Future of Tax Prep Business

[Guest Taxed]

I believe in next 5 yrs. the low hanging tax prep work (1040EZ, A) and may be even 1040 with standard deduction will all be done by the younger generation on their smartphone using IRS provided apps. I think young people (and some not so young) are getting comfortable with the quality and value (price) of online self prepared tax returns at Turbo Tax and TaxAct etc.

So us professional tax preparers have to show a value proposition to our clients, who have complicated returns and may not wish to spend a weekend doing taxes. What are your thoughts?

[jainen]

>>low hanging tax prep work<<

Sadly, you are probably right. It will be just like when cheap home microwaves destroyed the fast food business, so the only restaurants left are the fancy clubs.

[Jack from Ohio]

When 2013 & 2014 tax return season gets here and we have to do the documentation and calculation of the Obamacare tax, how can the IRS still have a 1040EZ?

The provisions of Obamacare will weed out the "wana-be" tax preparers, not the current cornucopia of new regulations on preparers. Those of us who choose to stay up to date and informed will be in great demand.

[Elrod]

Like old nags, we may all be put out to pasture with a national sales tax

[Jack from Ohio]

Like old nags, we may all be put out to pasture with a national sales tax

Not in our lifetime... Congress will NEVER give up the total power over the population of taxation.

[Elrod]

Jack...Sales tax is taxation...I'll hold my breath.

[ILLMAS]

I believe in next 5 yrs. the low hanging tax prep work (1040EZ, A) and may be even 1040 with standard deduction will all be done by the younger generation on their smartphone using IRS provided apps. I think young people (and some not so young) are getting comfortable with the quality and value (price) of online self prepared tax returns at Turbo Tax and TaxAct etc.

So us professional tax preparers have to show a value proposition to our clients, who have complicated returns and may not wish to spend a weekend doing taxes. What are your thoughts?

I agree, with more and more hipster and metrosexuals (lol it's a real word), we could be out of business

[taxxcpa]

Most people with simple returns should not have to pay someone to do their tax returns.

Younger people are increasingly computer-literate and could easily do returns that have nothing more complicated than a W-2 and a schedule A and schedule B.

[Guest Taxed]

My college literate son does his own taxes. I stopped doing his once he moved out of the house. He has iPad and all the latest gizmos. I am still hanging on to my 5 yr old lap top after changing battery and charger.

[Bart]

<<My college literate son does his own taxes>>

Does he do his own tax planning? Can he fill out his own W-4? Does he know tax rules enough to know when he has been effected by changes in his life or changes in the tax laws? There are other reasons to have a paid professional than just being able to fill out the forms.

[Guest Taxed]

As a matter of fact my son watched his old man do taxes since he started to walk! Don't underestimate the younger generation, they learned a lot more about taxes and business than we learned. Have you looked at a college or even high school business, math or science book lately? That is progress. A college educated kid should be able to do his own 1040 EZ or A without much hand holding!

[SCL]

i have been doing tax returns for 25 years (i quit counting at 25).

i am convinced, over a few or several years, anyone who wants to try to do their own tax return to save a small/larger tax prep fee is making a mistake.

eventually it will be a small ($50 minimum) to larger ($100 to ????) mistake...and many times over, even in one year.

i don't care how "simple" you preparers (who should know better) or they think their return is.

add so called "simple" state returns that also have many tax benefit loophole/laws. who does the state return?

why do you think the feds promote free, do it yourself online tax returns...while hammering small, medium, and large independent tax preparers (except the big box firms who who lobby congress with bribe money for exceptions) with increasing requirements, threats, and sanctions?

turbotax/do it yourself returns overstate tax liability.

[David1980]

I would love to see the tax code simplified to the point paying someone to do your taxes, or even filing a tax return becomes the exception rather than the rule. Wouldn't be good for me, I'd have to find something else to do I imagine, but I would like to see it happen all the same. Of course, that is never going to happen so I'll keep dreaming.

I don't like doing the standard deduction W-2 tax return. Feels like a waste of my time and my skills to be working on something that could be done by a simple computer program.

[taxxcpa]

I certainly can't see any reason why any literate person should have to pay a fee for a 1040EZ. Why should anyone go to all of the effort to become a CPA or EA and spend their time doing 1040EZ returns. It is like a person becoming a lawyer and doing nothing but notarize documents when almost anyone can become a notary without even a high school education being required.

A tax professional should be someone who normally handles situations beyond just a basic, simple return. Of course, there are some people who might be reluctant to prepare even a 1040EZ and want help, but they should be few and far between. The only such returns I ever do are those of the children of clients.

On the other hand, I've known some accountants who couldn't prepare their own return. Once I had a tax client who was an FDIC auditor.

[Guest Taxed]

Taxxcpa, you are correct. I see many tax preparers disagree with me and you and i think it may have to do with how long they have been in the business and if they are from the old school! No disrespect to the opposing viewpoint, but I can clearly see the handwriting on the wall. Over the past few years I have lost a few young college educated clients who I did 1040EZ or 1040A, just the usual young people deductions. I still do their parent or grandparents returns and when I ask they say he is doing it online etc.

I guess we have to figure out hw to show our value proposition to clients with complex returns and keep on convincing them that the fees they pay us is well below the amout of time they would spend researching complex tax issue. For example last year I must have spend over 2 hours researching the employer health care premium credit and veteran hire credit for 2 of my business clients. Assuming the client knows the dollar value of their time, I think they will make the right decision. It is the cheapskates who want you to do stuff for next to nothing that drag us down.

Also we have to match the "free" services offered by many aggressive payroll processing companies. We have a few in our area who promise to do the tax filing free if client engages them to do payroll! We all know there is no such thing as a free lunch. Every service is priced in.

We have one car dealer who runs an ad in Feb. that they will do the tax return free for people who are getting refunds if they will use that towards a downpayment on a car! What else is new the grocery store and convenience store will soon have kiosks like Walmart!

[Gail in Virginia]

Personally, I prefer doing payrolls and corporate/business returns. I feel like this is an area that challenges my knowledge and requires more of me than doing plain W-2/standard deduction tax returns. Just as a matter of principle, I don't think our tax code should be so complex that the average taxpayer needs to add insult to injury by having to pay someone to do their taxes. That being said, I do the plain tax returns if requested because some people find that their time is more valuable doing something else, or because anything that says IRS gives them the shakes, or they are illiterate (yes, occasionally) or they just don't want to do it. It is not my decision to make for them. But I hope that I bring some value to every client.

[Elrod]

Sorry to say, but I believe change is imminent. Weather a national sales tax or some other tax reform.

The complexity of our current tax code is cited by a lot of our young/current congressional leaders.

Not to mention the gargantuan cost of the IRS, which they themselves only give their agency a 60% accuracy rate of interpretation.

I've read on this board, and the other,... 3, 4, sometimes 5 answers to one tax question.

Just look what it's costing the tax prep. industry, software-education-facilities-efile security- etc....... Then some crook

in Hoboken steals your refund, because IRS doesn't know who you are.

Maybe it's just me....I'm old and have been doing this for 35 years....And yes...Reform has been touted all those years.

But........Like a juicy swollen pimple.........It's coming to a head..........

[GeneInAlabama]

No profession is secure. Times change. Remember the engineers in the space program (I can't remember the type of engineers at the moment) that lost their jobs in mass? I certainly thought their jobs were secure at the time. Remember the office machine repairman? They had to change their skills from mechanical to electronic and then even that faded away. Not too long ago I would have to have the copier repairman come in to repair my copier. Now, when something happens to my copier, I throw it away and buy a new one. How many copier repairmen are out there now? We have no way of knowing what will happen to our profession. We can only roll with the flow.

[kcjenkins]

http://www.accountingtoday.com/news/IRS-Level-Taxpayer-Service-Continues-Decline-65388-1.html?ET=webcpa:e6593:61496a:&st=email

IRS’s Level of Taxpayer Service Continues to Decline

The Internal Revenue Service faced challenges last tax season providing telephone service to taxpayers and responding to their correspondence, continuing the negative trends in recent years despite some efficiency gains and efforts to improve service, according to a new report by the Government Accountability Office.

However, the IRS's level of telephone service (the percentage of callers seeking live assistance who receive it) declined to 68 percent. In addition, of the 21 million pieces of paper correspondence received by the IRS, approximately 40 percent were considered overage (meaning that IRS did not respond within 45 days of receipt), an increase compared to last year.

[tetspa]

The trend I have seen (and am seeing now) is fewer EZ's, more 1040X's from CP2000 notices on "self-prepared" returns, and a relatively stable # of 1040A's (and by 1040A's I really mean the "EIC-Specials" - W-2's, Kids, and EIC with a sprinkling of unemployment, 1099R, and occasional child-care). As more "kids" do their own, more and more will "accidentally" claim their own exemption (and the ACC credit), jamming up their parents when they file.

Now, as far as operations are concerned, more emphasis will need to be placed on the "service" aspects of "tax preparation service" (i.e. hand-holding of clients and calling the IRS to respond to correspondence). More work on the "off-season" with 1040x's and CP2000 notices. More Identity-Theft affidavits. And yes, less of the "low-hanging fruit". But as the CP2000 notices increase, the satisfaction with Turbo-Tax and such-like will go down. More and more people will get "burned" by doing it themselves.