The Future World for Tax Preparers

Beginning in the mid-1980s the travel industry changed forever due to disintermediation between the consumer and the airline industry. (Generally, disintermediation is the process of removing the middleman or intermediary from future transactions) The number of local travel agencies plummeted during this period as online booking facilities abounded and commissions from the airlines dwindled. I believe the same phenomenon is emerging in the tax preparation industry.

Although the potential for gross simplification in the process is more of a political promise than an inevitable reality, a growing number of the younger generations are migrating to the online services to prepare their taxes. And for the routine tax filings, their risk is low. However, for the more complicated returns for those that are involved in the share economy (Uber, AirBnB and the like), the risk is higher and the opportunity for IRS interaction is enhanced.

My background in technology and my understanding of basic business principles, make me question the future of the data entry model of tax preparation where the computer does the heavy lifting and the only variable is the accuracy of the person doing the data entry. While it is difficult to accurately identify how many taxpayers use the self-service online services, it appears they are growing.

I believe the future for tax preparers lies in providing added value before, during and after the tax prep; specialization in a market niche; and professional credentialing combined with focused continuing education.

If the travel industry is any predictor, I believe we will see the number of preparers shrink from nearly a million to 10% to 15% of that number.