US Tax Preparation Services - REDO

Part
01
of six
Part
01

US Tax Filers, Spanish Speakers - REDO

Using census data, we estimate that there were approximately 8.7 million individual tax return filers in 2016 whose primary home language was Spanish. Of this total, we estimate that there were approximately 2.2 million individuals that were LEP (Limited English Proficiency) filers. This data is included in the attached document, with our assumptions and calculations outlined below.

METHODOLOGY /CALCULATIONS

The US Census compiles its data every ten years. Due to the absence of compiled data for the number of "Spanish speaking tax filers in the US in 2016", we estimated the number of tax filers in this category.


Using 2010 census numbers, we found that 12.97% of US citizens speak Spanish in the home. This percentage helped us calculate an approximate number of those tax filers.

US Citizens 289,215,745 US Citizens
36,995,602 of those citizens speak Spanish as primary language at home
36,995,062/289,215,745 = 12.79% of the population speaks Spanish at home.

2016 US Census data estimated 321,039,800 US Citizens:
321,039,800 x 12.79% = approximately 41,060,990 of the population speaks Spanish at home assuming growth was parallel with the 12.97% margin.

It's important to note that Limited English Proficiency (LEP) among citizens who speak Spanish as their primary language was calculated as follows:

2015 LEP citizens accounted for 16,600,000 of the US population.

2016 There were 66,723,000 individual tax returns filed.

66,723,000 x 12.97% = 8,653,973 filers speak Spanish at home.
16,600,00 x 12.97% = 2,152,020 filers are considered as Limited English Proficiency with Spanish as their primary language

This data has been provided here.


Part
02
of six
Part
02

US Tax Preparation Services, Spanish Speakers - REDO

Extensive research and triangulation of available data showed that Spanish-speaking Americans prepared their U.S. tax returns in four ways: 1) 14,393,180 Americans used online software; 2) 15,352,725 used tax preparation services; 3) 4,547,410 prepared with the help of family or friends, and 4) 3,546,146 did it by themselves. In addition, those who did not prepare their tax returns number 3,838,181.

TRIANGULATING A NUMERICAL OVERVIEW OF HOW SPANISH-SPEAKING AMERICANS PREPARE THEIR TAX RETURNS

Preexisting information about the number of Spanish-speaking Americans who prepare their Federal Tax returns and how they prepare is lacking. With this, in order to obtain the requested information, the researchers had to perform a triangulation. We started by looking for the percentage of primarily Spanish-speaking Americans, which the 2010 U.S. Census reported as 12.9 percent, that would form as the basis of the triangulation.

Afterwards, the researchers proceeded to look for the biggest available survey of Americans that had a sample large enough to triangulate against the percentage of Spanish speakers found. A 2016 survey by GOBankingRates surveyed 5,028 Americans about how they filed their Federal Tax returns, and data showed 10.9 percent of Americans had family or friends doing tax prep for them; 34.5 percent used a digital tax prep tool or software; 28.5 percent hired accountants; 8.5 percent used IRS forms and calculated their taxes themselves; 8.3 percent hired brick-and-mortar companies; and finally, 9.2 percent did not file taxes at all.

From here, the researchers used the 2016 U.S. population to find out the number of Spanish-speaking Americans in 2016 by multiplying the 2016 U.S. population by the 2010 U.S. Census percentage of Spanish-speaking Americans. Thus, 323,405,900 x 12.9% = 41,719,361 estimated Spanish-speaking Americans in 2016.

To complete the triangulation, we multiplied the estimated number of Spanish-speaking Americans in 2016 with the percentages found in the 2016 GOBankingRates survey about how Americans filed their tax returns. The results showed:
1. Friend/family 10.9% = [41,719,361 x 10.9%] = 4,547,410;
2. Software (or digital prep tool) 34.5% = [41,719,361 x 34.5%] = 14,393,180;
3. Tax prep services (accountants/brick-and-mortar companies) 36.8% = [41,719,361 x 36.8%] = 15,352,725;
4. Self-calculation 8.5% = [41,719,361 x 8.5%] = 3,546,146;
5. Didn't file at all 9.2% = [41,719,361 x 9.2%] = 3,838,181.

The full research brief, as well as the whole triangulation process and sources of used data, is written in the following Google doc: https://docs.google.com/document/d/1wPWTRmd7ycAqb3kRLpobx_mN1rrorlBB_Qbw7VBFq9M/edit#heading=h.i9f9r61nfg25.

CONCLUSION

From these calculations, it can be assumed that, in filing tax returns, 14,393,180 Spanish-speaking Americans used online software; 15,352,725 used tax preparation services; 4,547,410 prepared with the help of family or friends, and 3,546,146 did it by themselves. In the meantime, around 3,838,181 did not prepare their taxes at all.

Part
03
of six
Part
03

Self-employed / gig economy workers in the US

In 2015, there were 15 million self-employed people working in the US. The number of self-employed people decreases by 0.1% each year since 1994. However, the total employment increased by 0.3% which brings the total number of self-employed people to increase each year. Our forecast gives us an estimate of almost 20 million self-employed people in 2023. A summary of this data has been compiled in the attached document.

TRIANGULATION

For the following years, existing data was provided:
In 2015, 15 million self-employed people were working in the US.
In 2016, the number grew to 16 million.
In 2017, the number increased to 16.78 million.

To get the number for future projections, we had to triangulate data. The first step in this process was looking at the total number of employed people in the US which amounts to 125.97 million in 2017.
A simple calculation (16.78 million/125.97 million) shows that 13.78% of the total amount of people working in the US are self-employed.

This source shows that the total employment rate increases for 0.3% on average each year. This means that the total employment will be as follows:
2018: 125.97 x 1.03 =129.75
2019: 129.75 x 1.03 = 133.64
2020: 133.64 x 1.03 = 137.65
2021: 137.65 x 1.03 = 141.78
2022: 141.78 x 1.03 = 146.03
2023: 146.03 x 1.03 = 150.14

According to this source, the self employment rate decreased by 2.1% from 1994 to 2015. This is a 21-year period. A simple calculation (2.1%/21 years) shows that on average, the self employment historically decreases by 0.1% each year. We can apply the decrease for each of the years in our forecast. Our base year is 2017, where 13.78% of the total amount of people working in the US are self-employed. It follows that in 2018, 13.68% will be self-employed, in 2019 the rate will be 13.58% and so on.
This means that the self employment will be as follows:
2018: 129.75 x 0.1368 = 17.75 million
2019: 133.64 x 0.1358 = 18.15 million
2020: 137.65 x 0.1348 = 18.55 million
2021: 141.78 x 0.1338 = 18.97 million
2022: 146.03 x 0.1328 = 19.39 million
2023: 150.14 x 0.1318 = 19.79 million

A summary of this data has been compiled in the attached document.

CONCLUSION

In 2015, 15 million self-employed people were working in the US. In 2016, the number grew to 16 million, while in 2017, the number increased further to 16.78 million. In 2018, this number will be at 17.75 million and will grow to 18.15 million in 2019. The estimate for 2020 is 18.55 million, and growth is expected to push that number to 18.97 million in 2021. In 2022, there will be 19.39 million self-employed people in the US, and in 2023 that number will reach 19.79 million. A summary of this data has been compiled in the attached document.
Part
04
of six
Part
04

US Tax Filers, ADA - REDO

The total number of the U.S. tax filers who possibly could have required tax preparation software that is ADA compliant in 2016 was 5,372,000. The representative number of self-employed ADA workers was 569,432, or accounting to 10.60% of the total. In the attached document, I have entered 5,372,000 as total number of filings under the section of "Tax Preparation and the U.S. tax filers under the ADA". Below you will find more details of our findings.

EMPLOYED PEOPLE WITH DISABILITY IN THE UNITED STATES

The Census Bureau monitors annual statistics of the employment status for persons with disabilities in the United States. Data collected is based on reports released by the U.S. Bureau of Labor Statistics and surveys sponsored by the Department of Labor's Office of Disability Employment Policy (ODEP). The Office of Disability Employment Policy supports and acknowledges the Americans with Disabilities Act (ADA) policies and regulations including monitoring, enforcing and investigating claims involving the ADA. Thus, we can conclude and assume that the data collected by the Census Bureau as pertaining to statistics of persons with disability is fully compliant with ADA requirements.

Under the ADA requirements, you are qualified to have a disability if you carry the following conditions; 1) a physical or mental impairment that substantially limits one or more major life activities, 2) a record of such an impairment, or 3) you are regarded as having such an impairment. The two basic conditions to having a disability includes 1) you must have a physical or mental impairment, and 2) the impairment must substantially limit your major life activities.

In the fiscal year 2016, Census Bureau database recorded a total of 5,372,000 employed persons with disability in the United States. This full figure represents 17.9% of the total persons with a disability workforce and have worked either full-time or part-time. The breakdown is as per below:

3,564,000: Usually work full-time (representing 66%)
1,808,000: Usually work part-time (representing 34%)
299,000: Work part-time for economic reasons. These ADA workers refer to persons "who, whether they usually work full or part-time, worked 1 to 34 hours during the reference week for an economic reason such as slack work or unfavorable business conditions, inability to find full-time work, or seasonal declines in demand."

In 2016, the percentage of employed persons with a disability who are self-employed was 10.60%, as compared to 89.3% who are wage and salary workers.

Self-employed persons with a disability in 2016
= 5,372,000 * 10.60%
= 569,432

Wage and salary workers in 2016
= 5,372,000 * 89.3%
= 4,797,196

CONCLUSION

In summary, the total number of U.S. tax filers qualified under the ADA requirements is equivalent to the total employed persons with a disability identified in 2016 which was 5,372,000. This also represents the figure of Americans with disabilities "who would have required tax preparation software that is ADA compliant" during this year. Self-employed workers account for 10.60% of the total workforce which translates to 569,432.

Part
05
of six
Part
05

1040 PR Tax filers 2016

We have prepared a research brief containing information that has been triangulated. I began by analyzing IRS Data Book reports and uncovered how many individual tax returns were filed by employed people each year in Puerto Rico. I triangulated that data using the percent of self-employed people for 2013 thru 2016. The approximate amount of 1040-PR forms filed in 2016 is 34,579.

Executive Summary

Our research has identified the approximate amount of 1040-PR forms filed for 2016, 2015, 2014 and 2013. The amounts have grown from 31,514 in 2013 to 34,579 in 2016. The amount of 1040-PR forms that have been filed electronically have grown from 551 in 2013 to 1,248 in 2016.

While there was no publicly available data on the exact number of self-employed persons in Puerto Rico, we made some triangulations under the assumption that the percent of self-employed individuals reported in the Economic Analysis reports filed a return and used form 1040-PR. As a side note, while we do realize that not all self-employed persons file a tax return, despite being legally required, this is the closest we can come to a near approximation.

The detailed brief can be viewed here.
Part
06
of six
Part
06

US Tax Preparation Services TRENDS, Spanish Speakers

Using data provided in this document, this research will discuss the trends of tax preparation services for Spanish speakers in the United States. The data will reveal that, while there is an overall Compounded Annual Growth Rate (CAGR) of 5.7% for native Spanish speakers who file their taxes online, for every Spanish speaking person using online software (and thus, self-filing), there were around 2 using tax professional services. Native Spanish speakers who file their taxes traditionally (i.e., offline), did not grow at the same accelerated rate; they have only had a Compounded Annual Growth Rate (CAGR) of 2.0% over the same 2012-2016 period.

METHODOLOGY
Through individual sources of data provided by such places as the IRS, data was triangulated to observe the tax preparation trends amongst Spanish-speaking communities.

OBSERVATIONS
For the purpose of this research, the following assumptions were made:
1) Filings for Spanish speakers who were under the age of 19 would be taken care of by the parents. If a parent includes the income of a minor (<19) in his/her return, then s/he does not need to file a return. Hence, most of the tax base for Spanish speakers will consist of those persons 18 years of age and older. No further granular data was available as to how many below 18 years file individually vs. getting their income clubbed in parent's income.
2) 'Self-prepared' category of the e-filing receipts reported by IRS primarily constitutes the returns prepared by individuals using online software. This seem logical because taxes are filed in one of two ways: e-filing, and in-person visits to IRS office. Within e-filing, an individual can file his/her return either through tax professionals using their tax preparation services or on his/her own by using various tax preparation software/tools.
2012:
% of Spanish speaking people >=18 years= 8.3%
E-Filing Receipts through Tax Professionals: 76,322,000
E-Filing Receipts Self-prepared: 43,238,000
E-Filing Receipts through Tax Professionals for Spanish speakers: (76,322,000*8.3/100)=63,34,726
E-Filing Receipts Self-prepared for Spanish speakers: (43,238,000*8.3/100)=35,88,754
2013:
% of Spanish speaking people >=18 years= 8.3%
E-Filing Receipts through Tax Professionals: 77,268,000
E-Filing Receipts Self-prepared: 45,247,000
E-Filing Receipts through Tax Professionals for Spanish speakers: (77,268,000*8.3/100)=64,13,244
E-Filing Receipts Self-prepared for Spanish speakers: (45,247,000*8.3/100)=37,55,501
2014:
% of Spanish speaking people >=18 years= 8.5%
E-Filing Receipts through Tax Professionals: 77,875,000
E-Filing Receipts Self-prepared: 47,946,000
E-Filing Receipts through Tax Professionals for Spanish speakers: (77,875,000*8.5/100)=66,19,375
E-Filing Receipts Self-prepared for Spanish speakers: (47,946,000*8.5/100)=40,75,410
2015:
% of Spanish speaking people >=18 years= 8.7%
E-Filing Receipts through Tax Professionals: 78,406,000
E-Filing Receipts Self-prepared: 50,378,000
E-Filing Receipts through Tax Professionals for Spanish speakers: (78,406,000*8.7/100)=68,21,322
E-Filing Receipts Self-prepared for Spanish speakers: (50,378,000*8.7/100)=43,82,886
2016:
% of Spanish speaking people >=18 years= 8.9%
E-Filing Receipts through Tax Professionals: 78,736,000
E-Filing Receipts Self-prepared: 53,115,000
E-Filing Receipts through Tax Professionals for Spanish speakers: (78,736,000*8.9/100)=70,07,504
E-Filing Receipts Self-prepared for Spanish speakers: (53,115,000*8.9/100)=47,27,235
Hence, from the above we can say that the number of Spanish tax filers using online software has risen from 35,88,754 in 2012 to 47,27,235 in 2016. This represent a CAGR of 5.7% over 2012-2016 period. [(4727235/3588754)^(1/5)-1]*100=5.7%
CAGR for tax professional service users can be calculated by observing the growth from 63,34,726 in 2012 to 70,07,504 in 2016. This represents a CAGR of 2.0% over 2012-2016 period. [(70,07,504/63,34,726)^(1/5)-1]*100=2.0%
The ratio of filings by Spanish speakers using tax professional services to filings by Spanish speakers using online software (i.e., self-prepared) in 2012= 63,34,726/3588754=1.77
The ratio of filings by Spanish speakers using tax professional services to filings by Spanish speakers using online software (i.e., self-prepared) in 2016= 70,07,504/4727235=1.48

CONCLUSION
While native Spanish speakers, like native English speakers, use a wide variety of tax preparation services, there is a strong growth of filings using online software. However, for every one Spanish speaker who uses online software to file his/her taxes, there are about two who deploy the aid of professional services to file their taxes.
Sources
Sources