What does the American taxpayer think about existing tax software in the market? That was the focus of a recent study, the 2023 State of the American Taxpayer, conducted by April earlier this year. Accountants likely won’t find the findings shocking, but they show a lot of potential opportunity.
Proactive Service Really Matters
The survey of more than 4,600 taxpayers asked questions about the functional, emotional, and transformational benefits of tax products. The biggest takeaways include:
- Taxpayers want more engagement throughout the year.
- There is a concern with both accuracy and privacy.
- The perceived inequity of the tax system is a priority to solve.
- Taxpayers are willing to try new products.
For those accounting professionals, or anyone looking to serve the end consumer, the study found that taxpayers (unsurprisingly) hate surprises. However, tax planning truly is the most important added value that tax professionals can offer customers, yet too many professionals are hesitant to offer or charge for it.
More Data Connectivity Is Needed
Data today is more connected than ever, but taxes seem late to the data party. Tax professionals struggle to collect and connect the dots. This is the result of several factors, including clients who are slow to send needed information and professional software that hasn’t created the necessary connections for the data to be seamless.
Tax professionals still spend too much time gathering, entering, and calculating data. This limits the amount of time available to do solid planning on those tax returns. More than 25% of respondents would switch products, tax preparers included, with the caveat of it needing to be simple.
Americans believe there’s a better way to approach taxes, and many expressed excitement about the idea of an integrated tax product that included year-round engagement with opportunities to estimate and optimize their tax situation. The ability to access real-time refunds or calculate accurate real-time withholding remains a challenge, too, and it’s something the taxpayers really want.
Some Taxpayers Are More Open to Help
The study grouped taxpayers based on their tax personalities, as well as their demographics. These personalities include:
- Definitive delegator, who doesn’t engage with DIY tax software and uses a human to handle all things tax.
- Stubborn DIYer, who sticks with what they know even though they’re completely dissatisfied.
- Naive upstart, who is new to the tax filing process.
- Refund racer, who is all about getting the biggest refund in the quickest amount of time.
- Household CFO, who longs for a complete view of their household’s taxes and hates the surprise of the tax bill.
- Side gig dynamo, who has multiple sources of income and platforms to manage their income, and pulling it all together is a feat.
- Financial optimizer, who believes they have it all figured out but hasn’t included tax as part of their complete financial picture.
The financial optimizer, one of the most interesting personas, has optimized everything in life from food to exercise habits to finances, and they’re well-versed in financial opportunities but can’t figure out how they intersect with taxes. This taxpayer is looking for a way to have an accurate real-time financial picture, including their taxes, and is frustrated because they can’t figure that part out. Accountants are perfectly aligned to help here.
Next, consider the household CFO, who likely is the person responsible for house finances and who keeps their family on budget. They get overwhelmed by the surprise of a tax bill or wishes for more money to spend on groceries rather than a huge refund. It’s not just the financial impact, either. This person tries to watch things closely but has no real-time insight into how monthly take-home pay intersects with year-end taxes. This is another analysis accountants can provide.
An Important Part of Financial Health
As the world becomes more connected and more data is available, tax is the last piece of financial health that seems to be missing. Embedded tax hopes to be that connection to complete financial wellness for those who want the insight. And that’s something accountants can capitalize on.
CPAs have been providing a lot of these financial advisory services, but they typically don’t have the time or access to data in real time to offer the level of insight that taxpaying consumers desire.
Imagine a world where the tax products are basically a CPA in one’s pocket. There will always be a need for complex financial tax planning, but this is a potential solution for the everyday American who can’t afford the rates many CPAs have to charge for a 1040. A real-time app that can integrate data to provide tax planning would help taxpayers understand their complete financial health. Accountants can build advisory services on this.
Until then, how can consumers get what they need from tax professionals or CPAs to deliver on what taxpayers want? It starts with accountants understanding the taxpayer and that they want more real-time information. The more taxpayers can share with their tax professionals, the more accountants are positioned to help taxpayers attain their financial goals.
Taxpayers want more. Technology will be part of the solution, along with accountants who are willing to rethink the tax services they offer to meet the wants of buyers.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Jody Padar, CPA, is head of tax at April, an intelligent tax platform. She is the author of “From Success to Significance: The Radical CPA Guide,” “The Radical CPA: New Rules for the Future-Ready Firm,” and “Botkeeper for Dummies.”
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