CPA Practices

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 52,700 CPA practices in the US provide accounting, tax preparation, and auditing services to businesses, non-profit organizations, and individuals. Tax preparation and tax planning work for organizations and individuals comprise about one-third of overall CPA client fees, but are typically over half of client fees for smaller firms. Tax work is about evenly split between individuals and organizations. An additional 36,500 solo accountants operate with no employees and generate $2 billion in annual revenue. CPAs are licensed by their State Board of Accountancy.

Changing Tax Laws and Accounting Standards

Keeping up with changes in complex tax laws and accounting rules is a major challenge for CPA practices, particularly smaller ones.

Liability Exposure

Difficult economic times can cause business owners to blame their advisors for financial difficulties.

Industry size & Structure

The average CPA practice has $2 million in annual revenue and 9 employees.

    • Any accountant filing a report with the SEC is required to be a Certified Public Accountant (CPA).
    • There are about 52,700 CPA firms in the US operating about 56,100 locations and generating about $113 billion in annual revenue.
    • About 85% of firms have less than 10 employees.
    • An additional 36,500 establishments are owner-operated with no employees. These solo accountants generate $2 billion in annual revenue.
    • CPAs are licensed by their State Board of Accountancy. All States require passage of the Uniform CPA Examination prepared by the American Institute of Certified Public Accountants (AICPA) for licensing. Less than half of candidates pass all four parts of the exam on their first try.
    • Nearly all States require CPAs to complete a specific number of continuing education hours before their license can be renewed.
                            Industry Forecast
                            CPA Practices Industry Growth
                            Source: Vertical IQ and Inforum

                            Recent Developments

                            Nov 7, 2022 - IRS Makes Changes to Hotline for Tax Pros
                            • In an October email to tax professionals, the Internal Revenue Service said it was implementing a pilot program for its Practitioner Priority Service (PPS) that allows tax preparers to reach IRS assistance by telephone. As wait times for the PPS have increased over the past few years, some tax professionals have used third-party robocalling services to help them jump to the front of the phone queue. The new PPS system will require callers to repeat certain phrases that are vetted by speech recognition software before they can be forwarded to IRS service personnel.
                            • If Republicans take control of the House and/or the Senate in the 2022 midterms, they could undercut the $80 billion in IRS funding increases that were included in the Inflation Reduction Act (IRA), according to The Wall Street Journal. The increased funding aims to improve taxpayer service, increase audit enforcement, and implement technology improvements. GOP leaders have said if they retake either house of Congress, they plan to introduce legislation to repeal the IRS funding increase, which President Biden would likely veto. However, the IRS funding in the IRA could face an uphill battle during annual budget negotiations if the GOP controls the House or the Senate, or both.
                            • In September, the IRS issued a memorandum saying that it discovered that some recipients of Paycheck Production Program (PPP) loans whose loans were forgiven didn’t meet one or more of the eligibility requirements, and the loans must be repaid. The IRS said taxpayers who inappropriately received loan forgiveness should comply by filing amended tax returns that include forgiven loan proceeds amounts in their stated income. According to NBC News, up to $80 billion, or about 10%, of the $800 billion dispersed through the PPP may have been fraudulent.
                            • Also in September, the Treasury Inspector General for Tax Administration (TIGTA) issued a report saying that delays in management actions at the IRS are contributing to continued backlogs of millions of unprocessed tax returns and other types of tax account work. At the end of 2021, the IRS had a backlog of 8.2 million tax returns and about 2.6 million tax account transactions in its backlog. As of September 9, 2022, the IRS had about 7.2 million unprocessed returns filed this year – both for the most recent tax year and late-filed returns from past years. The TIGTA report cited employment shortfalls and outdated equipment at the IRS as primary causes for the delays, including antiquated mail-sorting equipment. The recently passed Inflation Reduction Act (IRA) includes $80 billion in IRS funding, with more than $45 billion for enforcement, about $25 billion for operations support, and $4.7 for business systems, including computer system upgrades. Another $3.2 billion will fund enhancements to taxpayer services.
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