Tax Preparation Services

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 18,600 tax preparation services in the US provide federal and state tax return preparation, filing, and related services to individuals and corporations. Other services provided include bookkeeping and compilations services and tax planning and consulting services. To mitigate the highly seasonal nature of tax return work, some firms also offer accounting, payroll, or insurance services.

Competition From Alternative Sources

Tax preparation service providers face competition from a variety of sources, including do-it-yourself (DIY) programs, accounting firms, law firms, independent CPAs, and government programs.


Demand for tax preparation services is highly seasonal because the majority of clients file returns between January and April.

Industry size & Structure

The average tax preparation services provider works out of a single location employs about 5 workers and generates about $462,000 annually.

    • The tax preparation services industry consists of about 18,600 firms that employ about 91,000 workers and generate about $8.6 billion annually.
    • The industry is concentrated at the top and fragmented at the bottom; the top 8 companies account for almost 40% of industry revenue. The top 50 companies account for less than 45% of industry revenue.
    • Large companies include H&R Block, Jackson Hewitt Tax Service, and JTH Tax (Liberty Tax Services).
    • The industry includes national chains, franchises, and independent operators.
    • About 53% of taxpayers use third parties to prepare taxes and tax preparation software is used in nearly all returns, according to the IRS.
                              Industry Forecast
                              Tax Preparation Services Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Jan 31, 2024 - Pricing Growth Stays Ahead of Rising Labor Costs
                              • Producer prices charged by providers of other accounting services firms increased moderately in the fourth quarter of 2023 compared to early Q4 2022. Wage growth in the industry over the same period has been slightly slower than pricing growth. Stronger pricing power amid slowing wage growth may suggest accounting services firms’ margins are holding up as labor costs increase. In Q4 2023, tax preparation employment increased slightly compared to a year earlier.
                              • Some taxpayers expecting a refund this tax season may find they owe a balance instead, according to The Wall Street Journal. By the end of 2022, about 18.6 million taxpayers owed a collective $318 billion to the IRS in back taxes, up from the $308 billion owed in September 2019. One reason why overdue balances have risen is that the IRS paused some collections during the pandemic, slowing payments by taxpayers who were in arrears. Taxpayers’ taxes may also have gone up due to a bump in pay, either for them or their spouse, or they may have had gains through investments. New IRS funding from the Inflation Reduction Act is helping the agency pursue high-income and high-wealth individuals who either failed to file or underpaid. Tax professionals urge taxpayers to be proactive and settle their back taxes before being contacted by the IRS.
                              • In November, the Internal Revenue Service announced it would delay lowering the threshold for Form 1099-K from $20,000 to $600 for one year, according to Accounting Today. The lowering of the 1099-K threshold was part of the American Rescue Plan Act of 2021 and aimed to collect more taxes from businesses and people who get paid through third-party applications such as eBay, PayPal, and Airbnb. The new 1099-K threshold will be phased in in 2024, starting at $5,000. The rule change is expected to result in 44 million more 1099-K forms being mailed to taxpayers, according to the Government Accountability Office. A recent survey by tax software firm Avalara found that 83% of online marketplaces expect sellers to abandon their platform, and 55% of gig workers and marketplace sellers said they were reconsidering on-demand work and online selling. About 46% of marketplace sellers surveyed said they plan to contact their tax professional, bookkeeper, or accountants to help navigate the new 1099-K rules.
                              • According to the recently released 2023 Fee Report by the National Association of Tax Professionals (NATP), tax professionals have been raising their fees. The study showed that, on average, tax preparers charged new clients $218 in 2023, up 23% over the $174 they charged in 2021. Rates charged by tax professionals varied by community size. In areas with 10,000 people or less, the average rate in 2023 was $164 compared to $224 in communities with $50,000 or more people. The survey also found that 42% of tax professionals access mobile payments from apps such as Venmo and Zelle and that 65% of a typical tax preparer’s gross revenue is earned during tax season.
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