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From the threat of DIY to the promise of the cloud
Despite the additional complexities of tax preparation, the trend toward do-it-yourself tax preparation continued to expand this past filing season. Returns filed professionally saw a 0.2 percent increase as of May 15,2015, over the previous year, while self-prepared returns grew a whopping 5.8 percent. Overall, 49,195,000, or more than 40 percent of the total of 120,612,000 e-filed returns, were filed by taxpayers who prepared the returns themselves. Yet most observers believe the complexity of the Tax Code will continue to drive taxpayers to professional preparers.
Although the surge in DIY is seemingly counterintuitive, the reason may be simply that more people entered the tax system this past season as a result of additional requirements, according to Timur Taluy, chief executive of ProTaxPro and fileyourtaxes.com and a board member of the Council on Electronic Revenue Communications Advancement. "They might just be trying to claim the premium tax credit, or just trying to get a refund; otherwise they might not have a filing requirement at all," he said.
"Some of those returns were extremely simple. To become eligible or to receive benefits under the [Affordable Care Act], it created a group of taxpayers that wouldn't traditionally file a return but needed to reconcile their health care benefits. Basically, we still saw growth in the paid preparer market."
Time was when every year the industry consolidated to a degree, resulting from the acquisition of smaller companies by the dominant manufacturers. This year there have been no large acquisitions, and the total number of software developers remains the same.
Although the industry is considered by some to be mature, today's tax software developers continue not only to bring out yearly "bells and whistles" updates, but to leverage new technology to assist preparers. Virtually every manufacturer has added features to make tax preparation more efficient, less open to fraud, and safer in terms of data storage.
"There were a number of things that posed an unexpected challenge," said Jordan Kleinsmith, tax product manager for the CS Professional Suite of Thomson Reuters. "The tangible property regulations and the elections and filings were a big unexpected blow for a lot of firms. The volume of e-filed extension requests for business...