final irs stats for busy season 2020 shows professionals filed 0.5% fewer returns than last year and lost market share to diy’ers.
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by beth bellor
卡塔尔世界杯常规比赛时间 research
in what may be an alarming turning point for the profession, tax practitioners finished an already chaotic and bruising tax season 2020 after preparing a total of 73.8 million e-filed returns – a decline of 400,00, or 0.5 percent, from tax season 2019 – the first such reversal on record. ever.
more on tax season 2020: say hello to the new 24-month busy season | when covid ‘got real’ | tax pros hold efiling market share as tax seasons winds down | the top six irs #fails this tax season (so far) | how covid has pulverized irs operations | the mystery of 10 million missing tax returns | covid cuts accounting profits | why busy season may never be the same again | covid tests accountants’ entrepreneurial talents | pro tax prep stalls to a crawl amid covid-extended season | clients, revenues, profits – trending down, down, down |
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“if you are in public accounting and relying on personal return revenue, the results this year are troubling as it is the first time that professionally prepared returns actually fell from the prior year,” says jon baron, the longtime ceo of thomson reuters tax & accounting, and now a venture capitalist with more than a couple startups in stealth mode.
“tax compliance – just the pure production of tax returns – for most firms is still over 50 percent of their revenue, so this loss of market share is a very serious issue,” he adds, in a post on linkedin.
“it is critical for professional firms to successfully add advisory services and consulting services to their practices to replace tax compliance revenue,” baron says. “if they don’t have the people or the skills to execute on that requirement, they should be looking for merger-and-acquisition opportunities. in these difficult times, i don’t wish to express bad news, however, i also believe in facing major challenges head-on. and this situation is a major challenge for the accounting and tax profession.”
since e-filing first gained full steam in tax year 2013 – tax season 2014 – tax professionals have seen their share of tax work shrink from 60.5 percent to today’s 51.5 percent, while do-it-yourself returns expanded from 39.5 percent to 48.5 percent.
the erosion of market share might be even more alarming were it not for the asterisk.
the asterisk: millions of returns filed solely to obtain economic impact payments to taxpayers beleaguered by the fallout from the covid-19 pandemic.
in all, the internal revenue service had received 151.8 million individual income tax returns as of the week ending july 17, up 4 percent from the same period in 2019. it had processed 145.5 million returns, up 0.2 percent. that pegged the agency’s processing rate during winddown at 95.8 percent.
but that the rosy total includes refunds filed to obtain economic impact payments by people who ordinarily would not file income tax returns. this doesn’t trouble us nearly so much as the thought of next year’s filing data which, assuming we return to an april 15 deadline, will be comparing apples to boomerangs.
e-filings
a total of 143.4 million returns were filed electronically, up 9.5 percent. as with overall returns, the total includes people filing just to obtain economic impact payments.
tax professionals handled 73.8 million of those returns, down 0.5 percent. do-it-yourselfers e-filed 69.6 million returns, up 22.8 percent. for the season, that gives the pros the overall edge at 51.5 percent in market share.
unfortunately, there’s no good way to get at some of the data we’d really love:
- how many of those 0.5 percent fewer clients were ones we didn’t mind shedding?
- and of that big diy hike, how many were people who in most years wouldn’t be filing at all?
website visits
visits to irs.gov at 1.4 billion were up 164.3 percent.
refunds
a total of 100.5 million refunds were issued, down 5.1 percent, in the total amount of $276.1 billion, down 4.9 percent. the average refund of $2,748 was up 0.3 percent.
a total of 83.4 million direct deposit refunds were issued, down 6.8 percent, in the total amount of $240.5 billion, down 6.9 percent. the average direct deposit refund of $2,884 was down 0.1 percent.
6 responses to “down by 400,000 returns – the end of tax prep?”
paul george dion
what is not mentioned with the substantial increase in the standard deduction many clients did not realize they no longer had to itemize. i suspect more taxpayers self prepared once they saw no value to the professional preparation.
another good reason why i focus on business and more complex returns.
my business is also down in # of returns but not revenue as this transition from simple returns occurs
jeffrey barrett, cpa
we normally have about 5% of individuals on extension and another 5% just rolling in sometime after april 15. as of july 15, 2020 we had 15% on extension, with another 10% mia – filed on their own, didn’t file, or will still come wandering in sometime in the future. at this point, we are at about 85% compared to last year, but had been expecting a 10% increase this year. by the end of the year, we may reach only 95% of last year.
jerry poore, e.a.
thanks for the info. this may be a little misleading. i speak only for my practice. at this point in time 22% of my clients elected to file an extension until october 15th. and 7.5% elected to file their own, or not file at all. i appreciate those extensions as it smooths out the time flow to prepare them. my resolution business picked up 25%. so, go figure. how many returns are still left un-filed?
卡塔尔世界杯常规比赛时间 research
jerry: how many returns are still left un-filed? good question!
but since july 15 ran into what otherwise would be “extension season,” it’s likely there are very few left unfiled.
rodger fagerburg
there are always “professional procrastinators” who will wait until the last minute (october), regardless of whether they have the information together or not. and we know who it will be, year after year.
jonathan baron
looking at the data of tax filing years 2014 to 2017 so as not to get into any major tax reform discrepancies and the craziness of 2020, here is what occurred: **
• the average percent of 1040 returns filed during the extension period during those years overall was 7.1% of the overall returns filed through october 15th.
• the average percent of 1040 returns filed during the extension period by tax professionals during those years was 9.6% of the overall returns filed through october 15th.
• the average percent of 1040 returns filed during the extension period during those years by the do-it-yourself group was 3.2% of the overall returns filed through october 15th.
so…we are likely to have a lower percent yet to be filed due to the extended filing deadline of july 15th. i would estimate that to be about 4.0%. in other words, my personal estimate of what’s left is about 4%, and the vast majority of those will be completed by tax professionals as historically been the case.
a final note – with such an odd year, we have no true apples-to-apples comparison.
** there are slight nuances with how and when the irs collected and reported the data, but these results should be considered to be statistically accurate.