Small, independent tax shops are burgeoning, fueled by layoffs elsewhere in finance, lower technological barriers to entry and increasingly complex filing requirements for individuals, organizations and companies.
Roughly three-quarters of the country's 44,000 tax businesses are one-person shops, according to the American Institute of Certified Public Accountants (AICPA). And almost half of tax accountants work in companies with fewer than 10 employees.
Mark Vogel, 53, set off on his own in July after 10 years as a partner at Homes, Lowry, Horn & Johnson Ltd., a midsize accounting firm in the Washington, D.C., area. It was a chance for him to focus more on his specialty, valuing companies for business deals and litigation, a relatively high-margin business in the trade.
"I've always wanted to have my own business, and public accounting was kind of the avenue for me," he said.
The most difficult part for Vogel was the start-up apparatus: getting a logo and letterhead, stocking office supplies and drawing up a marketing plan. The tax-work hasn't changed. "It kind of met my expectations," Vogel said. "I knew that it wasn't going to be easy, and it wasn't, but it wasn't harder than I thought it would be."
Filing taxes, like eating, is something we all must do, which makes the activity fertile ground for grassroots. Who doesn't know a cook who simmered a hobby into a bakery, café or catering service? The same thing can happen to those who start filing tax returns for friends and family.
Mark Koziel, director of specialized communities and firm practice management at the AICPA, said that small CPAs are thriving, in part, because of the Internet and increasingly inexpensive and effective tax software.
"What you are seeing is a change in the business model, because they don't have to build an office of bricks and mortar," Koziel said. "They can do it all virtually. Some of these small firms may have five employees that live all over the country."
Intuit Inc., the Mountainview, Calif., based maker of TurboTax and other accounting software, in December launched a new product aimed at tiny CPA shops. Dubbed ProLine Tax Online, the software allows tax accountants to file returns online and charges per filing, rather than a hefty licensing fee.
"It is analogous to the growth in the market," said Jorge Olavarrieta, Intuit's product manager of Proline. "We can either play in the space or choose to lose our customers by not playing in the space."
Interest in tax accounting overall is surging, as the sector is considered recession-proof relative to many roles in finance. In each of the past five years, the number of people taking the Certified Public Accountant exam has surged 16.4% on average. Almost 94,000 people took the test last year, versus 44,513 in 2004.
And in 2008, 66,000 students received bachelor's and master's degrees in accounting, the most since 1972, according to AICPA.
"It's very, very solid to be a CPA today," Koziel said. "Everybody still needs to file. And there are as much demand for audits as ever." The average return is also more complicated these days, as the government rolled out tax breaks and more people took on part-time or free-lance work in the wake of the financial crisis.
Even the giants of retail tax accounting see value in small, independent CPA shops. H&R Block, which boasts some 8,300 full-time workers, has launched a campaign to sell, or "refranchise" hundreds of its in-house retail offices. Last year, the Kansas City, Mo., based company flipped about 300 of its in-house offices to franchisees. And it is getting two to three times as many franchise applications as it was a few years ago.
"Someone who is entrepreneurial is key," said Doug Salaway, vice president of franchise development at H&R Block. "These are small businesses. Folks who love to get out there and talk about the business and market themselves, tend to be most successful. That's not to say that we don't also look for great tax knowledge."
H&R Block signs most new franchisees to a 10-year commitment, though turnover is low and many pass on the affiliation for generations.
On the whole, few CPA firms fail. If times get tight for accounting entrepreneurs, there is always friends and family.
"The only time in the history of the organization when we've lost members is in the case of a merger or acquisition," said Alan Deichler, president of CPAmerica, a trade group focused on helping independent tax companies.
How to Hang Your Own Shingle
While there is no formula for hanging a shingle for a tax shop, those who have succeeded recommend first logging experience at a larger company. They also suggest lining up some clients in advance, socking away some savings for marketing and start-up costs and becoming active in a local accounting society. Having a "CPA" after your name doesn't hurt, either.
Vogel, who left a position as partner, made sure to strike a deal with his former employer that allowed him to take his "book" of business. He also built up a $20,000 war chest in advance and made sure to keep his focus narrow, doing lucrative valuation work, rather than chasing lower-margin business.
Indeed, the AICPA recommends that those going it alone garner one of their four specialized certifications: financial forensics, business valuation, information technology or personal financial planning.
Gail Rosen has run a one- to five-person CPA shop near Newark, N.J., for 20 years, without ever having to advertise. She said that her best marketing has been happy clients and frequent participation in chamber of commerce functions and adult-education programs.
"When I got my first small client, I could see that that's what I liked -- the touchy-feely side of it," Rosen said. "Life is crazy and tax is crazy, so you really need someone to get into all those nitty-gritty details."
Rosen said the imperatives for a tax accountant going independent are a great computer with good tax software, a computer consultant, insurance and money for cash flow, as many clients pay their bills two or three months after the work is completed.
On busy days in April, Rosen will get into the office at 8 a.m. She will meet with about six clients for an hour or 90 minutes each before grabbing dinner and heading back to her desk until about 10 p.m. Once in a while, she'll hit the gym.
"I love my clients; I love my business; I love my staff," she said. "I don't want to be the next PricewaterhouseCoopers. I say that to people all the time, 'I'm going to be sitting here forever, just doing your taxes.'"
Write to Kyle Stock