IRS regulations will limit competition and reduce pricing pressures, spurring growth
Los Angeles, CA (PRWEB) April 16, 2013
In the five years to 2013, the Tax Preparation Services industry's revenue slowly contracted at a 0.2% average annual rate to about $9.4 billion. Though the industry experienced relatively strong growth between 2007 and 2008, revenue declined in 2009 and 2010, according to IBISWorld industry analyst Doug Kelly. “As economic conditions crumbled, rising unemployment and falling disposable income led more consumers to prepare their own tax returns to save money.” Luckily for industry operators, stabilizing economic conditions are expected to boost industry in 2013 and the immediate term.
The Tax Preparation Services industry is increasingly threatened by the Software Publishing industry (IBISWorld report 51121). Tax preparation software, such as Intuit's TurboTax, has gained popularity because it makes electronic filing more accessible. In response, “many tax preparation firms now provide basic services for free,” Kelly points out. “In doing so, they attract customers who often subsequently sign up for fee-based services, such as state income-tax preparation filing or consultation.”
The industry is highly seasonal, with demand peaking from January to April. While many small operators do business only during these months, large firms typically operate at a loss during the off-season. Declining profit has largely been the result of price reductions, competition from free services and high unemployment. Still, about 60.0% of US taxpayers continue to pay professionals to prepare their taxes. The high demand and personalized nature of the services cause the industry to be highly fragmented; some 85.1% of industry firms are non-employers. The relative ease with which a person can become a paid tax preparer has caused the number of industry enterprises to increase an average of 1.0% annually on average to 109,758 in the five years to 2013.
In the five years to 2018, the industry will continue to face rising pressure from software publishers, but revenue will grow as the economy and labor markets improve. Revenue and profit will also benefit from IRS regulation enacted in 2011 that requires operators to have a preparer tax identification number. The requirement will limit the number of firms entering the industry and help reduce pricing pressures. For more information, visit IBISWorld’s Tax Preparation Services in the US industry report page.
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IBISWorld industry Report Key Topics
Firms in this industry provide tax return preparation services to individuals without also providing accounting, bookkeeping, billing or payroll process services. Although the offices of CPAs are excluded from this industry, basic knowledge of tax law and filing requirements is required.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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