John Hewitt, the president, CEO and chairman of Liberty Tax Service, is anticipating increased business for preparers this tax season thanks to the Affordable Care Act and the boost in employment from the increasingly robust jobs market.
Hewitt founded Liberty Tax Service in 1996 after leaving Jackson Hewitt, another major tax prep chain that he co-founded back in 1982. He built them into the second and third largest tax prep chains in the country, right behind H&R Block, where he worked his way up from tax preparer to regional director.
Hewitt believes the ACA will make this one of the best tax seasons ever for Liberty Tax Service. “It’s the biggest tax change since 1986,” he told Accounting Today in an interview Thursday. “Tax change is one of the three primary drivers to people choosing to come in and get assisted preparation, and so it’s going to drive people from the capability of doing their own return into seeking assistance. In addition to that, more people are going to file, and also tax preparation fees in general are going to go up because of the additional complexity, and in this industry we charge on the complexity. So three major impacts: more people will file, a higher percentage of people will seek assistance, and thirdly the industry will get higher fees because of the increased complexity.”
On top of that, the increase in the employment numbers over the past year is likely to induce more taxpayers to seek help from preparers. “More people were put to work in 2014 than any year in the 21st century so that’s going to drive more people to file their return,” said Hewitt. “We think that about 3 million more people are going to file this year.” He anticipates over 60 percent of them will go to a tax preparer.
Next year will see a further influx of new taxpayers as President Obama’s executive action on immigration reform will prompt more undocumented immigrants to catch up on their back taxes to qualify for the amnesty, Hewitt predicts.
“One of the requirements to get amnesty is you have to prove that you’ve lived in the United States and you have to file tax returns,” he said. “So immediately there will be another 5 million people filing tax returns, and a larger than normal majority of them will seek assisted tax preparation, so it’s great for our industry and our company.”
Hewitt doesn’t anticipate that President Obama’s recent executive action will have a big impact until next year, though.
“I don’t think it’s going to have a major impact until you can file your paperwork to get this amnesty,” he said. “And that paperwork doesn’t look like it’s going to be available from the government for a couple of months. So I think the major impact is going to be in 2016, not 2015.”