
David Leary: -and ADP news. ADP and Intuit are announcing that they're having a deeper cross-platform connection with a new service solution, and so [cross talk]
Blake Oliver: I was surprised to hear this. It's like integrated now, right? Like in the app?
David Leary: Yeah. If we go back in history ... Let's go back 20 years ago. If you were a very good QuickBooks customer, Desktop, and [00:27:30] you were a very good ADP customer - which is fair ... You could be both, right? - you paid a penalty. Every single payroll, you'd have to download a file from ADP, save it your computer Desktop, import that in a QuickBooks Desktop software to get your payroll data from ADP in there ... Every single week; and it's prone to error. When QuickBooks Online came out, and Intuit started having that more open-platform mindset, that's when Zen Payroll, at the time, or Gusto [00:28:00] integrated, so you had ... Even though Intuit has a billion-dollar payroll division, they started letting other payroll providers get on their app store. ADP has their cloud-based product, called Run.
Blake Oliver: ADP Run, yep.
David Leary: ADP Run. That as a deep- that has an integrations QuickBooks Online. Apparently, they made it better because it sounds like, reading the article here ... When you signed up, you had to call up on a phone, and get somebody to map your accounts across. It was SaaS, but there was no UI for the SaaS. I don't know-
Blake Oliver: I [00:28:30] started using ADP Run a couple years ago, and by that time, they had built it so you could map it yourself, but it was really difficult. Even I had a hard time figuring it out, so, yeah, that does not surprise me.
David Leary: It sounds like they improved that. Also, reading this article, it sounds like they may have built an integration to QuickBooks Desktop, as well, instead of just the old IF export.
Blake Oliver: Cool.
David Leary: It sounds like that, from reading the article ... It's hard to tell exactly, because [00:29:00] it's a little bit more of a press-release type article. Then it also seems to indicate that there's some sort of- something they did, just for QuickBooks ProAdvisors, because ADP has their own accountants dashboard, so you can see all the clients you run payroll for. Even that, I tried to watch a video. I can't really tell what it is, or what it isn't. Really, I think the takeaway in this is you're gonna see more, and more of this - what do you call it - coopetition? [cross talk]
Blake Oliver: Coopetition? I [00:29:30] like that word. I've never heard that before.
David Leary: I'm not saying it right, but it's ... They're competitors, but they're cooperating for the sake of the-
Blake Oliver: Why do you think this has happened? Do you think this is because of apps like Gusto that just make this integration so easy that ADP said, "Oh, shit, we gotta do this"?
David Leary: I think it's maturity. Even Paychex integrated, finally. After 20 years of kind of screwing customers ... I really feel like people paid a penalty for not having integrations-
Blake Oliver: Oh, yeah, it was a huge pain in the ass, but they were doing it on purpose, or, because they were competitors. [00:30:00]
David Leary: Yes. It's a more mature view of the world, and everybody wins. I mean ADP gets the win. QuickBooks gets to win, but ultimately, the clients win. You just get smoother data workflows [cross talk].
Blake Oliver: Sorry to ruin your Kumbaya moment, David, but-.
David Leary: Oh, boy ...
Blake Oliver: You know me, right? Does everybody win? Somebody shared an article online, and I apologize, I can't remember who, about Borders, and Amazon; how Borders ... In the early years of Amazon, Borders utilized Amazon as their delivery mechanism. Then [00:30:30] they tried to compete with Amazon later, and they failed, and disappeared. This, to me, it's like ADP is now trying to cooperate. Maybe this analogy doesn't work, but, now they're making it easy, but I still don't think it's enough. I think they're still gonna be hugely disrupted and lose the small-business market.
David Leary: I think what you're saying, if I'm hearing you, is this too little, too late?
Blake Oliver: Right.
David Leary: I remember reaching out to ADP, reaching out to Paychex - these [00:31:00] legacy payroll players - before these other apps existed about, "Hey, let's build an integration." You gotta integrate. Customers are suffering pain from this. You're right, why did it take 20 years of customers paying a penalty, before this finally got done? You're right. Is it too little, too late? Only time's gonna tell that.
Blake Oliver: I do have a follow-up on the Free File fiasco, since we're talking about Intuit.
David Leary: Okay.
Blake Oliver: I probably would've led with this, if Wolters Kluwer hadn't screwed up so bad. Free File [00:31:30] made the NBC Nightly News. I don't know if you watch Lester Holt, David, but I like Lester Holt a lot. I like NBC Nightly News. Kinda just turn it on to get out of my niche, and see what is happening broadly, in America, and the world, just for half an hour or so. On May 6, Free File made the NBC Nightly News; they had a segment on it. It's because the Los Angeles City Attorney sued H&R Block, and TurboTax for allegedly misleading [00:32:00] low-income taxpayers. The allegation is that the companies defrauded low-income taxpayers and charged them for a service the companies are required, by law, to provide for free.
The suits allege ... It's two different ones against each company. The suits allege that the companies "intentionally obscured and failed to disclose" differences between its commercial products, and the Free File program. For our listeners who missed the last episode, Free File is a free service that the IRS requires these firms to provide to anyone [00:32:30] with an adjusted gross income of $66,000, or less. It's a deal that they cut with Intuit, H&R Block, and a number of other tax-preparation companies. As part of this agreement, the IRS said, We're not gonna go make our own tax software. You're gonna provide it for free to these lower-income Americans." Intuit, and H&R Block, it has turned out, according to a ProPublica investigation, have been hiding their Free File offerings, and apparently, allegedly, directing these folks who should have paid nothing into paid products [00:33:00] that charge them up to- over $100 dollars. at times.
David Leary: Do you have a link to that article for the show notes or is that just something that was on the TV?
Blake Oliver: No, no, there's a link that I will be putting in the show notes to an article, and it has the segment embedded as a video.
David Leary: The reason I'm bringing that up, because I feel like I saw a tweet from this guy. My question I have, I guess, if you have access to this article, right now: is this guy part of the L.A. County [00:33:30] Attorney General's Office that's doing this, or does he just have a Twitter name that says, "I'm a L.A. Los Angeles City lawyer"? I feel like I saw a tweet about this, and I clicked on him. I was like, "I think he's just a lawyer." Like this might be more of a class-action-y type suit [cross talk] this is not a government action ...
Blake Oliver: No, this is Mike Feuer. He is our elected City Attorney of Los Angeles. Obviously, he's also a politician, and he's jumping on this as a way to make a name for himself, but, also, his [00:34:00] argument ... His job is to represent the citizens of Los Angeles, and a lot of L.A. residents ... There's over 12 million of us, at this point, are lower-income, and are affected by this - millions, and millions of people. It's kind of cool to see cloud accounting in the NBC Nightly News. Here we are.
David Leary: City Attorney LA is his Twitter handle.
Blake Oliver: Yeah.
David Leary: You said it's Mike Feuer - F-E-U-E-R. Okay, got it.
Blake Oliver: Check it out. Let us know what [00:34:30] you think. Is this ridiculous? I have seen commentary on Twitter that, "Hey, this is absurd. Intuit, and H&R Block, they're abiding by the terms of this. This is just natural marketing. Of course, they want people to use their paid products ..." but people should know better." I think that was kinda one of the arguments that you and I were tossing around, as well. Maybe people should just do their homework and go find the Free File program. If you go find the page on the IRS website, you can get to these free programs; if you're putting it into Google, no, you [00:35:00] won't, but that's buyer beware, right?
David Leary: Yeah, I think, in the '90s, there was that Matthew Lesko guy, the guy- he'd have these TV commercials. "Here's how you can get all this government money, or these government programs." He sold that book for 40 bucks. He's the guy who had the suits with all the question marks on it. Do you remember that guy?
Blake Oliver: Oh, yeah, yeah, yeah.
David Leary: I'm sure the Free File answer is probably in that book, along with a bunch of other government programs to get free money, right? You're right, at some level, the program exists, but-.
Blake Oliver: What is the obligation of these companies [00:35:30] to promote the program? I think that is ambiguous, and we're gonna find out, as these lawsuits progress ... I think, either way, you don't want to be on the ... I don't think Intuit, and H&R Block really wanna be on this side of the news, at this point.
David Leary: I don't know ... It's that, you know, just spell the name right; get the domain right. All news is good news, I guess. Think about CCH. CNBC would never talk about them, ever, probably, right? Now, they're on CNBC ... It [00:36:00] gets people beyond The Cloud Accounting Podcast exposure, I guess. I have a couple articles that are kind of tied together.
Blake Oliver: Let's hear it.
David Leary: I wanted to try to get to these last week, but we just ran so long, last week, so we did not get to this, but I'm glad, because this week, I have an article that adds on to these that kind of ties it together a little bit.
Blake Oliver: Okay.
David Leary: Two weeks ago was a Accountex, in London, and there was a big explosion, because there was a panel of- I think there was eight white guys on it. People [00:36:30] were up in arms about 'man-els.'
Blake Oliver: Like a typical panel at an accounting conference?
David Leary: A typical panel ... Okay, sorry, yes, it was a typical panel at an accounting conference, exactly.
Blake Oliver: Yeah.
David Leary: We've talked about this before, when we go the AFCPA events, the [cross talk]
Blake Oliver: -we talked about it at the Accounting Salon, just a few days ago.
David Leary: Yeah, we talked about it at the beginning of Accounting Salon ... There's a couple articles we'll get in the links. A) There's a link to the- we'll have a link to the actual talk. The funny thing about it was the talk [00:37:00] was about accounting trends in the landscape - what's working, and where are we going? You'd better talk about diversity on that panel, because, obviously, you missed that boat. Heather Townsend wrote a very good article, and blog post about- are all-white-male panels hindering diversity in accounting? I think she has really a post. Paul Meissner, on Twitter ... Paul Meissner, I don't know if you know who he is? He hosts From the Trenches. It's an accounting podcast in Australia-
Blake Oliver: Yeah, you shouldn't listen to it, though. You should [00:37:30] always listen to The Cloud ...
David Leary: You shouldn't listen to it, no. He went off on a nice eight-Twitter rant about this, and I think it's really valuable, so we'll have a link to his tweets about that. Let's bring it into this week.
Blake Oliver: Yeah.
David Leary: I did discover an article on Going Concern that ties into all of this: "How New Accounting Grads [because everybody's graduation week, this week]-
Blake Oliver: Yeah.
David Leary: -Can Tune Up Their Diversity BS Detectors." This article is written by Joanne Cleaver. Essentially, she's giving you a manual of how to see [00:38:00] through the crap that's on people's websites. One thing she talks about, to summarize, is most of them will list the best places to work, but that's just blather about what benefits they have, amenities, but not really ... There's no- when they make those lists of best places to work, they never take into account how they have a diverse staff, or retain a diverse staff, or promote a diverse staff.
Blake Oliver: Right.
David Leary: It's not part of that criteria. She actually has concrete things you can do. If you're a new grad, and you're looking [00:38:30] to go get a job in the accounting industry, you can go to these companies' websites you're possibly interviewing with, or going to take a job with, and you can figure out if they support diversity. The first thing she says is you can actually just count their names or faces. She says you can just go to their website; a lot of them will list their-
Blake Oliver: Look at their pictures.
David Leary: -pictures of their partners. She just said, "Start counting." She made a little joke. She's like, "Don't worry, you won't run out of fingers. You just start touching their noses ..." Yeah ...
Blake Oliver: By the way, if the accounting firm doesn't have pictures of the partners [00:39:00] on their website, don't work there, because everybody should have pictures of the partners on their website, at this point. If they don't, they don't know what they're doing; from a marketing perspective, anyway. Side note. Go ahead.
David Leary: Then, look at the firm's leadership pipeline. A lot of them will have a news section on the site, and they'll talk about their latest partner class. Look at every single year. If you don't see diversity in the partner class, or really, [00:39:30] at this point, you should see it being an increasing proportion of women, and minorities over time. If you don't see that, it's not happening.
Then, see if women are heading up their new practices, because ultimately, it matters, and I'll read her quote. "Why does this matter? Because running an office, or a practice is a microcosm of running a whole firm. That's how partners qualify eventually to be the big dog- to be the top dog." Ultimately, she argues, "The accounting profession [00:40:00] won't have more women, and minorities running firms, if women, and minorities don't get a chance to show they can make money in a smaller scale. It's a good article that's just a manual of, "Hey, do these three things, and it'll tell you a lot about a firm."
Blake Oliver: Was it on the From the Trenches podcast, where ... I can't remember who said it, but the idea was the reason that so many men attend these panels is because it's easier for them to step away from family commitments, and a lot of this stuff isn't paid anyway. If you make it paid, [00:40:30] then you're more likely to get more women, and minorities, especially since they're on- they tend to be in smaller firms, at this point, because the diversity- the diversity is better in smaller firms, than in large firms. Large firms, though, are the ones that have the resources to send somebody.
David Leary: Yeah. There's a challenge, because a smaller firm, you don't have the elbow room. I think those are possibilities. I also feel like, based on my experience of putting on panels at conferences, I always felt like you have to represent the audience that's at the conference.
Blake Oliver: Right.
David Leary: Arguably, I've [00:41:00] been to enough accounting conferences to know that it's not just all white males attending the conferences. Now, yes, on stage you'll think it's that, but if you really step back, and look at the audience, it's not. I always felt like I've tried to make sure any panels I put together are representative of the audience that's attending. I actually feel like if you're just 10-percent conscious about this, it makes a 200-percent difference.
Blake Oliver: Mm hmm. Yeah, it does.
David Leary: You just to be a little bit conscious about it. I did hear, and I think somebody said this at the Accounting Salon, that [00:41:30] they ... Either somebody else said it, or it was an Accounting Salon member. I don't know if you remember? They talked they've had a policy for a couple of years now, where if they look at a conference panel, and they don't think it's diverse, they just opt out, and not participate in the conference panel.
Blake Oliver: Yes, that's the thing is the participants ... If the participants in the panel ask who else is on the panel, and there isn't enough diversity, and the participants speak up, that is probably the thing that will change it the fastest. If we just say no.
David Leary: Yeah, well, also, when [00:42:00] you put together a panel ... You run marketing; you're going to probably be putting together a panel here, or not ... It's frustrating, because I feel like it's so- it's so easy not to do this, and people just do it. It kinda makes my arms go in the air, and just-
Blake Oliver: Well, it's hard enough to- The argument is it's hard enough to get people to be on your panel in the first place, but that shouldn't be an excuse [cross talk]
David Leary: I think that is all ... I saw defenses of this, like, "Oh, women don't apply," or "Women [00:42:30] don't try to be on panels ..." It's all baloney. I put together lots of panels. I've never had anybody say no, unless, physically, they're like, "Oh, I already booked a family vacation. I'm not even going to another conference.".
Blake Oliver: Right.
David Leary: I've never had anybody say no, so I don't know if I'd buy into that. Maybe they say no because they don't like your conference, or your panel, or you. I don't know, but I've never heard anybody does not say yes, when they're asked. Anything else in the news?
Blake Oliver: Well, we were talking about taxes, and [00:43:00] I've had this one sitting on my list for a long time. I wanna hit it before we go, because this is controversial. You know I like controversial, right?
David Leary: Okay.
Blake Oliver: This is an article from last month, two days before Tax Day, on April 13, in the New York Times - everybody's favorite semi-Socialist publication ... Just totally sarcasm. there I'm kidding, okay? I love the New York Times. I read it, and the Washington- and The Wall Street Journal-
David Leary: You're just trying to be funny to earn that five-star review.
Blake Oliver: I'm trying to be funny ... It's not [00:43:30] working. I don't know. The headline is Everyone's Income Taxes Should be Public." Disclosure of tax payments would make it easier to hold politicians accountable. It would help to reduce fraud, and economic inequality. He makes the argument that in 1924 - I did not know this - the United States passed a law that made all income tax returns public. You could go, and you could read anyone's income tax return. It was obviously [00:44:00] not popular with the folks who made a lot of money, and the act was rescinded not long afterward, but there is precedent for us doing this. Mr. Appelbaum argues that we should revisit that. The argument is that it would reduce tax fraud. I guess you know more transparency leads to greater- more honesty. He cites-
David Leary: Yeah, this is never happening. It's never happening, Blake, because that means every politician is going to have to share- They're [00:44:30] gonna have to share their tax returns. This is never, never, never, never, never happening, ever.
Blake Oliver: Also, you and me, David; everyone. There is actually a country that does this now; a few of them do this. In Norway, tax records have been public since the founding of the modern state in 1814, and a newspaper put the records online in 2001. One study estimated that the records' greater availability caused a 3.1-percent increase in the reported incomes of self-employed Norwegians over the next three years; perhaps because they feared exposure. In Finland, [00:45:00] tax data is published every year on November 1. It is jovially known as National Jealousy Day, and people treat that information as a barometer of whether inequality is yawning too wide. I agree with you, this is never gonna happen. I find it interesting that some countries do make tax-return information public.
David Leary: I think this could be one of those unintended consequences things. People will start utilizing tax shelters, and hiding money, and they'll be doing other stuff even more. It'll cause even more inequality, and more lying-.
Blake Oliver: Because they won't [00:45:30] want that stuff to show up on their tax return?
David Leary: Yeah.
Blake Oliver: Yeah, well-.
David Leary: Right now, drug dealers file tax returns, and people doing illegal activities, they pay their taxes. A lot of them do. The people would possibly not want to make this information public, and they'll do more to hide it. I think this is one of those unintended consequences things; it would ripple really bad.
Blake Oliver: We're not even comfortable, in our businesses, sharing how much people make. Nope, people don't wanna talk about their salaries. We [00:46:00] discourage it, as employers, because we don't want people using that information to negotiate. Yeah, it's not gonna happen, but I just think it was interesting that somebody made that argument, and that we actually did do that at one point. Actually, at the bottom of the article, another thing I didn't know, apparently, when the first income tax was passed in 1861, during the Civil War, that also had full disclosure. There was disclosure of names, incomes, and tax payments. Then, over the following decade, before that first income tax was ended, that [00:46:30] data was posted in public, and printed in newspapers. It's been done before; might happen again, so, get ready guys.
David Leary: My only argument for making it public is that there's ... People that have access to the data, as these tech companies get bigger, and bigger, and you have the Equifaxes of the world ... Obviously, the IRS has some of this data ... A lot of this data is already out there.
Blake Oliver: Oh, yeah.
David Leary: It's kind of public already [cross talk].
Blake Oliver: -TurboTax files taxes [00:47:00] for millions, and millions of Americans; they have this information, and they're benefiting from it.
David Leary: I don't necessarily think Intuit is utilizing that in the same way, but, you bet, your credit report ... People can sign up, and buy your credit report, and the second you apply for a mortgage, they get notification that you applied for a mortgage, and you get 10 other phone calls from other mortgage companies instantly.
Blake Oliver: Well, you know who is using this information to benefit is Credit Karma. They have a free tax product that you don't pay anything for, but [00:47:30] in exchange for doing your taxes for free, they get to mine that information, and market to you. That's the future. Eventually, I think all tax preparation will ultimately be free, it's just going to be a question of do you wanna pay, or do you want to give your information to somebody so they can mine it? I don't know.
David Leary: Yeah. Ultimately, the way to think about this is maybe it's already public. It's just public in a poor way, where you can't- you and I can't get access to it, but people in the know can.
Blake Oliver: Yeah. Well, [00:48:00] that's all I got for this week. If folks want to get in touch with us online, David, tell us what they think, offer their commentary on Wolters Kluwer, or Free File, or QuickBooks Live, or whether or not everyone's income taxes should be public, where can they reach you, David?
David Leary: I'm on Twitter, very easy to find, @DavidLeary.
Blake Oliver: I am also on Twitter. I am @BlakeTOliver. Find, and like our Facebook page - Cloud Accounting Podcast. Type that into your Facebook, and [00:48:30] you'll find us-
David Leary: Or the Twitters.
Blake Oliver: Yeah, or the Twitters. We've got a Cloud Accounting Podcast account on Twitter. Most importantly, if you listened to anything that I just said, go to CloudAccountinPodcast.com, and click on the Subscribe banner to join our email list. That way you'll get the show notes sent out to you automatically, the day after- the morning after I publish an episode. You'll have a summary of the episode, along with links to all of the articles that we [00:49:00] discussed. You can follow up on everything we talked about. Do us a favor and write a review on iTunes. We will read it on the air. You wanna express your opinion? You wanna tell us what you think about the show? We will read it.
David Leary: We're just asking for it ...
Blake Oliver: That was too much, probably, but ... Go easy on us, guys. C'mon.
David Leary: Hey, man, and some of you that are still anti-cloud, and you wanna listen to something, Cloud Desktop Podcast is out there-
Blake Oliver: Yeah, the Desktop-
David Leary: Desktop Account ... Start again. You do it. You [00:49:30] say the ...
Blake Oliver: If you wanna listen to another podcast, other than From the Trenches, check out the Desktop Accounting Podcast, for all the latest desktop-accounting updates, including Quicken. and QuickBooks Desktop.
David Leary: I think Sage they talk about, as well.
Blake Oliver: Sage, as well, yep.
David Leary: Sage 50.
Blake Oliver: Excellent. Really, really fantastic journalism, and we look forward to more episodes of the Desktop Accounting Podcast.
David Leary: I think they have to send you that on CD-ROM, though.
Blake Oliver: Yeah, I think it's ... You've gotta put in your address, and then pay a fee; I think you have to send [00:50:00] them a check in the mail, and then they will mail you a CD with the podcast on it. podcast on it.
David Leary: Yes, good time. All right, everybody, I think that's a wrap.
Blake Oliver: That's a wrap. Talk to you next week, David.
David Leary: All right, bye.
Blake Oliver: Bye.