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 17,000 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.
Seasonality
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 5-6 workers and generates about $452,000 annually.
- The tax preparation services industry consists of about 17,000 firms that employ about 95,100 workers and generate about $7.7 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
Recent Developments
Mar 29, 2023 - Tax Changes Unlikely Amid Political Gridlock
- Some tax advisors suggest their clients take a wait-and-see approach to their tax-planning strategies as partisanship in Washington makes any significant changes in tax policy unlikely, according to Accounting Today. President Biden proposed increasing taxes on the wealthy and investors in his recent budget, but the Republican-held House rejected these ideas. Some Republicans wish to reduce additional IRS funding enacted through the Inflation Reduction Act, but Biden would likely veto a bill that included such provisions. The most probable source of change could be the fate of the Tax Cut and Jobs Act (TCJA), which will sunset in 2026 if not renewed. If the TCJA lapses, the top income tax rate would rise, business income deductions and itemizing deductions would change, and estate taxes would increase.
- An ongoing shortage of accountants may be due to the added educational time and expense necessary to become a CPA, according to The Wall Street Journal. A lack of enough new accountants entering the profession has forced accounting firms to boost salaries, turn away auditing work, and send work overseas. Some industry watchers suggest students are avoiding accounting in part due to the extra year spent in college to obtain the required 150 hours of college credit to get their license. Minnesota is considering a change to state law that would make the path to licensure easier. Some accounting trade groups have pushed back, suggesting that CPAs licensed in Minnesota might be unable to practice in other states. South Carolina and New Jersey are also reviewing alternatives to the 150-hour requirement.
- More large companies are disclosing and obtaining assurance services related to their environmental, social, and governance (ESG) initiatives. Providing assurance for client ESG information represents an opportunity for accounting firms, according to a recent report co-authored by the Association of International Certified Public Accountants (AICPA), the International Federation of Accountants, and the Chartered Institute of Management Accountants (CIMA). In a recent AICPA and CIMA survey of top US accounting firms, 84% of firms that do not currently offer ESG assurance services said they are likely or very likely to do so in the next one to three years. However, firms also cited the lack of internal resources and experts as the chief barriers to providing ESG assurance services.
- In early March, the IRS issued a consumer alert warning about a new filing season scam involving Form W-2 fraud circulating on social media. The scheme encourages consumers to use tax software to manually fill out Form W-2s with inflated, fraudulent income information. The scammers urge people to fabricate large income and withholding amounts from made-up employers, then file a fake tax return electronically to obtain large refunds. The IRS has warned taxpayers against being tempted by such schemes, which put them at risk of significant financial and criminal penalties.
Get A Demo
Vertical IQ’s Industry Intelligence Platform
See for yourself why over 60,000 users trust Vertical IQ for their industry research and call preparation needs. Our easy-to-digest industry insights save call preparation time and help differentiate you from the competition.
Build valuable, lasting relationships by having smarter conversations -
check out Vertical IQ today.