Cheers! You Survived Tax Season ‘06!

Practitioners report few glitches, solid business results.

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by Rick Telberg
At Large

Congratulations! If you’re reading this, you’ve lived through another tax season. And if you’re one of the thousands of tax practitioners who joined our tracking polls during the season, you’re probably more than satisfied with how it all went. Early reports from the home stretch indicate, in round numbers, that about 40 percent of practitioners were enjoying a smoother season than in 2005, with about 35 percent calling it even. One in four practitioners (25%) said it was worse.At the Leverich Group in Salt Lake City, for example, Joe Leverich reported, “We used our technology to allow stay-at-home CPAs to work from home.” And he increased staff by 50 percent. Both tactics ? new systems and staffing up ? appear to have been key ingredients for success for many practitioners.

Further, about 80 percent were reporting year-over-year increases in total revenue and total profit, with 64 percent handling more clients. Only 35 percent were reporting an increase in the number of clients on extension.

A whopping 85 percent indicated gains in revenue-per-client. But not all of that went to the bottom line, with less than 70 percent increasing profit-per-client.

There are some interesting clues in the data. For instance, the percentage of firms reporting year-over-year improvements, while still in the majority, has been declining for three years in a row now. That doesn’t suggest a downturn, but it might suggest that incremental gains in productivity, pricing and market share may be getting harder to achieve. In a nutshell: It’s a more competitive marketplace.

“So many returns, so little time!” said Lori Evers, of Evers & Fox in Atlanta, as if gasping for air in the countdown to the end.

About one in six practitioners had switched to new tax preparation software solutions, services or systems before the season. And many reported the kind of aches and pains one would expect from breaking in a new operation. A solid nine out of 10 reported they were more than satisfied with their tax software, but that won’t stop about a quarter of the market from considering a change next year.

On the “Tax Season Stress-O-Meter,” the final two weeks may have been the toughest, with 90 percent hitting the panic button at least once in that period.

“A big client just walked in, a week later than last year,” griped a sole practitioner who works tax season part-time in addition to her regular job in education.

In all, the IRS expects a grand total of 229.3 million tax returns this year, a modest increase of only one-tenth of one percent over last year’s. But beginning next year, tax filings are expected to return to their usual annual growth rate of 1.2 percent annually, reaching 246.8 million by 2012. The reason for the hiccup this year, the IRS said, can be traced to six million fewer filings of Forms 941 ? Employer’s Quarterly Federal Tax Return, and 2688 ? the Application for Additional Extension.

But take heart. If you thought, as so many did, that e-filing was a hassle this year, you weren’t alone. The IRS national taxpayer advocate, Nina Olson, sent in her own return by mail. She said it was to save the $14.95 fee.

[First published by the AICPA]

Posted at April 16, 2006
Filed Under BSG [CPA TRENDLINES] |

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