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One of the questions I am asked the most is how much the average tax professional can expect to earn. The answer is that it depends on a number of factors. This presentation is designed to explain the different models that companies use to pay tax professionals and provides examples for new and experienced preparers. With these examples, you can begin to do the math to calculate how much you would be able to earn either working for a tax preparation company or working for yourself.
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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
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.
www.AcceleratedTaxSystems.com
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.
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
Earning Potential
Two Basic Models Working for somebody else Working for yourself
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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 …
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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!
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
Earning Potential
Working for Yourself Example – Second Year
150 new clients $225 average fee $33,750 gross revenue 600 hours (50 hours x 12 weeks) $56.25 / hour
*Note: Does not take into account overhead and other costs
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
Earning Potential
Working for Yourself Example – Second Year
150 new clients $225 average fee $33,750 gross revenue 600 hours (50 hours x 12 weeks) $56.25 / hour
*Note: Does not take into account overhead and other costs
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
www.AcceleratedTaxSystems.com
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.
www.AcceleratedTaxSystems.com
Earning Potential
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
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
www.AcceleratedTaxSystems.com
Copyright 2013 Accelerated Tax Systems. All Rights Reserved.
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
www.TaxBusinessDirect.com
Accelerated Tax Systems
www.AcceleratedTaxSystems.com