Shortage of TRUE tax professionals

This may be a tabu subject, but in my city, and many cities, there seems to be a shortage of EA's and CPA's, truly trained. Let's please not have a thread about non EA's/CPA's being equal etc. That's another day.

My city has many tax professionals without credentials but not EA's or CPA's, and of course they may be good, who knows. I sold my practice but maintain about 100 clients that I do from a CFP firm that I joined. The firm has about 15 CFP's and they can't find a CPA/EA to refer to.

Moreover, this is driving up prices. I see firms charging $2,500 for a 1040 with a schedule C, Schedule D a few nuances but nothing crazy.

I literally have a guy in my office BEGGING me to do his 1040. He paid 5K to a regional firm. Said he felt like he was dealing with an 800 number. His return, once in my system might take 5-7 hours if he provides all the docs in a good manner. 3 K1's active, 2 rentals, and a complex set of 1099 B's from 2 accounts.

I have now set my minimum at $600 (UP FROM $500) and clearly state on my invoice that my rate is $3XX an hour.

My buddy is a controller in Boston. Sent an LLC/1065 of his bosseS to get done. 1 building, very simple. He said the fIrm charged him $3,300. I looked at it. Would have taken me 2 hours if I worked slow.

Any one else noticing this??? Any thoughts?

The mandatory 5 year schooling to be a CPA in my view has created some of this.

I agree, the shortage is real. And real bad. Even some of the folks with letters after their names are not good. I am dealing with an EA (not bashing the letters, I have great respect) I hired to be a tax manager 5 months ago. She is average, but she cannot take constructive criticism well AT all and is very slow at the work she produces; like 2-3 times longer than it takes me. But she is the best I've been able to hire; it is impossible to find good people. For the first few months of this year I had hopes and dreams of expanding. I added a ton of clients last year and into this year, added two staff and thought I'd be able to easily transition into financial planning and investment management. This morning I am planning on how I deal with losing two people and going back to working on my own with one very part-time admin who cut back her hours this year. Frustrating as hell.

I have seen the ridiculous prices in the past, but not lately (just because I have not seen invoices or heard other stories) but what makes the prices even worse is that the returns are usually done by a rookie and many times done incorrectly.

I follow the r/accounting community on Reddit and it is nothing but an employer/industry-bashing forum. The biggest problems that keep coming up are the 5-year requirement and long and unsustainable hours. Both need to change to get people back in the industry.

This has been a long, slow slide over the last twenty or thirty years. I saw it in the UK before I left and I see it here. In the UK, most public accounting tax departments outside the Big Six (as it then was) drew their staff from the inland Revenue. Do a few years there, in the right positions, and you could transition to public accounting. Then UK taxation moved towards something that roughly resembles the US system and the Inland Revenue automated. That included closing down local offices. I warned my last employer in the UK that the profession would have to take on the task of training tax professionals. Of course, they ignored me. Now they are, essentially, a technology advisory company that does auditing and taxes on the side. This was a large local firm - as large as most Group A firms and one Big Six locally. Very sad to see them lose their way.

I assume the prices you quoted in the OP are because of minimum pricing, or perhaps per-form pricing. I set a low minimum price to keep the worst price-shoppers away. For instance, the credit union stopped doing tax returns. I have had loads of enquiries and precisely one client. I have done better with other firms setting a much higher minimum fee and getting the work they don't want. That's fine. I do. Every job that I picked up this year has resulted in 100%+ recovery. I'm fine with that.

How much of the CPA exam overlaps what is taught in a master's program? If it's a lot, that is a waste of everyone's time and sucks money out of the economy, to no good effect. The focus on exams, rather than training and experience is misguided in my view.

The CPA family has been decreasing since 1990s. The Minnesota CPA society came out with a scary statistic: Of the CPAs in public accounting in Minnesota 75% were over age 50.

There are very good preparers outside of the CPAs, and we are hoping they must be growing!!!!

Great topic and lots of fodder for discussion.
Of of the biggest dynamics, in my opinion, is the narrative around being a tax professional. Long hours, no family life for 3 months, "chained" to your desk. Who signs up for that without meaningful compensation? Other jobs that have such a negative narrative are usually followed by "but at least it pays well". That's not the case in our profession.
To begin the reality, which precedes the narrative, prices have to increase. In my practice, if you are a relatively simple return, but you want a CPA's eye on it you are either an early comer or you go on extension. Hours can be managed by no longer letting clients manage our timelines for work and extending more returns.
We can't let our staff burn out and we need to more intentionally train them. I have a wonderful young lady working for me who is doing a great job and I don't ask her to sacrifice her personal life to work for me.

The CPA family has been decreasing since 1990s. The Minnesota CPA society came out with a scary statistic: Of the CPAs in public accounting in Minnesota 75% were over age 50.

I heard that same statistic when I was studying for my CPA 15 years ago. Plus ca change.

As a profession, we knew this was coming and we collectively did nothing about it. If anything, we made it worse, and then got bodyslammed by COVID -- existing members got health issues and/or died, and the tidal wave of changes that we had to deal with (tax law changes, PPP, ERC) led to more misery.

The 5 year requirement is a part of the issue in minting new CPAs, but it's ultimately a small part, because it's not the biggest deterrent to people motivated to become CPAs. The biggest deterrents are the stupid hours new CPAs are expected to work and the lengthened path to partner at low pay. Nothing will improve until decades after that is fixed -- it will take time for improvements in our profession to become widely known among high schoolers.

Hours can be managed by no longer letting clients manage our timelines for work and extending more returns.
We can't let our staff burn out and we need to more intentionally train them.

I've started requiring all first year compliance engagements to go on extension for all but referrals, and am thinking about changing that to include even referrals.

The way I've been selling is that we want to start on a good foundation. That a first year client's returns require more attention than a returning client's, and there are unknowns on our end that could lead to additional time required during the prep process. Pushing them to May or June allow me to dedicate more meaningful time to the returns, rather than cramming them in before 4/15 when everything is done at a very quick pace.

So far I haven't received much push back from prospects. At least not noticeable. Just questions about what that involves and the process. I don't think we realize just how many firms are not taking on new clients at all. Prospects have actually been speaking to multiple firms and realize that. They are willing to be flexible for the right firm I find...generally.

There's a secondary motive for me as well. I want to desensitize my client base to extensions. Some clients even thought you need to pay a fine or penalty if you file an extension, along with other misunderstandings.

I agree with above. The 5 year rule is stupid. I would not have made it if I had to do that. I was sick of school. Also, college is so much more expensive now. And...when I graduated, all that anyone knew was that I was able to get through college. When I started at PW, I didn't even know that FICA withholding on the W-2 was not tax deductible! The learning began when I went to work.

I think the other huge factor is when Congress changed the law so that partnerships, S corps, and some C corps could no longer be on a fiscal year-end. When I started, we had all of those on fiscal year-ends. We told the client is was for income deferral, but it was really so that we could spread the workload year round.

I will not take on any more clients who are unwilling to extend. I was actually ready for tax season to start. I was kind of bored. The work compression is insane, trying to earn 80% of my income in two or three months. The inability to spread out a very significant amount of work limits my earning potential.

I attend the Illinois Society of CPAs SUMMIT each year for CPE, and this is a heavy topic in the keynotes and many of the CPE offerings. Absolutely, the entry requirements to become a CPA have created this. The cost. The time. The burden. The headaches. The emotion of it all. Other than becoming a medical doctor, it is the most difficult career to enter. Becoming a lawyer is far simpler, and I know this from lawyers that are also CPAs.

It is good and bad. For the younger CPAs making their name in the profession, it is EXCELLENT. For the retiring CPAs, I don't know what to make of it. We can't find qualified staff, so support is reduced compared to prior years which in theory means value of firms decline. But, at same time, it is allowing us to truly charge what we are worth instead of the immensely suppressed fees of many decades past.

Another benefit is the SMART CPAs/tax preparers can now take control of situations. Clients cannot control us, because there simply are not any options. At same time, that can lead to even crappier service than CPAs and tax preparers are already known for, but those that excel at it will THRIVE!

So, I have very mixed thoughts being 37 and building a Firm in multiple states. I'm loosely discussing opportunities with other like-minded CPAs, so we'll see how things develop but the future is certainly bright for people like us...bleak for the others, and it is going to be a rough time for clients that are a PITA, drag their feet, etc.

Back to entry barriers, I also have VERY mixed thoughts on that. I see how many true idiots are in this profession (including EAs and CPAs--I know some of them, personally!) and so the thought of breaking down entry barriers scares the heck out of me. I do agree with the changes to the CPA exams, but perhaps we need to focus less on education credits (150 is insane) and more on real-world experience.

Another benefit is the SMART CPAs/tax preparers can now take control of situations. Clients cannot control us, because there simply are not any options. At same time, that can lead to even crappier service than CPAs and tax preparers are already known for, but those that excel at it will THRIVE!

So much of this!

It's great in some ways that it is so difficult to be a tax professional, even more difficult to be a good one, and even more difficult still to run a tax practice.

So hard, in fact, that most can't do it.

This barrier to entry, I figure, is why I will soon surpass that it takes to be in the top 1% of earners.

This all sounds arrogant, but this is not at all how I mean it. I'm actually very humbled by it. I hope I can do a great job for my clients at a reasonable price and continue to have success in the future.

I'm willing to work hard for it, but also while taking time to travel and relax during the off season. As of right now, I take about 7-8 weeks of vacation.

/ramble

PS: My buttocks are sore.

The work compression is insane, trying to earn 80% of my income in two or three months. The inability to spread out a very significant amount of work limits my earning potential.

This is the obstacle for someone starting their own practice. In my opinion, the only way for a sole practitioner to make a good living is to leverage your time with preparers who work for you or have enough experience and contacts to develop a boutique practice where you can charge substantially-above-market rates.

The CPA family has been decreasing since 1990s. The Minnesota CPA society came out with a scary statistic: Of the CPAs in public accounting in Minnesota 75% were over age 50.

That is breathtaking and instructive!

Agree with JAD that the work compression is insane. I could onboard so many more clients if the filing deadline were moved. I believe in the next five years many people will not be able to find qualified tax preparers. Those that are still practicing will not have the manpower to serve them. I know large CPA firms that are letting good clients go (because I did pick up a few of them last year) because a staff members left and they could not find replacements. Personally, after the last 4 years, I would not recommend anyone get into this profession due to the compressed workload, last minute and retroactive tax law changes and delayed software issues. Here it is March 30, and I still cannot efile a NC partnership tax return that elects the PTE tax. Yeah, the deadline was March 15.

Also agree that the education requirement needs to go back to 4 years. Yes, the pay needs to increase, but how exactly do firms do that when they can only service a set number of clients by the April 15 deadline? The work needs to be spread out more evenly through the year so firms don't have to worry about meeting payroll the end of the year. Extensions are nice, but not the answer. You still have to work up good numbers in order to have them pay in with the extension, in order to calculate a good first (and maybe second) estimated payment amount, see if they are eligible to make an IRA contribution, etc. I don't want to be the blame for underpayment penalties/interest. To me, extensions are not the answer.

Same here. But there are ways to manage this and I don't know why more professionals don't do this.

1. We are extending probably 75% of our 1040 clients.

2. Some of our clients for which we do prepare before 4/15 have 35-50% fee premiums.

3. There is no tax planning and very few tax projections done during tax season. If you think you may owe, that projection must be done before 12/15 of the previous year. Clients are aware they either pay for the estimate, pay the 50% premium to have a return done by 4/18, or pay the penalties.

4. All new clients must be tax planning and prep clients and they know they will go on extension. We give them a date range for when we will do their work. Right now new clients are going into a 7/1 time slot (and most of the summer is already filled already).

I will not take on any more clients who are unwilling to extend. I was actually ready for tax season to start. I was kind of bored. The work compression is insane, trying to earn 80% of my income in two or three months. The inability to spread out a very significant amount of work limits my earning potential.

Agree with JAD that the work compression is insane. I could onboard so many more clients if the filing deadline were moved. I believe in the next five years many people will not be able to find qualified tax preparers. Those that are still practicing will not have the manpower to serve them. I know large CPA firms that are letting good clients go (because I did pick up a few of them last year) because a staff members left and they could not find replacements. Personally, after the last 4 years, I would not recommend anyone get into this profession due to the compressed workload, last minute and retroactive tax law changes and delayed software issues. Here it is March 30, and I still cannot efile a NC partnership tax return that elects the PTE tax. Yeah, the deadline was March 15.

Also agree that the education requirement needs to go back to 4 years. Yes, the pay needs to increase, but how exactly do firms do that when they can only service a set number of clients by the April 15 deadline? The work needs to be spread out more evenly through the year so firms don't have to worry about meeting payroll the end of the year. Extensions are nice, but not the answer. You still have to work up good numbers in order to have them pay in with the extension, in order to calculate a good first (and maybe second) estimated payment amount, see if they are eligible to make an IRA contribution, etc. I don't want to be the blame for underpayment penalties/interest. To me, extensions are not the answer.

Friend of mine is a controller, makes about 150K a year. Expert at QB's and VERY good with taxes. I recommended he take the EA exam, quit his job, and open a shop. He could bang out 50-80 business returns in the 3K range and 100 personals, average fee of $1,000. Add to that some billable projects in the year. What other profession, now with what you describe, can a new entrant make in excess of 200 to 250K in 2 years?

I am the outlier here. I do NOT like extensions. In fact, if clients routinely want extensions, I try to get rid of them. I have shrunk my practice to about 120 1040's and will have only 6-8 extensions. ALL waiting on K1's. I want total relaxation from May to DEcember now.

Seaside... I'll actually be at CB 4/8-4/10. Just need my laptop to stay on top of things.

"Seaside... I'll actually be at CB 4/8-4/10. Just need my laptop to stay on top of things."

Good for you! Sounds like you have some time to come help me out!

Southpark, you have a great practice now. Wish I were in the same boat. Would love to let some of my old clients go, but I just can't send a 70-80 year old off to find someone new at this point, since I have been working with them for about 20 years.

"Seaside... I'll actually be at CB 4/8-4/10. Just need my laptop to stay on top of things."

Good for you! Sounds like you have some time to come help me out!

Southpark, you have a great practice now. Wish I were in the same boat. Would love to let some of my old clients go, but I just can't send a 70-80 year old off to find someone new at this point, since I have been working with them for about 20 years.

Most of my clients in that age category are giving their children POA, dying, or both.

This barrier to entry, I figure, is why I will soon surpass that it takes to be in the top 1% of earners.

State or national?

I'm in top 5% and way things are going, expect to hit top 1% (earnings) within 2-3 more years.

I just can't send a 70-80 year old off to find someone new at this point, since I have been working with them for about 20 years.

This is final year for some of my clients--including elderly--to adjust to how I operate my business or they'll be let go to find another CPA. I am tired of the few clients that have smartphones and manage to use them well, but refuse to adopt the simple technology I offer them to use.

Yes, the pay needs to increase, but how exactly do firms do that when they can only service a set number of clients by the April 15 deadline?

The answer is that prices will have to rise and that more of the value of the firm will need to be shared with the labor force instead of being given to the firm owners. It's basic supply and demand at play.

There has always been room in our profession for people who want to work seasonally, and perhaps you will see that more and more. I personally find it appealing to work ~50 hours a week when it's cold and snowing if it means I can spend my summers hiking at state parks and keeping my office time to around 10 hours a week. It's easier to do this if you're building your own firm, but even established CPA firms would be lining up to hire good people who wanted this sort of work-life balance.

It is good and bad. For the younger CPAs making their name in the profession, it is EXCELLENT. For the retiring CPAs, I don't know what to make of it. We can't find qualified staff, so support is reduced compared to prior years which in theory means value of firms decline. But, at same time, it is allowing us to truly charge what we are worth instead of the immensely suppressed fees of many decades past.

This is true, 100%. If you're still growing your practice, it's an amazing time to pick up clients. If you're established, staffing is extremely difficult. If you're getting ready to sell your practice, it's a nightmare because who in their right mind would pay for new clients right now?

If you're getting ready to sell your practice, it's a nightmare because who in their right mind would pay for new clients right now?

This is a big part of why I am on my own now and not setting up to purchase the practice I joined in April 2021.