From Tax Breaks to AI: 59 Key Tax Preparation Industry Statistics

Tax preparation is the process of organizing and preparing receipts, documents, and all the paperwork needed to fulfill tax obligations. It is a vital service in the United States, where the tax code is complex and ever-changing.

The tax code has become more complex recently, as Congress has added new tax breaks and deductions; this has made it more difficult for taxpayers to file their taxes on their own and has increased demand for tax preparation services. Another factor driving the growth of the US tax preparation industry is the increasing number of taxpayers who are eligible for tax credits and deductions.

The US tax preparation industry is dynamic and constantly changing; this makes it important for taxpayers to stay informed about the latest tax developments and choose a tax preparer who is up-to-date on the latest tax laws. So, this article showcases some of the most important statistics about the tax preparation industry regarding its companies, workers, growth, and others.

Interesting Tax Facts

Americans spend six billion hours and over $27 billion a year in collecting taxation data and filling out forms, according to Reason.
Filing taxes for free is possible using the IRS Free File Program, Alliance.
America hires more than one million accountants to help manage taxes each year.
According to Gitnux, taxes play a critical role in market capitalization, contributing more than $267 billion a year.
Small businesses that aren’t corporations don’t pay income tax at a business rate.
AI and machine learning are used to save tax professionals time and effort in collecting data and charging taxes.
Billionaires pay one-third of their earnings, approximately in taxes, as stated by Legaljobs.
In a surprising and unprecedented turn of events in 2018, Billionaires in America paid a lower percentage of taxes than the rest of the population.
One of the main objectives of taxes is to supply people from all social levels with the needed services that benefit everyone, such as healthcare assistance, schools, emergency services, and roads.
Taxes were used earlier to support the ruling class and fund armies.
All civilizations have their own tax systems; even the Sumerians’ tax history was discovered engraved on clay cones.
The taxation system in the United States is three-layered: federal, state, and local.
The taxation system isn’t unified in all the states in America; each of the 50 states has its own system.
According to Investopedia, the top ten countries with high-income taxes include Ivory Coast, Finland, Japan, Denmark, Austria, Sweden, Aruba, Belgium, Israel, and Slovenia.
According to the same source, many countries impose zero taxes: United Arab Emirates, Saudi Arabia, Bahrain, Bermuda, Bahamas, Cayman Islands, Oman, Kuwait, and Qatar.
Taxes greatly influence any country’s economic behavior, impacting how much people earn and spend.
Most products and services are subject to Value Added Tax (VAT), approximately 20% of their value.
Requesting an extension tax filing deadline is always possible; however, that extension doesn’t include the payment deadline.
The minimum income tax rate is 10%; the highest, on the other hand, is 37%.

Taxation Rates in the United States

Just like all rules and regulations change from one state to another, the taxation system is no different. The taxation differences between American states, whether federal, income, sales, or property taxes, are significant.

California has a top marginal income tax rate of 13.3%, while Florida has no state income tax at all. Similarly, Tennessee has a sales tax rate of 9.55%, while Alaska has no state sales tax.
Many states in the US don’t charge income taxes, including Washington, Wyoming, Alaska, Nevada, Florida, Texas, and South Dakota.
Some states have flat income tax rates, applying the same tax rate to most income. These states include Arizona, Colorado, Idaho, Illinois, Indiana, Kentucky, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah.
States with the highest tax burdens include New York, Hawaii, Maine, Vermont, Connecticut, New Jersey, Maryland, Minnesota, Illinois, and Iowa.
Others with the lowest tax burdens include Alaska, Delaware, New Hampshire, Tennessee, Florida, Wyoming, South Dakota, Montana, Missouri, and Oklahoma.

Tax Preparation Industry Workers

Any industry’s workers are the cornerstone of it; getting to know their numbers, qualifications, and salaries contribute to a general understanding of the industry’s current state as well as an overview of the professionals responsible for tax preparing:

According to research by ZIPPIA The Career Expert, men tax preparers count for 28% while women count for 71%.
The number of the industry’s employment is 296,703.
White tax preparers count for 56% of the industry. Hispanic and Latino tax preparers count for 18% of the industry. Black or African American tax preparers count for 10%.
The average base salary per hour for a tax preparer is $20.63, as stated by Indeed.
Tax preparers are paid an average of 51,020 in the US.
According to Wall Street Oasis, Goldman Sachs is paid higher than any other position, with an average salary of $85,000 per year.
Tax preparers of 40 years and more count for 65%; those between 30 and 40 years count for 22%. The young between 20 and 30 years count for 13%.
The average age of tax preparers is 47 years old.
The demand for tax preparers is higher in New York than in any other state in the US.
65% of tax preparers prefer to work in private companies rather than public ones, according to ZIPPIA The Career Expert.
Hiring a tax prep to sort out personal taxes isn’t expensive as it’s publicized; the cost for tax preparation per return is between $99 and $450, as stated by Thervo.

Tax Preparers Types

There are many types of tax preparers, each specialized in specific fields. Enrolled agents, for example, work with federal taxes and can represent individuals and businesses. On the other hand, certified public accountants (CPAs) prepare tax returns and manage accounting and tax work.

Tax attorneys assist in preparing and filing taxes; they also handle tax disputes and conduct legal research. Non-credentialed tax preparers, as the name suggests, perform tax preparer tasks without any professional certification. However, the number of each type of tax preparer varies.

The number of enrolled agents in the US in 2022 was 63,203.
There’re 478,783 certified public accountants in the US, according to ZIPPA The Career Expert.
%62.7 of tax attorneys in the United States are men, and %37.3 are women, with a total number of 3,836, according to IBISWorld.
According to Better Business Bureau (BBB), the US has 700,000 non-credentialed tax preparers.

Tax Preparation Industry Growth

The tax preparation industry has witnessed significant changes and developments since it emerged in 1861. Taxation revenues have increased, taxation professionals have grown in number and need, and taxation companies raised, as the following statistics will showcase:

The tax preparation industry has grown an average of 4.3% each year from 2017 to 2022, as stated by IBISWorld.
According to the same source, the tax preparation market is the fastest growing among many others, including technological and scientific services.
The tax preparation industry is ranked the 473rd biggest in the United States.
The market’s size has increased at a rate of 10% in the last year, 2022.
The tax preparation market was worth 27 billion dollars in 2022, according to a report by Fact. MR.
The market’s compound annual growth rate (CAGR) is expected to grow at 4.7%, which is the value of 44.7 billion dollars by the end of 2033.
A report by The Business Research Company expected the global tax preparation services market size to reach $38.28 billion in 2027.
Two-fifths of the European country’s national income comes from taxes, as stated by OUTblog.
Tax returns have increased $9.3 million in returns in 2020 from 2019, according to Tax Foundation.

Tax Preparation and Companies

Companies are the most affected parties by taxes, as their revenues and finances are always under supervision. In addition, they pay many types of taxes, such as income taxes, business rates, and national insurance. Some, however, manage to escape taxes following some practices. It’s noteworthy that tax preparation companies, nevertheless, aren’t excluded from this system; they also pay taxes.

They’re about 18,600 tax preparation firms that employ around 91,000 employees and generate $8.6 billion annually in the US, as noted by Vertical IQ.
No taxes are imposed on non-profit companies; however, that’s only for the first $416 of the company’s taxable income.
Many companies in America, including Nike, Salesforce, HP, and others, didn’t pay any federal income taxes in 2020.
Many companies avoid paying taxes by reporting a low taxable income.
The United States Labor Statistics categorizes California with the highest number of tax preparation employments, boasting 17,290 tax preparers.
Some of the largest tax preparation companies are located in the United States, according to a classification done in 2022 by BizVibe.

Tax Preparation and Technology

Technology has penetrated all businesses and industries in the last two decades. And the taxation industry has had a great share of this development; artificial intelligence and machine learning have made long, tedious, and overwhelming tax preparation tasks easy and quick.

Tax software revenues in the US are estimated at $5 billion in the US, according to Gitnux.
Most people are filing their taxes electronically, as in 2023, 134,224,000 tax returns were e-filed for the previous tax year, 2022, according to IRS.
Even cryptocurrency earnings are subject to taxes because Internal Revenue Service (IRS) views cryptocurrency as a property.
Based on the Global Tax Technology and Transformation survey of 2020, it was revealed that tax preparers invest a substantial amount of their time, approximately 70%, in data collection and calculations. Conversely, AI can effortlessly handle these intricate tasks in seconds.
Areas of taxpayer services are widely adopting AI, as 40% of taxpayer services used virtual assistance that leverages AI in 2022, according to the CIAT Inter-American Center of Tax Administration. Using AI and machine learning in taxation has major benefits, and reducing bias and corruption is among the most important.

Tax Preparation Industry Statistics: The Bottom Line

Keeping updated with the industry’s updates is critical to adapt to any changes by planning, budgeting, and meeting deadlines. The statistics mentioned above provide a comprehensive insight into the current state of the tax preparation industry.