Our Industry is changing. What changes are you making?

[SFA]

Our industry is changing. Many "former" clients now use TurboTax to self-prepare. They take pride in the fact that they can do their own and "save" money.

What's left are more complex returns that take more research time, and better trained staff to assist with the completion. We are raising our rates, but also, looking to aggressively increase other services related to our business and senior clients that allow us to keep our employees year-round, full-time.

I believe that the income tax preparation business has flat-lined and will continue to decrease as a cornerstone service of our office.

I am interested in how some of you are handling these changes.

[Yardley CPA]

I've actually seen an increase in the number of younger clients who have come to me. People who I would classify as professionals and well educated who could easily use Turbo Tax to prepare their returns. Some only have a W2 and a 1099-INT. I'm very confident in the service I offer and while some may think it's foolish, I do let these individuals know that they could save money by filing themselves through a Turbo Tax or State Free File option. No one has ever asked for their paperwork back and I end completing their returns. I think much of that has to do with hearing the media discuss all of the tax changes that have occurred over the past year. I'm not complaining.

[Catherine]

They are also doing themselves and you a favor by getting to know and trust you - and you getting to know them -- now, while their situations are simple. I had a kid from the local deli come to me in high school; couldn't figure out a 1040-EZ on Turbo Tax to get his $150 refund from his after-school job. Kept asking me questions and eventually I told him to just bring me his stuff. He has been a client ever since -- and he's now in his late 20's. Serious girlfriend, talking about getting married and buying a house -- he will be a client forever.

[Lion EA]

My clients are the more complex individual returns and small businesses as well as a few that could do it themselves but like the "insurance" of using a professional who keeps of with the constantly changing tax laws. Or, they want someone to tell their financial story to, often to make sure we're doing the best we can in planning for their taxes or just because they don't want to talk personal finances with friends or coworkers. And, the intelligent ones who could do it themselves, but they make more money spending their time on their business than they would save with DIY tax prep. Or the wife said no more spreading out all over the dining room for two months while you work on taxes every weekend; give it all to our preparer and wait for the call to go in to sign. My business and my clients have changed very little in the 17+ years I've been preparing taxes. In fact, in almost every case, their financial lives have gotten more complex, so they need me even more now than 17 years ago. I have lost one or two over that time to a broker who also prepares taxes, but not enough for me to consider selling investments.

[mcb39]

I agree that business is increasing rather than the opposite. Children are growing up and going off to college. The parents want to keep them as dependents so bring the students' returns in as well. (I do not charge for student children of my clients, for that reason) Nor do I charge for active military; or wounded in action military. However, older clients have more investments and want more help with financial planning. New clients are sending more new clients. Preparers are retiring and referring clients. Wherever they are coming from, this is the busiest year that I have ever had and the returns just keep becoming more complex. More extensions this year than in all the prior years combined. I am seeing more rentals, more small businesses, more college credits, etc. People who have lost jobs are trying to make a living in whatever way they can and have no idea how to handle the tax repercussions. They come for advice, they come for help and they bring their (sometimes very complex) tax returns as well. I am grateful; but I am also here to help. The foundation of my business is not "all about money"!

[Jack from Ohio]

I WILL obtain my E.A. certification by the end of the year. This will be my leverage into the "DIY" tax prep group when they get those notices.

2014 will be a huge disaster for the "DIY" tax prep group due to the intricacies of the "ACA." I use quotes because by no standard based in reality is it "Affordable."

With my E.A. designation, come 2015 I will be in demand big time in my town.

[HV Ken]

We were just recognized by our regional chamber of commerce with a Headliner Award for continued growth in current economy. We have seen double digit growth each of the last four years (2010-2013) and I bet when I get caught up with the books for tax season 2014, we will have hit that mark again. The economy is hitting people hard and they are looking for someone they can trust for help. My wife obtaining her EA, me Intuit QuickBooks ProAdvisor has drawn more people in who need and want help. Our approach of establishing relationships with our clients is resonating and attracting new clients.

Gina is on the left, I am two over, or 2nd one from right.

[SCL]

there is a not so subtle campaign going on by congress/irs.

I saw in the press today that 32 mill federal returns were filed by individuals from their home computers.

their requirement...buy an individual tax prep program or use "FREE flipping FILE", follow the menu, and press send...and good luck with your state return that you have to pay for.

on the other hand, congress/irs wants to impose regulations/standards (not that there is anything wrong with that) on the tax prep industry...from mom/pop stores to eas, cpas, and attorneys who know way more than individual filers who are doing their own returns to save $75-$150+.

WHY? individuals who prepare their own returns and make it through, pay more (way more?) taxes because they don't know what they are doing on their fed and state returns.

many individual returns that incorrectly over claim tax law benefits are flagged and corrected.

the irs and state tax bodies do not flag and correct tax law benefits that are not taken.

[JohnH]

That's a great point. The system is getting better and better at catching underreported income and overstated deductions. But it makes no effort to ferret out over-reported income and/or missed deductions.

[kcjenkins]

I totally agree with SCL on that one. Over all my many years in the business, over 90% of the self-prepared returns I reviewed showed the t/p had over-paid due to missing deductions and/or choosing the wrong option for treating a transaction, due to not understanding all their choices.

[mcb39]

Just to add a little humor to the thread, I had a client call me last week to say that he had gotten a letter from the IRS suggesting that he might qualify for EIC. He trusted me to know what they were talking about. Well, by golly, I overlooked that one. He is on disability for a bad heart and his wife works two part time jobs. No qualifying child. I ran the numbers and told him that he was qualified for $8 in EIC. He laughted. I told him that it wasn't worth amending for, but if they had given him a form to fill out, he should send it in. If they want to send him a check for $8, let them. He said he would think about it. (This is due diligence in reverse).

[RitaB]

Remember way back yonder when you could qualify for EIC with negative AGI? I swear it's true - I had a couple who received EIC with negative AGI. One had 4,872 SE income, other had (8,439). I didn't give them EIC, never occurred to me. IRS sent them the letter saying you might qualify. Year was 2001. I'm looking at the file right now. I have in my notes where I called IRS in disbelief, a Ms. Casper didn't know either, spent 30 minutes on it, finally told me to have clients fill out the form and hope for the best. They got $346.

EIC is a nightmare, in my opinion, and I wish it had never been instituted. I fear we are stuck with it forever.

[kcjenkins]

According to the Tax Foundation, today, April 21, 2014, is Tax Freedom Day. It's the day we have worked as a nation collectively to pay our total tax bill for the year. This includes federal and state income taxes for a combined total of $4.5 trillion. Tax Freedom Day is three days later than last year at 111 days into the year. We will spend more on taxes in 2014 than we will on food, clothing and housing combined. EITC was SUPPOSED to help mitigate the ta burden on 'the poor'.

[SFA]

I've taken a few days off, and just scanned some "General Chat" to catch up on what I've missed. Interesting that those who commented on this thread are so upbeat about the future of our industry and the upward trajectory of growth in your practices.

We also had a successful tax season, but when I look closer, like everyone else, it is a mix of new clients with some attrition.

ATX delivered this year. No question. But in the end, I was exhausted and wonder how many years I can wreck my mind and body doing this kind of work. I am determined to diversify our services and to invite more employees to join our practice. To do that, I need to cultivate work to attract young talent and to pay the wages that keep them in my employ full time, year round.

Not exactly sure exactly how I am going to accomplish this feat, but that is my goal going forward.

[SaraEA]

Turbo Tax has been a boon to the paid tax prep business. All they need to do is get an IRS letter, or to come in one year because of some unusual circumstance like an inheritance or divorce only to learn they've been cheating themselves out of some juicy deductions. (Had one this year who have been claiming their state refund as income year after year, even though they were in AMT land and never got a benefit from it.) They all vow "never again" and become clients for life.

We have lost some clients to DIY software, but most of them have the type of return they SHOULD be able to do themselves. We won't miss the W-2, maybe some interest, Sch A returns. In fact, we're referring most clients with EITC to H&R Block, where the preparers are well-trained in the required due diligence, record-keeping etc. To us it's not worth the risk (exceptions for long-term clients who just had an off-year, we know their kids live with them and the requirements are all met). And some of the simpler returns we're referring to VITA. Some clients won't move, but maybe some others will digest the suggestion and give it a try.

I agree that the replacements are indeed more complex returns. The majority of our returns this year have taken 2+ hours (some many ++++ hours) to complete. For those looking to increase business, it pays to work with attorneys. We've had attorneys as clients and found an error in the way their own partnership returns were prepared, or were able to help them help one of their divorcing clients with the tax implications of various ways of dividing assets or retirement accounts, and before you know it they're sending tax law questions and estates and trusts to you. We've had the same response with our clients' financial advisors. Contact the advisor for this or that piece of missing info, they get the idea that you're thorough and really care about that client, and they begin to refer others.

Another way to increase business if that's what you want to do is to specialize. I see this as the direction of the paid tax practice. No one could know everything, and as the code becomes more complex it's harder to know the basics of some tax situations. So learn everything there is to know (at least as humanly possible) about, say, foreign citizens with US income, US citizens with foreign income, estates, law or medical practices, bars and restaurants, construction businesses, or whatever interests you. Those clients will refer others, and you will establish your niche.

We have more clients than we can handle, even after firing some. We intend to fire more. This is when we have to think about the types of return we want to do. The easy ones are quick and bring in revenue, but is it worth the stress of keeping up the fast pace? I'd rather sit at my desk for a few hours completing an intricate return than seeing 8 clients in 4 hours. Others would like it best the other way around. Something to think about as you take steps to shape the direction of your practice.