Melanie Lauridsen, vice president of tax policy and advocacy at the AICPA, and Cynthia Rijo Sanchez, president of the Puerto Rico CPA Society, discuss the boom in demand for tax and accounting services, and what it takes to successfully serve this market.
Transcription:
Dan Hood (00:02):
Welcome to On the Air With Accounting. Today, I'm editor-in-chief Dan Hood. It's Hispanic Heritage Month and people are marking it with music and culture and food and festivals and fiesta fun. We are not going to do that. Instead we are going to market by exploring the boom in demand for tax and accounting services in this Hispanic community, which is pretty exciting in and of itself. Here to help us with all that is Melanie Lauridsen; she's the VP of tax policy and advocacy at the AICPA and Cynthia Rijo Sanchez, president of the Puerto Rico CPA Society. Melanie, thanks for joining us.
Cynthia Rijo Sanchez (00:28):
Happy
(00:29):
To be here.
Dan Hood (00:30):
And Cynthia, thanks for coming on the show.
Melanie Lauridsen (00:33):
Thank you for having me.
Dan Hood (00:34):
Alright. Like I said, there is this boom in tax and accounting or demand for tax accounting services in the Hispanic community. Melanie, maybe you can kick us off by talking about what's driving that growth. It's pretty rapid growth in the need for these services. What's causing that?
Melanie Lauridsen (00:50):
So there definitely is rapid growth and according to the US Small Business Administration Office of Advocacy, they've said that US Hispanics are the majority minority business owners representing 14.5%, but business owners in 2022, which is a 13% increase from 2021. However, treasury also added in that beginning in 2020, there has been a lasting surge in business applications and startups and nearly 25% of those entrepreneurs were Latino. So clearly we are seeing a rapid growth and people are definitely coming in. I think Hispanics definitely have that entrepreneurial spirit and they're exploring it, looking into it and diving right
Dan Hood (01:43):
I know Cynthia, if you have any thoughts on this. Obviously the numbers are pointing strongly in this direction. Do we have any sense apart from the general entrepreneurial spirit, is there anything else driving the reason why it's happening now or
Cynthia Rijo Sanchez (01:56):
I would say, and historically all these numbers respond to all the opportunities that Hispanics have in the United States to keep growing, to help their families and to start businesses there in the states.
Dan Hood (02:13):
And we should double check this as we talked about, you talked about business and business formation. Is there a similar demand on the individual front?
Melanie Lauridsen (02:20):
Yes, definitely there is. And according to the Census Bureau, the Hispanic population has been expanding substantially faster than any other non-Hispanic population. And right now Hispanics are about 65 million in this country. And that increase from 2022 to 2023 has amounted to about 1.8% increase. But that is actually really sharp contrast with a 0.2% increase for non-Hispanic populations. So absolutely we're seeing that rise not only businesses but in the population and pretty much across the country in different sectors.
Dan Hood (03:03):
Gotcha. And I realize we had a lot of statistics, which is awesome, but I'm not sure, did we touch on the actual percentage of Hispanics in the US population? It's somewhere between 18 and 20%, is that right?
Melanie Lauridsen (03:14):
That is correct. It is the largest growing population. Yeah.
Dan Hood (03:18):
So obviously a core part of this, right, is that the Hispanic community is looking for these services, traditional accounting services, bookkeeping, tax prep, et cetera, et cetera in Spanish, right? That's one level of it. But are there specific services that they're looking for, specific types of services that they're looking for, Cynthia?
Cynthia Rijo Sanchez (03:35):
Well, I would say aside from language specific services, it is very important to recognize the broader linguistics and cultural challenges that can arise. Definitely we would need to give Hispanic community more orientation. I know that the IRS tries to, and they are very diligent on translating all the documents and have them available in Spanish for the Hispanic community. But probably they will need to feel more comfortable with the people explaining them, the procedures, the compliance in order for them to feel comfortable. I was going to say, for instance, in Puerto Rico talking about the cultural challenges in Puerto Rico under the presidency of CPA one Flores Gza back in 1991, there was a significant debate about whether to retain the English language for the CPA exam due to the law that made Spanish the official language of government documents. And this led to complications as the exam as much as the professional practice were conducted in English. Eventually, while the efforts of CPAs and for practical reasons, a profession reverted to using English. So this example highlights how the language and cultural dynamics can influence the needs of Hispanic clients, not only here in Puerto Rico where I am, but also in the US. These communities often require services that balance linguistic preference with practical and legal requirements. So that's basically my point of they being comfortable with professionals knowing their cultures, how they do business and they understanding what are the compliance requirements and all that.
Dan Hood (05:34):
Right. Yeah. Before we started recording, we were talking about the complexities just of translation to what is beneficial ownership information, what is that in Spanish, and would it mean anything to some, a native Spanish speaker and all the complexities of that. So I mean that makes a lot of sense. Melanie, did you want to jump in out here?
Melanie Lauridsen (05:51):
I did. There's also, and Cynthia brings some really great points, but also a report, and I know it's a little bit dated, it's 2015 from the National Taxpayer Advocate, but had some fascinating fines in which it found that the Hispanic taxpayers were less likely to actually self prepare their tax returns. So they are much more likely to use a repair. So that goes back to what you were saying, that they absolutely need entity support, whether it be bookkeeping or filing reported requirements and things like the beneficial ownership of information that you mentioned. But I think it goes beyond that. I think another service is also financial planning. That is something that can be brought towards the Hispanic community because they clearly are entrepreneurs and they clearly are going to go into business, but that has the trickle down effects into the individuals and all that planning. So being able to look at it, not from just one perspective, but from a global perspective in their lives is also a service that can be offered to people. And also I think it's an area that can be studied a little bit more to be able to look at the trends because clearly there is a need for Hispanic type services to this community.
Cynthia Rijo Sanchez (07:11):
Melanie is used. You say that it jumps to my mind that they also need tax planning.
Melanie Lauridsen (07:17):
Absolutely,
Cynthia Rijo Sanchez (07:18):
Yes. This is something that probably the US citizens are more aware and they usually plan ahead for their taxes, but it's not a common thing for the Hispanic community. They just wait for April 15 and let's see what happens. Yeah.
Dan Hood (07:39):
Well this leads naturally to my next question and one of the reasons we're talking about, right? It's growing demand. This is a great area for accountants and for CPAs to look at. These are clients who very much need and can benefit from and would appreciate the sort of services that an accountant can bring. But apart from obviously knowing Spanish, which would be a crucial element to serving a Spanish speaking clientele, are there any other things that account accountant needs to know to successfully serve Hispanics? And Cynthia, I'm going to turn to you. You had talked a little bit about the cultural understanding and the need for that sort of thinking as you approach it, but what would you say an account, let's say a non-Hispanic accountant who was looking to serve the Hispanic community, other than knowing Spanish, are there other things they would need to do to successfully serve that community?
Cynthia Rijo Sanchez (08:29):
Yeah, we would need to give orientations so that they can have trust on these professionals. It is very important as a professional to understand the cultural values and the business practices of the Hispanic community, that being essential. But to build a strong relationship, trust-based relationships and showing a genuine commitment to helping clients succeed are just as important as the language skills, flexibility and a personalized approach to meet the unique needs of each client can go a long way in effectively serving this community. So definitely I would say to build those trust relationships.
Dan Hood (09:18):
Melanie, did you want to jump in on this?
Melanie Lauridsen (09:20):
Sure. I definitely want to add on, so in that same report that I mentioned from the National taxpayer advocate, they also found that 60% of Hispanics taxpayers reported using a tax return prepare other than a CPA, an attorney or an enrolled agent. And that's interesting because it makes the Hispanic community especially vulnerable to unscrupulous tax return preparers that we hear about it. They will promote high interest rate loans, they charge higher fees, and then really it just exposes the community to a higher risk of having their returns prepared incorrectly, whether it's incompetency or willful misconduct. Which goes back into what Cynthia was saying, it's about building that trust relationship and educating them because off the top, when they think of A CPA, they think it's more costly, but the reality is that just isn't the case. It's a trusted advisor that will be there and it could save you thousands of dollars in comparison to these unregulated repairs. So it's interesting information and so I think our work is cut out for us in educating the population of what the value is that A CPA can help them with everything that they're doing.
Cynthia Rijo Sanchez (10:41):
Daniel, if you can lend me, add something here in Puerto Rico, we have something very interesting. You know that in legal terms, there is a privilege between the attorney and the client. Well, here in Puerto Rico, the CPAs also have a privilege CPA client and that only the CPAs not the non. So that helps to build the trust that the people know, hey, we are not governments, we are not IARS, we are not going after you. We just want to help you comply with the laws and having all your business. Correct. So you avoid problems.
Dan Hood (11:25):
Right, right. Exactly. Well that's hugely important just in the Melanie. We follow a lot of tax preparers who are going after, well, they go after a lot of different communities, but it's often it's the ones that aren't as familiar with CPA and CPA profession or the rolled agents or any of the IRS approved prepares who are most vulnerable to that. And it takes a lot of effort and time to sort of build that trust. In part, I think we both will acknowledge that there is a perception that CPAs will be more expensive, but obviously worth it for the trustworthiness and for the knowledge. There's a lot more we can go into. There's a lot more we're going to go into. And one of the things we're going to talk about in a second is we've been sort of very blindly saying the Hispanic community, but you could make a strong argument that it's not just one community, it's a community of a bunch of different communities. We're going to dive into that a little bit, what that might mean for accountants who are looking to serve and help the Hispanic community in a second. But first off, we've got to take a quick break.
(12:28):
Alright, and we're back. We're speaking with Melanie Lords and Cynthia Rijo Sanchez and Hispanic Heritage Month that we're talking about the tremendous growth in demand for tax and accounting services among Hispanic community. But as I said, we've been talking about the Hispanic community and sort of using that as a broad term, but it's really not, I'm going to ask this question, how monolithic is the Hispanic community and to the end, but throw it at you, how monolithic is it? And I've sort of trailed the idea that maybe it's not as monolithic as I'm suggesting.
Cynthia Rijo Sanchez (12:58):
Correct. The Hispanic community is far from monolithic. It is incredibly diverse with individuals and businesses coming from different countries, regions and cultures as you just mentioned. So each group may have its own unique financial challenges and needs. So it's important for accountants to be aware of these differences and offer personalized services according.
Dan Hood (13:24):
Makes a lot of sense. And I suppose one aspect of this might be as you look around accents would be an issue. I don't know if this it is, but I know I was looking at a map that showed different accents among Spanish communities just across South America and Central America. How important is it that you'd be able to speak the Spanish of the people you're serving? I dunno if anybody even have a thought on that. I
Melanie Lauridsen (13:47):
Think it's very important to be able to understand the people that you're serving. And like Cynthia said, the Hispanic community is not monolithic. And I know some people actually want to think it is. And back in the day when I was younger, people just always assumed that I was from Mexico, which my sister-in-law's from Mexico love Mexico, but I am not. And when we first immigrated into this country as a child, my parents didn't know what a taco was. My parents didn't know what yuca was. My parents didn't know red beans and rice like any of these foods. And yet that was the perception that we had or people had of myself and my family. And it is really understanding the different cultures and the different people and it helps to go a long way to building that trust and understanding how they work and how they do business because it is different being able to have a long extended lunch in a conversation that's just part of the culture while in the United States it's more let's get down to business. So yeah, it really would help.
Cynthia Rijo Sanchez (14:49):
And that specifically, it is important that Hispanics don't feel bullied with all these topics. I used to work for Department of Defense and I used to live in the States. And one of my jobs, as Melanie was telling, there is this perception that all Hispanics are Mexicans and it comes down to lunchtime and they would say, Cynthia, something very unique from the Mexican culture. So yeah, we actually as Hispanics zone, we do not identify with that practices.
Dan Hood (15:34):
This is entirely because most non-Hispanic Americans, entire concept of Hispanic culture comes from cartoons because we're not very smart. But it's fascinating and it's interesting because I'm in New York right now and there are five or six different specific different Hispanic communities and you would never want to confuse them one for the other. And they each, as you say, have different culture leads, different accents, different approaches to everything they're doing. And it's got to be super valuable for to know who they're talking to and how they're talking to, just as you would want to know any client that you were dealing with.
Cynthia Rijo Sanchez (16:10):
Yes.
Dan Hood (16:11):
I want to talk a little bit about shift the focus more to the profession at its relationship with the Hispanic community. We talked about Hispanics makeup roughly a fifth of the general US population. They're, as you said, a majority minority in the country, but they only make up about 5% of CPAs. And I wanted to ask Melanie a little bit about this. Maybe you can lead us through this. What do you think causes that underrepresentation?
Melanie Lauridsen (16:39):
So there's a lot of things, and I would say with the Hispanic community, it is the fastest growing. And so simply put, we just haven't caught up. That's the first step. And I do know that A-I-C-P-A has been making strides with including diversity inclusion and not just for the Hispanic population, and we have moved the needle. So that 5% is with effort and it is moving the needle, but change is slow and change takes time to add to it, to accountants, wherever you go. There is a shortage of accountants of CPAs. And so we are struggling to get people to come into the industry and the profession to understand it. But I think if you look across the board of the minority populations, Hispanics are beginning to get it and they are actually 5% is actually higher than other minorities in there. And so like I said, it's moving the needle. It is slow change, but I hope to see the change come more forward. I hope to see the CPA demographic look more of what their clientele looks like and see that change.
Dan Hood (17:51):
Absolutely. Absolutely. Cynthia, I want to ask you, what could we do to speed this transition up? What could we do to attract more Hispanics to the accounting profession?
Cynthia Rijo Sanchez (18:04):
So definitely you cannot pick what you don't know. And the AICPA has been moving on this initiative to go to middle and high school and let them know what our accountants do we do here in Puerto Rico. Now, under my presidency, I started a committee called CPA Kids. And it is, as you know, kids can recognize easily a doctor, a firefighter, a police officer, but they don't identify that easily AICPA and what do we do? So that would be the initiatives to start teaching from the house since they are small financial concepts that they feel more comfortable and definitely they need to be aware that this is a viable and rewarding career path. So I would say we need to start educating from a younger age.
Dan Hood (19:16):
Right? And as you say, making them familiar with that, the profession has a possibility. Melanie, you shared those statistics about how many Hispanics get their taxes prepared by a non-Hispanic or by, sorry, by a non CPA. So if you're not seeing a CPA as your tax preparer, right? That's where most people see A CPA. You're never going to be considering the profession. Sorry, did you want to jump in on this, Melanie? I
Melanie Lauridsen (19:38):
Did. So I think mentorship and community really is key areas to focus, which will help with career development. And we really need people that the Hispanic community can relate to, whether it's the background, the language, the cultural gaps that are there, all of that together creates opportunities and can create a sense of belonging. And this also helps with what Cynthia was saying with the students because a student doesn't understand and they can't navigate all the different professions out there and much less understand the various career paths of A CPA because there are many career paths for the CPA and also to help 'em land that first job. Because ultimately students want to land a job that pays them. And I think once they get into that job, we need to offer them skills to develop themselves and to network, which that helps foster further opportunities and of course, increased representation. So it takes a village, it says to raise a child, but it takes a village to be able to support the community.
Dan Hood (20:46):
Melanie,
Melanie Lauridsen (20:46):
Probably
Cynthia Rijo Sanchez (20:47):
Like shadowing programs. I would say many of these Hispanic community lack of role models within the profession. And many young Hispanics may not be aware of the accounting and as you say, all the career paths. So definitely
Dan Hood (21:08):
Right, well puts a certain amount of the burden on Hispanics who are already CPAs are working in the profession to get out there and be visible and be seen and talk to, as you say, talk, go to schools and talk to students and that sort of stuff. But it is moving forward, which is great because this, as we described, the growth in demand, it's a pretty exciting opportunity for the profession, one that they'd be well advised to take advantage of. This has been great. I appreciate both of you joining us to talk about the opportunity for accountants and serving the Hispanic and beauty and to help us celebrate Hispanic Heritage Month. Melanie Lauridsen from the AICPA. Thank you so much for joining us.
Melanie Lauridsen (21:44):
Thank you for having me.
Dan Hood (21:45):
And Cynthia Rijo Sanchez from Puerto Rico CPA Society. Thank you for joining us.
Cynthia Rijo Sanchez (21:49):
Thank you for the opportunity
Dan Hood (21:52):
And thank you all for listening. This episode of On the Air was produced by Accounting Today with audio production by Wen-Wyst Jeanmary. Rate to review us on your favorite podcast platform, see the rest of our content on