The Earning Potential of a Tax Professional

EARNING POTENTIAL OF A TAX PROFESSIONALCharles Davidson, Accelerated Tax Systems

This presentation discusses the earnings potential of tax professionals, especially those who are new to the business.

If you have questions, please contact:Charles Davidson

Accelerated Tax Systems

[email protected]

www.acceleratedtaxsystems.com

Copyright 2013 Accelerated Tax Systems. All Rights Reserved.

www.AcceleratedTaxSystems.com

Earning Potential

The number one question:

How much money can I

make?Copyright 2013 Accelerated Tax Systems. All Rights Reserved.


Earning Potential

Important: The income examples in this presentation are only

examples. They are not intended to represent or guarantee

that everyone will achieve the same results. Each individual’s success will be determined by his

or her desire, dedication, background, effort and motivation to work.

There is no guarantee you will duplicate any of the results stated here.

You recognize any business endeavor has inherent risk for loss of capital.



Earning Potential

Two Basic Models Working for somebody else Working for yourself



Earning Potential

Working for Somebody Else National Tax Franchise or Small, Local Tax Firm

H & R Block, Jackson Hewitt, Liberty Tax Service Most people start out this way Great way to learn the business Pay can be low, especially when starting out. Part-time vs. full-time / seasonal vs. year-round

Opportunities in “corporate” tax Usually larger CPA firms or businesses that have a tax

department Can pay a higher, steady salary for year-round employment Usually need a college degree in business, finance, or taxation Typically want a CPA or CPA candidate Harder to get unless you have a strong business background



Earning Potential

Compensation plans There is no standard for compensation

plans Every company is different Every office is different Tax preparers can negotiate compensation Make sure you understand the

compensation plan before you sign a contract



Earning Potential

Four basic salary structures Hourly salary Commission only Base plus commission Base against commission

Let’s take a look at a few examples …



Earning Potential

… But first, some assumptions Number of returns

100 returns is achievable in your first year Long-term preparers build repeat clients Busy offices can have more traffic Some offices cut staff after first initial rush

Average Fee $240 is the average fee for a franchise office Average fees depend on the geographic area Most independent preparers charge less



Earning Potential

Hourly Salary (National Tax Franchise) Reality – Low starting salary Most tax prep jobs are entry level jobs

Minimum wage $10 - $12 / hour

Increases with experience and education Many franchise companies lay off after the

first rush



Earning Potential

Hourly Salary (National Tax Franchise) Example:

$10 / hour x 30 hours per week $300 per week x 12 weeks (typical tax season) $3,600 salary Less employment taxes and withholding



Earning Potential

Hourly Salary (National Tax Franchise) Example:

$12 / hour x 40 hours per week $480 per week x 12 weeks (typical tax season) $5,760 salary Less employment taxes and withholding



Earning Potential

Commission Only (National Tax Franchise) Earn a percentage on all fees you generate Percentage may be 12% to 35%

Low first year commission Depends on experience and education Typically increases every year

No regular salary Best if you have already have a book of

clientsCopyright 2013 Accelerated Tax Systems. All Rights Reserved.


Earning Potential

Commission Only (National Tax Franchise) Example – New Preparer

100 tax returns $175 average fee $17,500 total fees x 15% commission $2,625 total earnings 360 hours (30 hours * 12 weeks) $7.29 / hour



Earning Potential

Commission Only (National Tax Franchise) Example – Experienced Preparer

200 tax returns $225 average fee $45,000 total fees x 30% commission $13,500 total earnings 540 hours (45 hours * 12 weeks) $25.00 / hour



Earning Potential

Base Plus Commission (National Tax Franchise) A salary plus a bonus or commission on

fees generated Low starting salary

$9 to $12 / hour May increase with experience

Plus low starting commission 2% to %10 Usually increases with experience



Earning Potential

Base Plus Commission (National Tax Franchise) Example – New Preparer

$10 / hour base 360 hours $3,600 salary $17,500 total fees (100 x $175) $525 bonus (3% commission) $4,125 total earnings 11.45 / hour



Earning Potential

Base Plus Commission (National Tax Franchise) Example – Experienced Preparer

$14 / hour base 420 hours (40 hours x 12 weeks) $5,880 salary $45,000 total fees (200 x $225) $2,700 commission (6%) $8,580 total salary $20.43 / hour



Earning Potential

Base Against Commission (National Tax Franchise) Commission Only Tax Preparer

You only earn a commission based on the fee you generate Higher commission amount

Minimum salary paid weekly Usually minimum wage Guarantees you have some income while working

Bonus calculated at end of tax season Commission calculated Total salary deducted from commission Difference paid as a bonus Possibility of an overdraw



Earning Potential

Base Against Commission (National Tax Franchise) Overdraw

When you are paid more money in guaranteed salary than you earn in commissions.

You don’t earn enough commission to pay back your salary

Consequences Most companies won’t require you to pay back your

overdraw … BUT … you will probably be looking for a new employer

for next tax season Keep track of your commissions and your salary!



Earning Potential

Base Against Commission (National Tax Franchise) Example – New Preparer

$9 / hour base 360 hours (30 hours x 12 weeks) $3,240 salary $17,500 total fees (100 x $175) $2,800 bonus (16% commission) $440 OVERDRAW $3,240 total salary



Earning Potential

Base Against Commission (National Tax Franchise) Example – Experienced Preparer

$9 / hour base 520 hours (40 hours x 12 weeks) $4,680 salary $45,00 total fees (200 x $225) $8,100 commission (18% commission) $3,420 bonus (after tax season 15.57 / hour



Earning Potential

Earning Extra Commissions Sell Additional products and services

Most companies have add-on products or services Earn extra commissions on

Guarantee programs Bank products Audit protection / assistance Financial products

Retention bonus for returning clients Office supervisors and managers

Commission on total volume of the office Performance bonuses



Earning Potential

How to Increase Your Commissions Most national franchise tax companies:

Will not make you pay back an overdraw Are sensitive to cost of labor Lay off employees after the initial rush

Best way to guarantee your income Be a top performer Work quickly and know your stuff Get to know the software



Earning Potential

Working for Yourself Change the game! More risk but more reward Starting your own tax preparation business

is the best way to guarantee your own success



Earning Potential

Working for Yourself Example – First Year

100 new clients $175 average fee $17,500 gross revenue 600 hours (50 hours x 12 weeks) $29.60 / hour

*Note: Does not take into account overhead and other costs



Earning Potential

Working for Yourself Example – Second Year





Earning Potential

Working for Yourself Example – Second Year





Earning Potential

Working for Yourself Earnings increase as:

Your average fee increases You increase the number of tax returns You add employees

Additional income Add-on products and services



Earning Potential

Working for Yourself These scenarios are not complete

Many factors affect compensation We can’t represent all possible situations

Your earnings could be significantly different You may earn more or less than the examples

provided Expect to start small and grow your business Your salary will grow as you add new clients to

your existing client base each year It takes time to grow a successful practice



Earning Potential

Tax preparation is mostly a seasonal business Examples are based on a 3-month period You can choose to:

Work part-time for extra income Work just part of the year Engage in different businesses each season Expand your business for year-round income

Flexible business model Earn good income Be aware of challenges and opportunitiesCopyright 2013 Accelerated Tax Systems. All Rights Reserved.


Earning Potential


Accelerated Tax Systems is a full-service company that provides the products, services, and resources that help you create and grow a successful tax practice. Tax Education Training Software and Bank Products Marketing Operations Consulting Services




Accelerated Tax Systems We can help you start your tax preparation

business Consulting and coaching Computer hardware and software Bank products Training and technical support Tax education programs for you and your staff

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