Tax Preparation Services in the US Industry Market Research Report from IBISWorld has Been Updated

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While employment and income levels are forecast to pick up and stimulate industry demand over the coming years, especially since filing taxes are required by law, tax preparers will still face strong competition from free and DIY versions. For these reasons, industry research firm IBISWorld has updated a report on the Tax Preparation Services industry in its growing industry report collection.

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IRS regulations will limit competition and reduce pricing pressures, spurring growth

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.

Industry Performance
Executive Summary
Key External Drivers
Current Performance
Industry Outlook
Industry Life Cycle
Products & Markets
Supply Chain
Products & Services
Major Markets
Globalization & Trade
Business Locations
Competitive Landscape
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
Major Companies
Operating Conditions
Capital Intensity
Key Statistics
Industry Data
Annual Change
Key Ratios

About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.

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Gavin Smith
IBISWorld
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