Will high unemployment mean less need for tax preparation this tax season?
Posted by AccountingWEB on 4385
The saying goes that there is nothing certain but death and taxes. That sounds like job security for tax preparers and morticians, but in the coming tax season, morticians may find themselves burning the midnight oil alone on some nights. The highest unemployment in decades means more people will not have to file at all or will have returns simple enough to do without assistance – at least they hope so. And many who are still working may not seek help with their tax returns this year. Economists say that when money is scarce, people choose to repair instead of replace and whenever possible, to do for themselves what they used to pay others to do. While tax preparation hardly seems like a luxury, in this tax season, tight budgets may cause a lot more people to look for alternatives.
What does the near future look like for those who prepare taxes?
Fewer jobs will likely mean less overall demand for tax assistance, whether that means paying a tax preparer or using do-it-yourself programs. But there are a couple of factors that could help the paid preparer industry. Those who do file may be more interested than ever in seeking help to make sure they squeeze out every possible tax break. And those expecting beefy refunds might be more motivated to take advantage of the rapid refunds offered by firms like H&R Block and Jackson Hewitt. Also, most high volume tax preparation firms recognize that do-it-yourself programs like TaxCut and TurboTax can pose a threat to their customer base, and some are getting in on the business by offering their own online programs. Others have programs currently in development.
Officials at Intuit – the makers of Turbo Tax – told the Wall Street Journal Online that high unemployment which leads to a “declining pool of filers” could mean decreased revenue growth for its tax software division in the coming year. But to some extent, they add, self-help tax software is recession proof. It’s a low cost alternative for people strapped for cash. Intuit and the developers of many at-home tax software programs have worked hard to make their products easy to navigate, in order to encourage people to try doing-it-themselves. Plus for the feint-of-heart, some of these programs allow taxpayers to submit their finished returns for a professional opinion on their finished return for a fee that is generally much less than a visit to any tax preparer.
If the unemployment rate and general economic doldrums do take a harsh toll on the tax preparation business, it will be the second year in a row that the industry has been hit, though for different reasons. The 2009 decrease in business was not due so much to lost jobs as it was to record high filing in 2008. That was when the Economic Stimulus Act inspired approximately 14.4 million returns to be filed by those who normally did not need to file – since there was no other way to take advantage of the tax benefits offered by the new law. If the coming tax season sees a huge dip in business, tax preparers may be left wishing for their own bailout, in the form of a repeat of the 2008 Economic Stimulus Act.