Published September 26th, 2016 by

The H&R Chopping Block: Why Major Tax Services Are Losing to Independent Accountants

Although major tax preparers are “quick,” “inexpensive,” and “easy-to-use,” one question looms larger for consumers than ever: Who is the actual individual at H&R Block, Jackson Hewitt, or Instant Tax Service preparing my tax returns, and what are his or her credentials?

Consumers are increasingly unhappy with the answer, as most major tax preparation services employee workers who are neither CPAs nor licensed in a similar capacity. However, consumers are not only more demanding than ever, they’re also more unaware of their own behavior:

The Wall Street Journal reported in March 2016 that major tax preparer, H&R Block, had posted a “wider-than-expected loss,” because consumers are waiting longer to file their taxes each year, which is understandable: Who among us would rush to be first-in-line for tax services administered by professionals without readily available, transparent tax preparation credentials?

And while consumers balk at the onset of tax season each year, major tax preparers like H&R Block must handle a similar workload over an increasingly short time span, making it difficult for them and other major tax preparers to stay efficient and accurate. The hurriedness major tax preparers face is only exacerbated by regulating authorities investing more time in combatting fraud—further delaying the time it takes to process tax refunds. Coupling these two factors has proven difficult for H&R Block, whose stock price recently dropped 5.1% to $31.22 in after-hours trading, resulting in a quarterly loss of $81.7 million.

The TurboTax phishing scam, which also happened in March 2016, also hurt major tax preparation services’ reputation. As one of the most popular tax preparation websites in the world, TurboTax suffered greatly when a sophisticated group of scammers sent privacy update emails claiming to be TurboTax—resulting in numerous quarrels with the Better Business Bureau, and, even worse—customers.

Although consumers are at fault for filing their taxes later than they should, it doesn’t change the fact they’re how tax preparation business and CPAs make their money. However, an inability on the part of major tax preparers to adapt come tax season has resulted in many consumers opting out of services from these organizations—instead taking their business to smaller competitors and independent accountants—who’ve worked smarter over the last decade than their major tax preparing counterparts to remain efficient and secure.

The reason for this all boils down to two truths: Major tax preparers are losing business to independent accountants because of a lack of security, and inefficiency: two things many independent accountants have overcome with software that helps them go paperless – going paperless being something that 93% of accountants have either done or desire to do.

Paperless has become a less daunting prospect by way of technologies like document management software, which emerged at the turn of the 21st century and have grown increasingly popular among the CPA demographic. Although paperless remains a daunting prospect requiring significant overhaul of internal processes to many, the majority of smaller accounting firms and independent CPAs find that using DMS simplifies the process of going paperless.

For instance, Patrick Ballard, CPA and owner of Ballard & Company ltd relied on document management software to go paperless, and to keep his business efficient and secure, noting, “This is what makes us able to do what we do as efficiently as we do it. If you’re not paperless and you’re not doing this, you’re losing money.”

Sentiments like Ballard’s are why independent accountants and smaller CPA firms are turning to document management software to go paperless and positively differentiate themselves from major tax preparation services.

Paperless software increases their accessibility to clients, particularly via DMS mobile apps, which essentially help CPAs put their offices in their pockets without sacrificing security. And in the frenzy of tax season, mistakes are easier to make, but independent accountants increasingly rely on the security of document management software to help them, which prevents instances akin to the TurboTax debacle.

The message is clear: if major tax preparation services want to adapt and remain relevant in the tax preparation business, they’ll need to adjust their internal operations with paperless technology that facilitates greater efficiency and security to keep pace with independent accountants and smaller CPA firms.

However, this phenomenon is about much more than technology—it’s about what the technology facilitates: the augmenting of accountants’ responsibilities and value they bring to their clients. This technology has helped accountants outgrow the disparaging “bean counter” image of yesterday’s accountant, and replaced it with the vision of accountants as trusted advisors for all things financial.

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