Who actually prepares your tax return?
And why does it cost so much?
Depending on how you file your taxes, you may be wondering who exactly prepares your return and where your fees end up. Obviously, if you have been using DIY tax software, or trusting a friend or family member to prepare your taxes, there isn’t any confusion. But, if you use a traditional tax firm, things may be less clear.
This is because tax firms continue to rely on what’s called a “leveraged staffing model” to prepare returns. In a nutshell, it means they try to get lower-salaried employees, called Preparers, to do most of the work. Think of it as the grunt work, meaning all of the document organization, such as photocopying, collating and annotating, as well as the communication with taxpayers to make sure everything is in place. Then, the firm will usually have a layer of Managers above the Preparers, whose job it is to review the work that the Preparers have done, for each taxpayer file. If there are missing items, the file goes back down to the Preparers, and so on, until the Manager is satisfied with the level of completion. Once the Managers have completed their review of the files, they are finally passed on to a Partner for sign off.
Naturally, it is in the firm’s best interest to have the Partners spend as little time as possible reviewing tax returns. After all, they are the highest-salaried employees with highest billable hours. There’s nothing wrong with that, in itself - as long as the return is complete, accurate and properly reviewed, it makes perfect business sense for the firm to do things that way, as it minimizes their cost.
What is less appealing, for the taxpayer, is that throwing more lower-skilled labour at the preparation task still results in high prices that are generally still billed by the hour. It’s difficult for firms to pass along any cost savings to the taxpayer because they still have fixed costs, like salaries, office space and overhead, associated with the number of employees required for a leveraged staffing model. So even though the bulk of the work in preparing the returns is done by low-salary Preparers, the taxpayers don’t see the benefit.
At Blackspark, we think there is a better way, one that is a win-win for accountants and taxpayers, alike.
We’re using modern technology that creates a better experience for the taxpayer and, crucially, also eliminates manual preparation efforts and the need to have an abundance of Preparer staff, along with the associated overhead costs. We believe the expertise of a Partner and highly experienced licensed chartered accountant should be available to everyone, with transparent pricing.
