Top Tax Preparation Software for Small Businesses
The top tax preparation software for small businesses according to their annual revenue, in descending order, are Intuit TurboTax, H&R Block, Blucora's TaxAct, Liberty Tax, Jackson Hewitt, FreeTaxUSA (Taxhawk, Inc.), Credit Karma, eFile (TaxWork, LLC), Drake Software, and TaxSlayer.
TOP TAX PREPARATION SOFTWARE FOR SMALL BUSINESSES ACCORDING TO ANNUAL REVENUE
1) INTUIT TURBOTAX: $2.52 billion
- Intuit has three business segments: small business & self-employed, consumer, and strategic partner.
- Intuit's TurboTax income tax preparation products and services, which belong to its consumer segment, are only offered and sold in the US and Canada.
- Intuit's consumer segment revenue, which is primarily derived from TurboTax desktop tax return preparation products and services sold in the US and Canada, amounted to $2.52 billion in 2018. Out of this amount, $237 million came from product revenue and $2.28 billion came from service and other revenue.
- Intuit cited H&R Block as their major competitor in its consumer segment, where TurboTax belongs. Their minor competitors in the US are Blucora's TaxAct and Credit Karma.
- In 2017, Intuit TurboTax had a market share of 19.8% in the tax preparation industry in the US. The company ranked second to H&R Block, which held a 20.7% market share.
2) H&R Block: $2.45 billion
- H&R Block operates as a single-segment business; and in the 2018 fiscal year, they generated a total revenue of $3.16 billion.
- Out of the total revenue generated in 2018, $2.45 billion specifically came from their US tax preparation transactions. The breakdown of the amount is as follows: $1.95 billion from assisted tax preparation fees, $243.16 million from DIY tax preparation fees, and $254.44 million from royalties.
- During the 2018 fiscal year, 19.97 million tax returns in the US were prepared through and by H&R Block.
- H&R Block cited Intuit, Inc. as their largest competitor in terms of DIY tax preparation services.
- In 2017, the tax preparation market was dominated by H&R with a 20.7% market share.
3) BLUCORA'S TaxAct: $187.29 million
- Blucora has two business segments: the wealth management segment and the tax preparation segment. Their tax preparation segment is solely comprised of their TaxAct business.
- In 2018, Blucora's tax preparation services segment revenue was $187.28 million.
- In the same year, TaxAct was top three among providers of digital tax preparation solutions based on the number of e-files made.
- Blucora cited Intuit's TurboTax, H&R Block, and Credit Karma as their tax preparation business segment major competitors. Their minor competitors include Liberty Tax and Jackson Hewitt.
4) LIBERTY TAX: $173.99 million
- Liberty Tax, Inc. has two operating segments: the US and the Canadian operations. However, since the products, services, regulatory environment, types of customers, and processes offered in these two operating segments are identical, they are aggregated into a single reporting segment.
- For the fiscal year 2018, which ended in April 2018, Tax Liberty earned $173.99 million, $7 million of which was generated by the Canadian operations.
- Liberty Tax sees Intuit TurboTax, H&R Block, and Blucora's TaxAct as major competitors.
5) JACKSON HEWITT: $50 MILLION
- Owler estimated Jackson Hewitt's annual revenue at $50 million, and it tags TaxAct, TaxSlayer, Bench, Drake Software, and National Tax Service as its top competitors.
- Jackson Hewitt was acquired by Corsair Capital on May 31, 2018.
- The last publicly available annual report filed by Jackson Hewitt to the US Securities Exchange and Commission was in 2010.
6) FREETAXUSA (TAXHAWK, INC.): $24.7 MILLION
- FreeTaxUSA is one of the three websites owned and operated by TaxHawk Inc. The other two are TaxHawk and Express1040.
- Owler estimates TaxHawk to have annual revenue of $24.7 million.
- Taxhawk, Inc. has an A+ rating on Better Business Bureau.
- TaxHawk was founded by a team of professional software developers and a CPA in 2001.
7) CREDIT KARMA: $20 million
- In 2017, Credit Karma announced to have generated a total revenue of $500 million the year before; however, Owler and Crunchbase report the company to have estimated annual revenue of $20 million in the present.
- The company has raised a total of $868 million in seven rounds of funding, with the latest funding, with the latest funding worth $500 million from Silver Lake Partners on March 28, 2018.
- Their tax preparation product is said to compete against TaxAct, TurboTax, and H&R Block.
8) EFILE: $17.9 MILLION
- eFile is owned by TaxWork, LLC.
- Owler estimated the company to have annual revenue of $17.9 million, generating $314,000 in revenue per employee.
9) DRAKE SOFTWARE: $13.2 MILLION
- Crunchbase tags TaxAct, H&R Block, and Turbo Tax as Drake Software's major competitors while Owler listed TaxSlayer as Drake Software's top competitor.
10) TAXSLAYER: $5 million
- TaxSlayer has estimated annual revenue of $5 million.
- Tax Slayer was founded as a brick-and-mortar tax preparation firm in 1965; and in 1995, began selling their tax proprietary software across the US.
- TaxSlayer fills approximately 10 million federal and state returns every year.
- With their tagline "Your Refund is Waiting," TaxSlayer's major selling point is focusing on the tax refund an individual might get from filing proper taxes. In fact, they are pushing to be known as a refund company instead of as a tax-prep service.
To look for the top tax preparation software for small businesses, we started our search looking for industry reports to see which companies have the biggest market share in the US. However, the closest we got is the tax preparation software developer and services reports, both from IBISWorld. In these two reports, Intuit Inc. and H&R Block Inc. are said to have the biggest market shares in tax preparations software developer industry and tax preparation service industry in the US; however, the specific figures of their market shares are behind a paywall. We looked for third-party articles that could have been written about these tax preparation industry reports to possibly uncover the market share figures, and we found the AdWeek article published in 2017 that cited IBISWorld as its source. According to the article, H&R Block held 20.7% of the tax preparation market, closely followed by Intuit TurboTax at 19.8%. Unfortunately, we couldn't find a more recent version of this article.
Next, we changed our research strategy and looked for lists of top tax preparation software for small businesses by leading publications and other credible third-party sources. We found several, but the software was ranked according to prices, features, user experience, ease-of-use, customer and tax supper, help resources, customer feedback, and BBB ratings. We didn't find any list that uses market share, number of users, number of tax filings per year, revenue, or other comparable quantitative metrics. From here, we collated all 12 lists of the top tax preparation software for small businesses, which can be accessed here, and ranked them according to the number of mentions, and the result is as follows:
- Intuit TurboTax: 12 mentions
- H&R Block: 11 mentions
- Blucora's TaxAct: 11 mentions
- Liberty Tax or eSmart Tax by Liberty Tax: 6 mentions
- TaxSlayer: 5 mentions
- FreeTaxUSA: 3 mentions
The following were only mentioned or recommended once:
- Credit Karma Tax
- Jackson Hewitt
- Halon Tax
- Drake Software
We used the collated list as a starting point to look for a quantitative metric we could use to rank them again. We looked for market share, annual revenue, the number of users, and the number of tax filings using their annual report. In the absence of a publicly available annual report or other financial statements, we used Owler, Crunchbase, and DB Hoovers, three leading tools that crowd source competitive insights of startups and privately held companies. Since information on market share, the number of users, and the number of tax filing per year are almost non-existent, we focused on the company's annual revenue for the final ranking.
There are companies that have different market segments. For example, Intuit has three market segments, and TurboTax, which is offered only in the US and Canada, belongs to the consumer segment. In this case, we only considered the total revenue of the said business segment, and not of the whole company.