How did the tax prep industry get started and by whom?
H&R Block is widely considered to be the company that founded the US tax industry as we know it. They’re one of the largest and most well-known tax service providers in the world. It’s estimated that they’ve prepared more than 720 million tax returns since 1955.
H&R Block is a franchise with more than 12,000 locations in all 50 states, Puerto Rico and other U.S. territories. They’re also on U.S. military bases around the world. An H&R Block-branded retail office is located within five miles of most Americans.
But they’re far from the only show in town.
The US tax preparation industry has long been a robust market with thousands of participants ranging from giants like H&R Block to individual CPAs or a family friend or even a friend of a friend. It is a huge industry that represents a $20 billion opportunity for the thousands of businesses and hundreds of thousands of employees that seek to get in on the action. Even H&R Block as the largest assisted preparer in the US has only been able to carve out a 15% share in the category.
Tax preparation is BIG business, and because it is required, it’s an industry that tends to be recession resistant.
The main competitor for the tax preparation industry is personal finance software such as Quicken and TurboTax, which allow people to file tax returns for themselves. For tax year 2014, over fifty million taxpayers prepared and e-filed their federal tax returns.
In order to counter this trend, tax preparers have begun to offer online services of their own. These generally contain web forms which consumers fill out and the preparer files electronically, offering a middle ground between paying a tax preparer to file by hand and computing their own taxes at home.