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Christian

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The bank is likely getting some monetary return, since they do nothing for free...

Being in the payroll business, where anyone "can" prepare their own, and for which there are 800lb gorilla's (although we have been around longer), there is no end to the need for small providers, which is probably true for tax prep too.  The skill is finding the proper niche and staying in it, no matter what forces suggest you widen or change.

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I agree with the original posting and a few years ago, I said that if Turbo Tax would come with a pricing method that will allow users to buy only what they need, they will drive a lot of preparers out of business. Now people will only itemized if they have documents from the mortgage companies and letter from the church, they will not need us anymore. Someone said that they sell customer services not tax returns... well if you have a market of 100 million tax payers, then no problem, but if that market shrinks to about 20millions and a lot of preparers are "selling services", you do the math.  Time is changing and changing quickly. Between HR Block, Turbo tax, and other factors, our market is dissipating and whoever thinks otherwise... you will be thinking similar to what companies thought of Amazon. When Amazon started, most business said, "we don't sell goods, we sell customer services and human interaction"... today they are out of business.

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I was i walmart several days ago.. walking down an isle and saw these banners and some sort of fabric divider.. some lady behind the curtain set up to do income taxes..did a double take and even walked back around a couple times.. cannot believe anyone would get their taxes done behind a curtain next to housewares, or whatever department it was set up in

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20 minutes ago, ETax847 said:

People value the relationship.  If a client calls outside of tax season, I am there to answer.  Software can not compete with that.

ETax...I agree wholeheartedly with your post.  I've built my practice with this philosophy.  With that said, there will always be a segment of my client-base who react to price.  I'm not naïve to that.  There comes a point where clients, when offered a much more economical or free option, will choose to make a change regardless of how good a service we provide.  I'm experiencing that currently.  For the longest time, my prices were no where near what they should have been.  After last season, I made all my clients aware that my prices would increase 25% to 50%.  I received notification from some clients who have been with me for 20 years, they will be going with someone "closer to home."  I'm okay with that...I expected it.  Those individuals who truly value the relationship and all that we offer will stay, for the most part.  We do need to continue to be aware of the free file and other low cost options.  Some base their decisions totally on that, whether its in their best interest or not. 

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But I do think that Pacun makes a good point.  My older clients tend to value the relationship.  Younger clients tend to value convenience.  Younger clients are getting used to everything being self-service - order on-line, or ring up and bag your own groceries, pump your own gas, etc.  As the apps and programs available get more user friendly and more cost effective, I think we will probably see our younger customers go that route.  And our older customers eventually don't have to file for whatever reason. Those who are in business for themselves and need bookkeeping in addition to tax preparation will probably stay but our business model is going to change.  But I also don't usually see a lot of young people at tax conferences I attend, so maybe we are a dying breed too. Or the younger crown gets all their education on line and doesn't see a benefit to the networking at conferences that I enjoy so much. 

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Agree that young people may choose the DIY route, but I'm not that worried about the profession going extinct.  For one, people are strapped for time so they are used to paying for a lot of services they could do themselves, like car washes and mowing the lawn.  A lot of people fear the IRS and what will happen if they make a mistake, so they would never risk doing it themselves.  More people are entering the gig economy or becoming consultants and will get lost in the rules.  Way back when I worked for HRB, they said that big tax changes usually drove crowds in the door and they were right.  Maybe after this year when people realize they will no longer itemize, some will shift to DIY.  On the other hand, small business owners will come in flocks because they will never understand QBI and will trust that we do.  (Please don't let on that we are just as confused as they are!)  These people will stay too, and that is exactly the type of client we want.  I do see estate work diminishing because of the higher exemptions, but many states still have Probate filings.  Trusts will be around as long as the "free dinner" folk spread fear.  Tax advice should be in hot demand too, particularly when new businesses choose an entity type.  And when the new law sunsets, we'll start all over again.

In our practice we are not concerned about losing clients because we do a lot of small businesses as well as professionals with complex situations.  If some of the Sch A folks eventually leave, this is who will replace them.  Maybe we all should plan on fewer clients but higher fees, which isn't so bad.

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I always encourage  young, newly married or single to do their own returns, free file, Turbo or whatever. Come see me this summer and I will show you how to fix your return. 

Seems to work, I fix them,for a fee, and now have 3 or more generations of same families in multiple states. One this afternoon is the Granddaughter of one client and she Came from Colorado, where husband is working at the Air Academy. Did not give a thought to looking at other alternatives. Including the free service from the Academy. "If it is Free not sure if it will be done right". 800 plus miles. here yesterday and going home tomorrow. That is typical in our practice. 

No worries about future, except how do we get out when it is time?

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According to the IRS, in 2017, 53,395,000 were efiled by individuals, since Turbo tax is the leader, I will say AT LEAST 35 million returns were efiled using turbo tax. So technically we lost 35 millions tax payers to Turbo tax and let's be generous and say that we corrected 1 million returns for the people that got letters, do the math and tell me if Turbo tax is not a threat.

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I don't doubt that Turbo tax is a threat for younger preparers than myself. I am praying that I can hang on and make a living until I hit 70 in 9 years. I have not accepted new clients except for referrals in almost 10 years. Normally when one passes away, I end up with kids or grandkids. I have a couple of clients with a lot of kids that are now married and into their own small businesses so I keep getting more business returns. After having my 55 year old cousin pass away today, I am really hoping that I can make it to 70 and get to enjoy some years in retirement or even working part time at something that I enjoy.

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10 hours ago, NECPA in NEBRASKA said:

I am really hoping that I can make it to 70 and get to enjoy some years in retirement or even working part time at something that I enjoy.

I am in the opposite boat as you.   My practice has not been big enough to support my family so I work full time and have the practice on the side.  Now that my kids are graduated from college and off on their own and working their careers, I am hoping I can build it big enough, soon enough, so that I can "retire" to just doing tax work.   That is what I love doing.

Tom
Modesto, CA

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On 1/29/2019 at 10:37 AM, Yardley CPA said:

I find it strange why an independent hometown bank is helping send its clients' money out of state for tax preparation even when there are local tax preparers who do business with said bank, and possibly owns stock in  said bank as well.   Now is the time to mention the situation to the President of the bank when you see him/her in the grocery store.

 

On 1/28/2019 at 11:55 AM, Christian said:

My local hometown independent bank is now pushing filing through Turbotax. Who would have thunk it ? Other financial outlets are doing much the same. Alas, the day of the small time tax practitioner is likely slowly drawing to a close. 😢

 

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3 hours ago, BulldogTom said:

I am in the opposite boat as you.   My practice has not been big enough to support my family so I work full time and have the practice on the side.  Now that my kids are graduated from college and off on their own and working their careers, I am hoping I can build it big enough, soon enough, so that I can "retire" to just doing tax work.   That is what I love doing.

Tom
Modesto, CA

Tom, my practice is not very big, compared to a lot of other small practices. It's just big enough that when my husband became very ill and could not work, I was able to move it home and save a ton of expenses. I have great clients that are pretty much like family, so that makes it more enjoyable for me. I've been doing this since I was 19 when I loved every minute of my job. I still like tax work, but I really stress out about the liability of having my own practice, paying for health insurance, and would love to have more freedom the first five to six months of the year. I hope that you can grow your practice enough so that you can quit your day job. 

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My clients won't DIY or go to HRB or look for someone cheaper -- usually. I do lose one every once in a while who wants their return faster when I already have a backlog. But, I keep getting referrals. Non-itemizers are not a threat. DIY is not a threat. Find a niche, such as small businesses or trusts or investors or multi-state returns or...and work as much and as long as you want.

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Pacun, I read those statistics differently.  Returns filed by paid preparers have stayed at around 60% for years.  Long ago when I was at HRB they said it was about 64 or 65%, so not that much has been lost as TT and similar DIY software have grown.  Those who turned to software were mainly former paper filers who did their own returns by hand, not people leaving their preparers to do it themselves.  Now there are phone apps for tax prep, which might attract more younger people.  That seems worse than sitting behind a shower curtain at Walmart.  Do the apps come with "fat finger" warnings?  Or warnings that Facebook and other media may be snooping on your phone?

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