Tax Preparation Filers

Part
01
of six
Part
01

Self-employment in Puerto Rico

In the attached Google document under section 2. "Simple total for the number of people filing who are self-employed in Puerto Rico
2016," I have provided analyses of the total number of employed persons in Puerto Rico, the total number of self-employed persons, the total number of self-employed persons filings returns and other forms and the total number of persons not filing. To determine those numbers, I relied on government data from the Internal Revenue Service (IRS), the Bureau of Labor and Statistics and Puerto Rico's Department of Labor and Human Resources.

On the document I have explained my assumptions and provided elaborate calculations explaining how I arrived at the answers. You can access the document with the information here.
Part
02
of six
Part
02

Projected growth of self-employment in Puerto Rico 2017 - 2023

The number of self-employed workers in Puerto Rico is calculated to grow from 133,826 in 2017 to 144,430 by 2023 at a CAGR of 1.27%.

Your requested information is also prepared for you in the "Puerto Rico Self-Employment Growth Rate 2017-2023" sheet of the attached Tax Preparation Industry document.

Below you will find a deep dive of my findings and methodology.

METHODOLOGY

To complete your request, I looked for self-employment projections for Puerto Rico from official resources including the Bureau of Labor Statistics. I found an official resource from the Puerto Rico Department of Labor and Human Resource providing the exact figures for self-employment from 2012-2022. I calculated the compound annual growth rate for this period and extended it by one year to determine 2023 numbers.

I did not find any additional data such as the age or gender of self-employed people in Puerto Rico. The report also did not give a breakdown of the self-employed by industry. However, I found a recent ruling regarding taxation of the self-employed in Puerto Rico that I believe will be helpful to your project. Please continue below to see the results of my research.

PUERTO RICO SELF-EMPLOYMENT 2017-2023

The Puerto Rico Department of Labor and Human Resource published the report "Puerto Rico Long-Term Industry & Occupational Projections 2012-2022" in 2014. I have determined that this is the most recent and only existing version of the report.

In pages 2-6 the report details the 10-year projection of employment for different industries in Puerto Rico. In p.6 the report includes the total number of self-employed workers from 2012 to 2022:

2012 - 125,587
2022 - 142,606

The report notes that by 2022, a total of 17,019 self-employed individuals will have been added to the original 2012 count.

I used these figures to determine the compound annual growth rate (CAGR) at 1.27%. Therefore, I applied the CAGR to the following years:

2017 - 133,826
2018 - 135,537
2019 - 137,271
2020 - 139,027
2021 - 140,805
2022 - 142,606

Applying the same rate for another year yields:
2023 - 144,430

SELF-EMPLOYMENT TAX

RSM reported in 2016 that the Tax Court ruled in favor of the Internal Revenue Service regarding taxation of self-employed individuals in US territories including Puerto Rico. In the case of Jose M. Curet v. Commissioner, self-employed consulting engineer Mr. Curet asserted that he need not pay any US tax since he was a resident of Puerto Rico and paid all his taxes there. The US Tax Court disagreed with Mr. Curet and ruled that he was still subject to the US self-employment tax as well as social security tax.

The IRS subsequently prepared an alternative self-employment tax return for Mr. Curet along with penalties.

CONCLUSION

To wrap it up, based on the projections of the Puerto Rico Department of Labor and Human Resource report, the number of self-employed workers in Puerto Rico is calculated to grow from 133,826 in 2017 to 144,430 by 2023 at a CAGR of 1.27%. Also, the US Tax Court ruled in 2016 that self-employed individuals in Puerto Rico are still required to pay US taxes including self-employment and social security taxes.

Your requested information is also prepared for you in the "Puerto Rico Self-Employment Growth Rate 2017-2023" sheet of the attached Tax Preparation Industry document.
Part
03
of six
Part
03

Tax Preparation and Spanish-Speaking Filers

While there is no pre-existing information to fully answer your question, we've used the available data to pull together key findings. In 2016, only 22% of Hispanics filing tax returns in the US used a tax filing program. The majority of this population depends on paid tax preparers or advice from friends and volunteer tax services. However, some top tax preparation software recommended to Spanish-speaking tax filers include TurboTax, H&R Block, TaxAct, and eFile, while some Puerto Rican tax filing software options include eFile Puerto Rico, PRSoft's My PRTax, and Expert PR Taxes.

Below you'll find an outline of our research methodology to better understand why the information you've requested is publicly unavailable, as well as a deep dive into our findings.

METHODOLOGY

In determining which tax preparation software is used by Spanish-speaking tax filers or Spanish speakers filing 1040PR, we searched the IRS website for statistics on the historical use of such programs. However, we found no data on this segment. We also searched for tax industry or new media sources for statistics or anecdotal commentary on the use of such programs by the Spanish-speaking or Hispanic population. In addition, we tried to find polls or surveys that might have been conducted among these tax filers with the hope of finding precompiled data. Again, we found no solid data using this research method. To further our research, we used Spanish phrases for 'tax preparation software' (software de preparación de impuestos), 'tax filing' (la declaración de impuestos), 'tax filing software' (software de archivo de impuestos), and 'tax software' (software de impuestos). We filtered results for 2015 and 2016 in search of articles or reviews promoting specific software solutions to the Spanish-speaking population for the 2016 filing year. We also specifically looked for data on Puerto Rican tax filers, using the methods described above. Since you are interested in the 2016 tax filing year, some of our sources are older than our typical two-year time frame.

FINDINGS

The National Taxpayer Advocate offers a section on "Understanding the Hispanic Underserved Population" in its 2015 Report to Congress, the most recent year for which they offer this focus. According to this document, the Hispanic population of US taxpayers overwhelmingly uses outside services or the counsel of others to prepare their taxes. Fully 76% of those surveyed use a paid tax return preparer, attorney, CPA, or enrolled agent to prepare their taxes, while another 16% rely on friends and 6% use free tax services offered by volunteers. My search for more recent data compiled by this organization was not fruitful.

According to 2016 research conducted by TurboTax, however, just 22% of Hispanic tax filers in the US use a do-it-yourself (DIY) online tax preparation software. So, while it appears that tax preparation software may be growing in popularity among this population, it remains a low percentage of the population.

Since the percentage is so low, it may account for the lack of data regarding the use of these programs among this particular population of tax filers.

SOFTWARE

While we found no solid information regarding the programs that were actually used by Spanish-speaking tax filers for the 2016 filing year, we were able to identify several programs that cater to this audience. Data regarding these software solutions has been compiled in the attached document, as requested.

A 2015 article at Comologia, an informational site for Spanish speakers, recommends tax preparation software for this population of tax filers for the 2016 filing year. While we cannot attest to whether or not this population actually used these software products, they are marketed to the Spanish-speaking population and are, therefore, likely candidates. Using Google Translate, I've explored the Comologia article for details about these programs. The programs outlined in the attached document are TurboTax, H&R Block, TaxAct, and eFile.

We also explored software that may be used by tax filers in Puerto Rico, the only Spanish-speaking US territory. Three programs were identified: eFile Puerto Rico, PRSoft, and Expert PR Taxes.

CONCLUSION

In conclusion, while there is no solid data regarding the tax preparation software used by Spanish-speaking U.S. tax filers and Spanish-speakers filing 1040PR forms in the tax year 2016, we were able to learn that some recommended software products for this population include TurboTax, H&R Block, TaxAct, eFile, and My PRTax. The details of our research can be found in the attached document.
Part
04
of six
Part
04

Tax Preparation and the U.S. tax filers under the ADA

Based on our research, those defined under the ADA Act should be able to utilize TurboTax, H&R, a local VITA program, or potential tax prep sessions hosted by local government. Our write up of these companies are included below, as well as in the Tax Preparation Industry document.

We also made a note to ensure these programs and filing capabilities were available for the 2016 tax year.

TurboTax

Their website has plenty of information regarding the qualifications and information regarding disability tax credits and deductions. Articles are provided on specific topics providing a step by step process for filing, as well as assurances that their software can help calculate these items. For example, on the page for "Schedule R: Tax Credit for Elderly or Disabled" the article mentions at the bottom "...if you use TurboTax, we’ll handle all these calculations for you, behind the scenes and tell you how much of the credit you are qualified to receive." The software is capable of handling medical expenses, as well as deductions for small businesses who have engaged in construction to make their premise ADA compliant.

H&R

Like TurboTax, the company has a page dedicated to answering topics regarding disability. This showcases their knowledge, as well as the ability to handle issues on their software. Additionally, the company was sued in 2014 by the Federation of the Blind, followed by the Department of Justice who joined the case afterwards. The H&R website then took special notice to make their website ADA compliant, ensuring it could serve this population correctly.

VITA

A federally sponsored program that offers free tax prep for qualifying residents, including those on disability. The Volunteer Income Tax Assistance (VITA) program is open to those who "make $54,000 or less, persons with disabilities and limited English speaking taxpayers."

Vita programs may operate under other aliases that are continuously offered year after year. For example, the county of Santa Cruz County's Senior Citizen OUTreach (SCOUT) has routinely provided tax services to "to seniors, individuals with a disability, and low income residents." The program utilizes VITA's offerings to make this program possible.

Local Government and Organizations for Deaf

Mayor's Office in large cities will offer free tax prep for targeted communities. The city of Houston offered tax prep for the deaf community with ASL interpreters on the spot. The Boston Tax Help Coalition (BTHC) offered state-certified interpreters to service the community and help file taxes in coordination with the Mayor's Commission for Persons with Disabilities.

Small scale operations have made efforts to provide tax prep for local disabled groups. We found examples through local chapters of the Deaf Connect organization.

Other Information

Given your interest specifically in the 2016 tax year, we've provided tax rules that were changed or put in effect during this time period.

Changes to disability taxes for the year 2016 was the inclusion of ABLE accounts, Paralympic winners are no longer taxed on the value of their medal or awarded money, and Schedule R medical expense deduction which is awarded based on medical expenses consisting of 7.5% of your adjusted gross income or more. After 2016, this rate rose to 10%.

Conclusion

You can find the same summary of the software and services noted in your document under the heading "Tax Preparation and the U.S. tax filers under the ADA." Some of these programs are targeted towards specific groups of disability such as DeafConnect, some service any and all disabled groups such as the federal nationwide VITA program.
Part
05
of six
Part
05

Tax Filings under the ADA Pt 1

After an exhaustive search for the total number of filings for 2016 US tax filers represented under the ADA the information requested is determined to not be available in the public domain. However, it is possible to estimate, using additional data, the number of individual tax filings by disabled tax payers in 2016 was between 23,291,955 and 54,043,425.

Findings

The total 2016 US population ages 18-64 is 191,800,000 + 10,560,000 = 202,360,000 (please note that I assumed an even distribution for each age 15-19).
Total 2016 disabled population:
10.5% of 18-64 population = .105 * 202,360,000 = 21,247,800
35.4% of 65+ population = .354 * 48,480,000 = 17,161,920
21,247,800 + 17,161,920 = 38,409,720
(38,409,720/(202,360,000+48,480,000))*100 = 15.3%
Thus, 15.3% of US adults ages 18 and up are disabled.
I then picked up the number of individual returns filed in 2017 (note my assumption is that all returns filed in 2017 were for 2016 tax year. This will include any late filing and filings from prior years, which would likely be minimal).
Total individual returns filed = 152,235,000
Disabled proportion = 15.3% of this (as calculated above) =
.153 * 152,235,000 = 23,291,955 returns filed by disabled taxpayers.
We can also estimate the proportion using percentage of disabled work force:
(5,372,000/151,436,000) * 100 = 3.55%
.355 * 152,235,000 = 54,043,425 returns filed by disabled taxpayers. However, this number is likely understated because a large share of disabled taxpayers are likely not part of the workforce.

CONCLUSION

We can only estimate the exact number of disabled people filing an individual tax claim in the US as this data has not been made available. All information gathered for this request has been filled in on the attached document as requested.
Part
06
of six
Part
06

Tax Filings under the ADA Pt 2

In 2016, total tax collected in the US was $3.27 trillion, of which $1.846 trillion was from income taxes — $1,546.1 billion individual income tax and $299.6 billion from corporate income tax. Employment-population during this year was 151,436,000, as according to Census Bureau data. From these figures, the average tax revenue per American worker based on individual income tax was $10,209.60 [$1,546.1 billion/151,436,000].

Due to the absence of data available in the public domain, the research for this request led us to use triangulation and estimation to come up with an estimated tax amount collected for 2016 from U.S. tax filers represented under the ADA. The worker's population, employed with income, represented by the Americans with Disabilities Act (ADA) was 5,372,000 in 2016. The estimated average tax revenue per ADA worker was $6,318.96 annually, thus translating into an estimated $33.95 billion tax revenues during this year. For this research, we assumed that all Americans employed with disabilities are qualified under ADA regulations and policies. Below you will find calculations, estimations, and assumptions of how these figures were derived. The final calculation has been added to the provided document under 'Tax Preparation and the U.S. tax filers under the ADA.'

INCOME TAX AND AMERICANS WITH DISABILITIES IN 2016


According to the U.S. Bureau of Labor Statistics, 17.9% of persons with a disability were employed in 2016. The employment-population ratio increased by 0.4 percentage point from 2015. From the Census Bureau data, the total number of employed persons with disabilities was 5,372,000 in 2016. These figures represent both full-time and part-time workers (3,564,000 full time, 1,808,000 usually works part-time, and 299,000 works part-time for economic reasons).

The average or median annual earnings of "non-institutionalized persons aged 21-64 years with a disability in the United States who were working full-time/full-year in 2016 was $40,300 (plus or minus $450)." This data was from Disability Statistics and was based on a survey conducted by the American Community Survey (ACS). The statistics show the states of Alaska, Connecticut, Maryland, and New Jersey recorded the highest earnings at $54,400, $53,400, $52,400, and $50,400 respectively. The lowest earnings record in 2016 was from Puerto Rico with annual earnings of $20,200 and Alabama with $34,800 per ADA worker.

By using a provided tax calculator and setting it up in year 2016, assuming the tax filer has disabilities and using the average annual earnings per sample state, it would give the following result.

Income tax (federal and state tax) per employed ADA:
Alaska = $5,510.00
Alabama = $3,941.00
Massachusetts = $6,696.00
California = $5,560.08
Connecticut = $7,130.00

The above five representative states would give an average income tax of $5,767.40 per ADA worker. If we use this average figure and multiply it with the 2016 Americans with disabilities workers' population, it will give us a roughly estimated number of $30.98 billion [$5,767.40*5,372,000]. This number may not be considered fully exhaustive as it is only coming from five representative states.

In 2014, American Institutes for Research (AIR) analysis found that about $31.5 billion estimated tax revenue was created by workers with disabilities. If in 2014 there were 4,985,000 population of workers with disabilities, then the estimated average tax revenue per ADA worker during that year was $6,318.96.

$31,500,000,000/4,985,000 = $6,318.96

Assuming that this average was similarly applicable in 2015 and also in 2016, and using the 2016 U.S. population of workers with disabilities identified for that year which is 5,372,000, then the estimated 2016 tax amount collected from US tax filers represented under the ADA was $33.95 billion, which is reasonably close to our earlier estimation of $30.98 billion.

2016 estimated tax revenues
= $6,318.96*5,372,000
= $33.95 billion

If we are to calculate the percent share of the estimated tax revenues from overall individual income taxes collected in the United States, the $33.95 billion represents only about 2.20% [$33.95/$1,546.1], as compared to the overall population of employed workers' percent share of 3.50% [5,372,000/151,436,000]. The slight difference may be due to the fact that in 2015, workers with disabilities earn 37% less on average than their "typically-developing peers" without disabilities.

CONCLUSION


While the exact tax amount collected from US tax filers represented by the Americans with Disabilities Act (ADA) in 2016 was not publicly available, we have presented an estimated figure which amounts to $33.95 billion. With the total individual income tax collected in the United States in 2016 which was $1,546.1 billion, the $33.95 billion represents about 2.20% of the total. Based on employed population from Census Bureau database in 2016, people with disabilities account for just 3.50%. In 2016, the total Americans employed (with and without disabilities) was 151,436,000, and the number of people employed with disabilities was 5,372,000.

Sources
Sources