A tax preparer’s income has always been based on variables like the size of one’s client list or the economy during tax season. However, new issues like more competition and better technology have added a new, more prominent element of uncertainty to the viability of this profession.
How is your income limited as a tax preparer, and what can you do to remove the cap on your success?
1. You Constantly Fight Competition
Thanks to technological advances, taxpayers have more options than ever when it comes to filing their returns. While traditional methods like hiring certified public accountants or tax preparers still account for about three-fifths of filer’s business, another 30% of filers used computer programs such as Turbotax and Quicken.
As a larger pool of filers become more comfortable with the technology, it’s likely that this percentage will grow. With more competition in the space, tax preparers must find ways to keep up with the simplicity and accessibility offered by computer programs in order to protect and grow their bottom line.
2. You Struggle to Keep Up With Less Expensive (or Free) Options
Not only are computer programs like TurboTax, Quicken, TaxAct and TaxSlayer increasingly accessible and easy to use, in most cases, they are also less expensive. (The IRS launching a Free File program for 2018 only adds insult to injury.)
Ease and cost are two factors each of your clients will consider before reaching out around tax season; especially clients who have simple returns that can be handled easily. If your clients can prepare their own taxes, for free, how can you compete? As more options pop up, you may be losing your market share. Finding a way to retain value for your existing and future clients is imperative.
3. You Experience Cyclical Exhaustion
As a tax preparer's income is mostly cyclical, cramming as much work as you can into a few months out of the year is logical, but exhausting. No matter how well-prepared you are for tax season, there will always be a threshold for how much work you can handle.
Can a tax preparer make money doing more? By expanding your capabilities to reach more people, for more months of the year, you’re opening up room to grow your income.
4. Your Process Is Too Manual
A growing number of tax preparers and third-party vendors tout increased organization through automation. That is to say, rather than manually filling out personally identifiable information each year, clients can use cached information from other personal finance websites, such as Mint.com or Quicken, to directly fill their tax returns with a single click.
If your tax preparation software or process is too manual, or too narrow, your clients may jump ship. Clicking a button and have everything filled out, and connected to, other aspects of personal finance is becoming the expectation more than a luxury.
5. Your Client List Needs Diversification
Have you heard the saying ‘don’t put all of your eggs into one basket’? It’s a common blunder for many entrepreneurs - too much of their revenue relies on too few clients.
This is a giant risk. What if one of your big fish leaves, how much of a dent would that put in your bottom line?
Not diversifying clients can be a risk too. For example, non-business owners tend to need their taxes done once a year. Business owners may need to file more often or have tax questions sprinkled throughout the year.
Finding ways to grow and diversify your tax preparation business can help fill the gaps throughout the year, and provide padding should someone leave your client list or reduce their need for your service.
6. Leaving Money on the Table
Smart tax preparers know that their service is also useful for prospecting for other types of business. As a tax preparer, many of your clients view you as a finance professional. By leveraging your trust and authority in the finance space, you can start to add other services to your business.
Our clients have found success by adding credit repair to their tax preparer business. Credit repair can be a fulfilling and profitable add-on to your business all year around. It’s no wonder why smart entrepreneurs are jumping in head first.