By Andy Frye
The short answer is yes, your ability to earn money as a professional tax preparer, to the extent you prepare tax returns for middle-to-lower income clients, is under direct assault from the President of the United States.
The longer answer, and the less depressing answer, is that there are certain things you can do as a CTEC tax preparer to position yourself to not only thrive, but survive no matter what tax changes President Trump enacts.
In other words, we can turn lemons into lemonade, as long as we’re willing to do some cutting and squeezing.
Exaggerated Demise, Again
I grew up around the tax business and I can remember all the way back to the 1980s when my Dad thought that Reagan was going to simplify the tax code and the public would no longer have a need for our family business.
Of course, that never happened.
Rumors of our demise were highly exaggerated.
Rumors of the demise of the tax preparation business have been highly exaggerated for over 30 years.
I know some our grizzled veteran CTEC tax pros are probably reading this article with skepticism, like, “Yeah, sure son, we’ve heard this one before and it never ends up actually happening. Wake me up when the show’s over.”
Reason to Panic
Is this time different? Well, it’s a fact that leadership is one thing that actually does effect difficult change. And no matter what you think of President Trump, there can be no doubt that he has shown, throughout his career, some incredible abilities to lead teams of people in accomplishing goals that often seem impossible.
President Trump has been saying for several years now that his “dream” is to put H&R BlockⓇ out of business out of business.
He says, “They don’t deserve to be in business, frankly.”
Perhaps your first instinct as an independent tax professional is something like, “Yeah! Yeah! Put them out of business, Donald, that would be great!”
Your enthusiasm for that prospect probably dims when you realize that President Trump is talking about putting YOU out of business. After all, if and when President Trump achieves his “dream,” smaller independent tax businesses will surely go out of business much faster than a well-funded national institution like H&R BlockⓇ.
And let’s face it, please don’t let this hurt your feelings: the type of middle-to-lower income taxpayer that has been the “bread and butter” client at HRB–and at Pronto Income Tax, too–should not need to pay $300 and up for tax preparation.
I mean seriously, is there really any justification for someone earning $30,000 per year to have to pay $300-$600 to prepare their tax return?
The complexity of these middle-to-lower income tax returns, and the prices we as tax professionals have wanted / needed to charge to make it “worth it” on our end, has become highly questionable.
For God’s sake, many people are paying more for tax preparation fees than they even pay in taxes!
There is a reason why Trump got a lot of “traction” from his “put tax preparers out of business” rhetoric and that’s because many taxpayers feel that they pay their tax preparers way too much and they don’t want to do that anymore.
Meanwhile, TurboTaxⓇ and other online do-it-yourself programs have made quantum leaps in accuracy and quality, creating a whole generation of taxpayers (Millennials) who regard going to a tax preparation office as a last resort, to be utilized only after all other avenues have been exhausted.
How Trump’s Tax Plan Impacts CTEC Tax Preparers
Now, once people start talking about putting other people out of business, people start to feel scared.
And when people feel scared, rational thought becomes endangered.
Therefore, let’s bring this conversation down to earth, and make sure we are talking about facts and not just fear-mongering.
One provision in Trump’s tax plan will have the greatest and most immediate negative impact on the earnings of many CTEC tax preparers:
The doubling of the standard deduction; for instance, taking the standard deduction for Married Filing Jointly to $24,000 or even $30,000.
Statistics suggest that this could reduce the number of taxpayers who itemize deductions on Schedule A by something like 30 million taxpayers.
And this appears to be the one provision of Trump’s tax plan that “everyone” agrees on.
If you’re doing a lot of tax returns for Schedule A filers, who don’t have many complexities to their situation other than owning a home, this increase in the standard deuction change would hurt your business quite badly, and quite immediately. Taxpayers who are only using a pro because of Schedule A will drop their tax preparers like a bad habit if and when this particular change comes to pass. For some CTEC tax preparers, this is 25-50% of our revenue.
To see how you’d be impacted, run an anlysis of your database and see how many clients you have who would not need you if they weren’t filling out Schedule A, then subtract all the fees you collected from those clients.
Solutions & Opportunities for CTEC Tax Preparers
The next 12-24 months is going to be a rough ride for a lot of CTEC tax preparers.
Tax preparers who decide to take this “off season” as a vacation may come back to find that whatever they come back to is a lot less than they left behind.
Out of this 12-24 months of pain in our industry will come many, many new and great opportunities for CTEC tax preparers who make the right moves and adapt for the purpose of not only surviving, but THRIVING in a new environment.
At Pronto Tax School, we have a mission of empowering independent tax professionals, and a big part of that is to be here in the rough times and help you along the way.
Here are a few of the biggest opportunities we have our eyes on as these tumultuous times continue:
- Increased focus on sales skills for tax professionals, so that you can portray your value to a public that may not realize how much it needs you
- Increased focus on more advanced training, such as our upcoming Business Tax Verified Program teaching you about corporations, S-corporations, and LLC tax work
- Increased focus on building a COMMUNITY of independent tax professionals who help each other instead of trying to be the “lone wolf” that we all love to think we are
Those are the main three things we see as being key to not only surving but THRIVING as the changes affecting our industry continue to accelerate.
How do YOU plan to adapt to the new realities? Please share your feedback so that we can be a resource for you. And, frankly, so that you can be a resource for us.
We’re all going to need help and we, as a community, will be much better off helping each other than asking for help from outside sources.