The Future of the Tax Preparation Industry
The main competitor for the tax preparation industry is personal finance software such as Quicken and TurboTax, which allow people to file tax returns for themselves. For tax year 2014, over fifty million taxpayers prepared and e-filed their federal tax returns. In order to counter this trend, tax preparers have begun to offer online services of their own. These generally contain web forms which consumers fill out and the preparer files electronically, offering a middle ground between paying a tax preparer to file by hand, and computing their own taxes at home.
In order to accommodate this growing online practice, tax preparers must focus on data security, by making sure their computer and networks are appropriately protected. In addition, because of constant changes to the tax code and regulations, tax preparers must make sure their software is up to date. Additional competition for seasonal tax franchises comes from full-service accounting firms offering other accounting services in addition to filing tax returns. Since most individuals are unlikely to need these other services this is more of an issue regarding business clients and higher net worth individuals.
Despite politicians occasionally clamoring for a flat tax, income taxes remain as complicated as ever. It is very likely there will always be a demand for tax preparers, even as tax prep computer software becomes more user friendly and accessible. The industry, including other accounting services, is expected to grow by 4 percent per year through at least 2018.