The tax services industry is a considerable part of the U.S. economy, with new tax service businesses opening as more people discover the lucrative opportunities that come from partnering with companies like Prestige. There’s an opportunityfor anyone to make a name for themselves in the industry and develop lasting relationships with new clients.
In this blog post, we’ll walk you through some recent trends in the tax services industry, along with an analysis of how each could present opportunities to develop a new tax services business. This information is vital to anyone currently working in this industry, or even just opening a tax business.
The IRS Data Book is a report produced annually by the Internal Revenue Service, the U.S. government’s tax collection arm. It contains a series of useful statistics on how much was raised in taxes over the course of the year, how many people paid their taxes, and how many people and organizations failed to pay on time.
The 2020 Data Book, published in June 2021, contains useful information on penalties issued for the year to 30 September 2021. It shows that there were nearly half a million penalties issued for producing inaccurate individual returns, resulting in total fines of over $800 million.
In addition, a staggering 19 million penalties were issued to individuals for failing to pay on time, resulting in combined assessed penalties of over $7 billion.
On the corporate side, over a quarter of a million penalties were issued for failure to pay corporate taxes on time, resulting inpenalties worth over $500 million in total.
These Data Book statistics show that hundreds of thousands of individuals and businesses struggle to navigate the U.S. taxation system effectively and end up having to pay penalties as a result.
No one wants to make a mistake on their return and end up getting fined for it. There is a huge demand for tax services businesses to help these individuals and corporations get their personal finances back on track, ensure that they comply with financial laws, and avoid hefty fines.
The tax services industry continues to outpace the growth of several other professional services industries. According to data from Ibis World, the U.S. tax preparation services market is worth an aggregate of $10.8 billion in 2021, up 4.6% from the previous year. By market size, it is the 23rd largest of the professional and technical services industries.
One of the best-known companies in the industry, PwC, saw revenues of over $10 billion from global tax services in 2020. Despite the challenging year, this represented revenue growth of 2% on the previous year.
But the tax market is not dominated by a handful of very large businesses. According to Ibis World, there are over 80,000 small and large businesses in the U.S. document preparation services market.
These numbers suggest that there is competition in the tax service market. However, the barriers to entry are low compared to other professional services industries. Opening a tax business is more optimistic for newcomers in 2021 compared to other industries, like office real estate.
The law around U.S. taxes continues to change every year as Congress passes an ever-growing suite of measures to collect more in revenues and put a stop to egregious tax avoidance and evasion.
Here are just a few examples of recent changes introduced to the U.S. tax rules:
Of course, the total number of changes to these rules is much larger than the examples given here. Without the right expertise, it can be difficult for the average person, or even the skilled professional, to keep track of these legal changes and adjust their income calculations accordingly.
However, these changes present an ideal opportunity for tax professional services to educate clients on today’s updated laws. It’s the responsibility of every tax business owner to ensure their clients are aware of these changes and comply with their tax reporting obligations appropriately.
If there’s one consistency among all of these tax trends in the United States, it’s that there’s a strong demand for tax services. Whether it’s to educate clients on changing laws or assist the thousands of people who misfile their tax information annually, tax service businesses have plenty of opportunities to make an impact on American individuals and business owners.