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Opinions: Is the Tax Prep Business waning?

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    Opinions: Is the Tax Prep Business waning?

    Just a general discussion.

    In our office, we have been talking about whether or not the tax prep business is eventually going to go away. Is it shrinking?
    Some in our office think that the very simple returns will all be self prepared in the near future. The more complex returns will be done by tax preparers. Some think that only businesses that need complex returns done will need tax preparers.

    Some think that it will eventually become mostly audit and representation clients.

    My boss said he would like to know what the general thought in the industry is.

    Anyone care to give their thoughts on where the business may be headed?
    You have the right to remain silent. Anything you say will be misquoted, then used against you.

    #2
    the general thought in the industry is that your boss is freaky.

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      #3
      I think he is probably correct. Only simple returns (i.e, short forms) I do are family members, usually kids. I had to cut off all new clients just to manage.

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        #4
        Business waning

        I think for my own business I have hit a plateau. Lost 1/3 of returns do to EITC due diligence and move of office. Holding at 1500 returns.

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          #5
          I'm trying to shrink

          Would love to have 100 tax and financial planning only clients. If I generate $2500 per year per client on average I would be doing about the same revenue with half the clients.

          Comment


            #6
            Yes and No

            The eminent regulation of the industry, if regulation has the same effect as other industries, will lead to the closure of the small one-practitioner shops and the survival of the large national firms. Fines and penalties can run the small shop out of business. If IRS chooses to ding big firms like Block, they will be met with "Our lawyer will be in touch." IRS will know they are dealing with administrative headaches that are not worth it. This not an assignment for or against morality, it's just the way the world is.

            Oleander's boss throws out the possibility of an emerging populace growing up in a tech-savvy world, where software "apps" rule the world, and take the human element out of the action. The vision may be correct, but this emerging youth is also be "dumbed down" by the same technology. Buttons and downloads and "whiz-bang" stuff will abound, but what about CONTENT? This upcoming generation is more poorly informed on content than one could imagine. Schools are now being encouraged to stop teaching multiplication and division because "everyone will be doing this on a calculator." Some kids can't even read cursive handwriting anymore. So the next generation may be 100% devoted to TurboTax but won't ever know when they move from one tax bracket to another. Tax planning will be a thing of the past. There will a demand for what we do if anyone is to have the advantages of CONTENT.

            And content is not improving in today's students -- in fact it is moving in the other direction. Social promotion, lack of discipline, lack of parental oversight --
            a generation of all of these things have hurt, rather than helped, the emerging student population. Walking around with cellphones stuck in your ear and playing games with your fingers may create an image of futureworld brainiacs but in fact just the opposite is happening.

            Much like that big maple tree in the barnlot when I was growing up. Every year it kept getting bigger and taller - giving me the illusion that the tree was getting stronger and stronger each year. Over the decades even though the tree was getting thicker and broader, inside the dote and rot was weakening the tree, and we lost the big maple a few years ago in a storm.

            Good question from Oleander's boss. The pendulum may move either way.

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              #7
              Simple returns are increasing

              My business in increasing. I am seeing a steady stream of potential clients who are functionally tax illiterate. They can not prepare a simple tax return. They are unable to understand any IRS publication. If they use software such as TurboTax, they later get enquires from the IRS that they cannot read/understand. I feel the key to profitably servicing such clients is to drive my costs down while still maintaining sufficient checking, recording, oversight, etc.
              Christopher Mewhort, EA
              mewhorttax.com

              Comment


                #8
                I agree

                Originally posted by Uncle View Post
                My business in increasing. I am seeing a steady stream of potential clients who are functionally tax illiterate. They can not prepare a simple tax return. They are unable to understand any IRS publication. If they use software such as TurboTax, they later get enquires from the IRS that they cannot read/understand. I feel the key to profitably servicing such clients is to drive my costs down while still maintaining sufficient checking, recording, oversight, etc.
                But I don't want those clients. I want high margin, high touch clients. I can do a 1040-EZ in 5 minutes. I make $50. I can do a 1040 with Sch A, B and C or D in 30-45 minutes and make $400-800. I would rather have 100 of the second type of client then 1000 of the first.

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                  #9
                  You prices are much different from mine!

                  Originally posted by JoshinNC View Post
                  But I don't want those clients. I want high margin, high touch clients. I can do a 1040-EZ in 5 minutes. I make $50. I can do a 1040 with Sch A, B and C or D in 30-45 minutes and make $400-800. I would rather have 100 of the second type of client then 1000 of the first.
                  My fee on that simple one would be $125-$150. And 5-10 minutes, agreed. My fee on the 1040 with A,B & C or D would be $250-$400. And 45 minutes, agreed. I make more on the simple ones, period. Send all your extras to me.
                  Christopher Mewhort, EA
                  mewhorttax.com

                  Comment


                    #10
                    Lol

                    Originally posted by Uncle View Post
                    My fee on that simple one would be $125-$150. And 5-10 minutes, agreed. My fee on the 1040 with A,B & C or D would be $250-$400. And 45 minutes, agreed. I make more on the simple ones, period. Send all your extras to me.
                    I think I'd have to charge $125-150 on the simple ones to live in the islands like you.

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                      #11
                      Originally posted by Uncle View Post
                      My fee on that simple one would be $125-$150. And 5-10 minutes, agreed. My fee on the 1040 with A,B & C or D would be $250-$400. And 45 minutes, agreed. I make more on the simple ones, period. Send all your extras to me.
                      I don't do a lot of the ultra simple ones but when I do, I find them as profitable or more than the larger returns. 20 minutes to earn $150? I'll do that all day long.

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                        #12
                        For anyone paying attention to the new 2014 draft forms concerning Obama Care, I think you will see a huge increase in business next spring as hoards of do-it-yourselfers come to your office wanting to know why they owe all of this money this year when they never did in the past - thanks to the new Premium Tax Credit and how nobody's tax return will match the credit they received when signing up for the exchange.

                        This is the year the bulk of the Obama Care tax provisions kick in, and every one of those new forms is complicated, even for the most simple of tax returns. The Premium Tax Credit is the 21st century version of the Earned Income Credit.

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                          #13
                          Just as an example, for divorced or separated parents, if the custodial mom signs up on the exchange along with her kids, and dad gets to claim one or more of the kids, the Premium Tax Credit will involve a complex allocation computation that nobody will be able to understand. The credit calculated by the exchange will NOT match the tax return, so my predication is this is going to be a hot topic this fall when you go to your tax seminars for CPE.

                          Pay attention to this, because its going to be huge.
                          Last edited by Bees Knees; 08-15-2014, 10:39 AM.

                          Comment


                            #14
                            Thanks to all for your thoughts and input.
                            You have the right to remain silent. Anything you say will be misquoted, then used against you.

                            Comment


                              #15
                              I was just looking at that form

                              Originally posted by Bees Knees View Post
                              Just as an example, for divorced or separated parents, if the custodial mom signs up on the exchange along with her kids, and dad gets to claim one or more of the kids, the Premium Tax Credit will involve a complex allocation computation that nobody will be able to understand. The credit calculated by the exchange will NOT match the tax return, so my predication is this is going to be a hot topic this fall when you go to your tax seminars for CPE.

                              Pay attention to this, because its going to be huge.
                              and discussing it with some colleagues. It looks like "$100" form if I ever saw one.

                              Comment

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