Obamacare could be a boon for tax preparers
A tax professional at H&R Block inputs a client's tax information. Analysts expect H&R Block to benefit from the ACA this year.
H&R Block is expected to report its earnings Wednesday afternoon, and analysts feel good about the tax-prep giant’s future. Actually, they feel pretty great about the industry as a whole.
The source of their optimism is the Affordable Care Act, thanks, says George Brandes with Jackson Hewitt, to the tax-prep business truism: “Complicated taxes equals more people needing help.”
Brandes says his company assumes that figuring out the tax implications of the ACA will be tricky for millions of consumers.
“A study by the University of California, Berkeley, suggests as many as a third of all tax credit recipients will owe some money back, and so that adds another layer of complexity on how you handle something like this,” he says.
A person could owe money because their subsidy is based on estimated earnings; if someone underestimates, they’re on the hook to Uncle Sam.
The IRS says 140 million people file tax returns every year, with about 60 percent being done by professionals. Northcoast Research analyst Kartik Mehta expects that percentage to increase.
“We haven’t seen this type of a complication to the tax return in a long, long time,” he says.
Mehta says the real winners will be the brand-name preparers who can afford to blitz the airwaves come tax time.