Tax Preparation Software Developers
Business for Sale Industry Economics
2002 - 2020
2020 - 2026
Operators in the Tax Preparation Software Developers industry provide software that enables individuals and small businesses to file federal and state tax returns online, often following an automated step-by-step guide.
Due to the necessary nature of filing taxes each year, industry revenue is generally steady.
Further, operators have encountered rising demand over the five years to 2020, as more personal and business filers became comfortable using software programs.
According to the 2020 Tax Returns Study by the National Retail Federation, the share of consumers self-filing with computer software will total 37.0% this year, while more than 70.0% will file online altogether.
This has enabled the industry to outpace growth in demand for other tax-filing services.
Overall, industry revenue has risen at an annualized rate of 5.9% over the five years to 2020 to $3.3 billion, including anticipated growth of 2.5% in 2020.
The COVID-19 (coronavirus) pandemic has prompted the Internal Revenue Service to extend the deadline for personal tax filings and constrained the US economy, including lower private investment in computers and software.
This is likely to constrain industry revenue growth this year.
The Tax Preparation Software Developers industry comprises operators that provide software enabling individuals and small businesses to prepare and file state and federal tax returns.
Software programs are typically hosted online and designed to guide the user step-by-step through their filing.
This industry excludes tax preparation software programs used by professional accountants.
Nearly all working households in the United States must submit a tax return each year, which creates a stable base of demand for industry software.
The Tax Preparation Software Developers industry is expected to continue growing over the five years to 2025, albeit at a more moderate rate.
Altogether, industry revenue is projected to rise an annualized 2.4% during the period, reaching an estimated $3.7 billion.
As the industry expands and revenue potential increases for new entrants, participation will increase as well.
As a result, growth in the number of industry operators is expected to outpace industry revenue growth.
Industry participation is currently expected to grow at an annualized rate of 7.2% to 75 businesses, with employment rising an annualized 4.4%, to 13,018 workers during the same five-year period.
This industry provides software, usually hosted online, that enables individuals to file federal and state tax returns.
The software is designed to guide users through their tax returns step-by-step.
Additionally, operators in the industry provide software for small businesses.
This industry excludes tax preparation software used by professional accountants.
The industry of Tax Preparation Software Developers has a low capital intensity. The research projects that in 2020, $0.04 will be spent on capital for every dollar spent on work using salaries as labor proxy and depreciation as the proxy for equity.
Capital investments in the industry consist mostly of computers, devices, and office spaces acquired. Companies recruit highly qualified staff because excellent software depends on the developers who provide it.
This means that the industry has a very high average salary since the operators compete with a small number of competent developers. In addition, industry owners must pay tax attorneys, accountants, or staff with a deep understanding of state and federal tax rules, which drives up labor costs even further.
As more online services and the dissemination of software on the Internet increases, software publication, and distribution capital will also decrease. As a result, over the course of five years, the research anticipates a minor decline in the intensity of industrial capital.
Overall, the industry of Tax Preparation Software Developers has a low amount of revenue volatility. Over the five years leading up to 2020, the industry’s sales growth has averaged 8.1 percent each year (in absolute terms).
Consumers have grown increasingly comfortable submitting their taxes online as the number of services handled online has increased, helping the business.
Overall, taxes are imposed every year by law, limiting the industry’s vulnerability to economic downturns or major fluctuations. The industry is largely seasonal, with the first four months of the calendar year accounting for the majority of income.