The Earning Potential of a Tax Professional
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The Earning Potential of a Tax Professional

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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......

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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  • 1. EARNING POTENTIAL OF A TAX PROFESSIONAL Charles Davidson, Accelerated Tax Systems
  • 2. 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 davidson@acceleratedtaxsystems.com www.acceleratedtaxsystems.com Copyright 2013 Accelerated Tax Systems. All Rights Reserved. www.AcceleratedTaxSystems.com Earning Potential
  • 3. The number one question: How much money can I make?Copyright 2013 Accelerated Tax Systems. All Rights Reserved. www.AcceleratedTaxSystems.com Earning Potential
  • 4.  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
  • 5.  Two Basic Models  Working for somebody else  Working for yourself Copyright 2013 Accelerated Tax Systems. All Rights Reserved. www.AcceleratedTaxSystems.com Earning Potential
  • 6.  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
  • 7.  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
  • 8.  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
  • 9.  … 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
  • 10.  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
  • 11.  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
  • 12.  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
  • 13.  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 clients Copyright 2013 Accelerated Tax Systems. All Rights Reserved. www.AcceleratedTaxSystems.com Earning Potential
  • 14.  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
  • 15.  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
  • 16.  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
  • 17.  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
  • 18.  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
  • 19.  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
  • 20.  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
  • 21.  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
  • 22.  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
  • 23.  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
  • 24.  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
  • 25.  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
  • 26.  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
  • 27.  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
  • 28.  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
  • 29.  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
  • 30.  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
  • 31.  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 opportunities Copyright 2013 Accelerated Tax Systems. All Rights Reserved. www.AcceleratedTaxSystems.com Earning Potential
  • 32.  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 Copyright 2013 Accelerated Tax Systems. All Rights Reserved. www.AcceleratedTaxSystems.com
  • 33.  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 Copyright 2013 Accelerated Tax Systems. All Rights Reserved. www.AcceleratedTaxSystems.com