Tax & Accounting Blog

The Challenge of Finding an Experienced Fiduciary Tax Professional

Blog, ONESOURCE, Tax Information Reporting, Trust Tax August 29, 2017

As the number of experienced fiduciary tax professionals decreases, technology is transforming every aspect of the tax and accounting industry — from the challenges professionals face to the way they get work done.

To compound the challenges, financial institutions are struggling to find qualified candidates to fill open positions, since fewer accountants coming out of college today are looking at careers in the fiduciary tax industry, preferring to specialize in corporate and individual tax instead. With the current generation of fiduciary tax professionals nearing retirement age, it’s increasingly likely that trends will collide to cause a shortage of professionals available to handle the anticipated volume of work in fiduciary tax.

Fiduciary tax professionals work on behalf of trusts to report income to state and federal tax authorities, most notably IRS Forms 1041, 5227 and 990. A trust, at its most basic level, is a legal instrument created to hold wealth in a tax-efficient manner — and although completing and filing these forms in a compliant manner is a large part of fiduciary tax, it’s not the whole story.

The legal and regulatory rules that apply to trusts are, in a word, complex. Not only is the applicable tax code remarkably lengthy and dense, fiduciary law can vary substantially from state to state. Additionally, changes to trust law don’t make headlines like proposed changes to statutory income tax rates, or the corporate statutory rates. This means trusts fly largely under the radar compared to other, more controversial, tax proposals and regulation.

And yet fiduciary tax is immensely important to a lot of people. Trusts can change hands because of someone’s death or incapacitation — events that frequently happen without much foresight from a financial planning standpoint — and a fiduciary is a valued stakeholder in managing the trust’s assets in the manner prescribed by its design.

Here’s the bottom line: Financial institutions with fiduciary tax departments are already struggling to find available candidates with sufficient knowledge and experience in fiduciary taxation — and this difficulty will most likely only accelerate moving forward.

What does this means for the industry at large? First, financial institutions will continue to look at outsourcing fiduciary tax to the specialists who are left. Moreover, technologies to automate the fiduciary tax process will be seen as delivering greater and greater value.

The need for fiduciary tax services is not going to decrease, despite the dwindling number of professionals working in this specialty. Automating key steps of the fiduciary tax process — such as regulatory filing and document management — and embracing new technology is the most logical way to ensure the work gets done well moving forward.

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