State of the Accounting Industry
Written By: Brian Ellenbecker, CFP®, EA, CPWA®, CIMA®, CLTC®
With the 2021 extended tax deadline in the rearview mirror, we have about a two month break before the 2022 tax season starts to ramp up in early 2023. The time to file will be here before we know it! The accounting industry has faced some challenges over the past few years, so if you are in need of tax preparation assistance for 2022, now is the time to interview potential accountants.
As you start your due diligence process, keep these things in mind:
Accountants’ Time is Stretched Thin
A good accountant has always been in demand. They are a trusted advisor for many and their expertise in navigating the complex world of taxes is incredibly valuable. There have been some changes over the past few years that put an even greater demand on their time.
In 2020, shortly after the COVID outbreak, Congress passed several COVID relief-related bills over the next two years which included significant tax-related provisions. Programs like the Paycheck Protection Program (PPP), Employee Retention Credit and changes to the child tax credit, along with issuance of Economic Impact Payments added significant complexity to many taxpayers’ lives, who then sought out the council of a qualified tax advisor.
This increased demand on time made it much more difficult for accountants to service their existing client base, much less take on new clients.
Fees are Higher
Because of the increased demand for an accountant’s time, fees have also increased. Many have implemented minimum fees for even relatively simple returns. It’s not uncommon to see fees in the $500 – $1,000 range for a relatively basic return.
The days of paying $200 or less for a tax return are most likely behind us.
Shortage of Accountants
As we have seen with many sectors of the economy, there is a shortage of skilled workers. The accounting industry has been no different. Retirements and career changes have taken a significant toll. In addition, enrollment in accounting programs at the college level has been on a decline in recent years. Firms are having a hard time filling open positions, which compounds the time and fee issues previously mentioned.
Switching Accountants
A significant number of accountants are no longer taking on new clients due to the amount of time they are already spending with existing clients. Some are even reducing their existing client base due to the extreme demands on their already limited time. Clients who found themselves in a situation where they needed to try to establish a new relationship with an accountant struggled to find someone who could help.
If you find yourself in need of a new accountant, don’t wait until the last minute to find one. Typically, October through early December of each year is the best time to start your search.
Those with more basic returns may find themselves trying to do it themselves using Turbo Tax, H&R Block or one of the many other self-preparation software packages available due to cost and/or the inability to find someone to work with on these returns.
Filing an Extended Return
If you don’t mind filing an extension and waiting to file your return until later in the year, you will have an easier time finding someone to work with. However, if you expect to receive a refund, it’s typically preferable to file as soon as you can. If you owe tax, you will need to pay your estimated tax liability by the April 18, 2023 payment deadline to avoid late payment interest and penalties even though you extended the time to file the return itself.
If you’re in need of accounting assistance, reach out to your Shakespeare financial advisor. They will be able to discuss your tax preparation needs and may be able to refer you to someone who can help.