New York firm opens online tax prep business
CWS CPA LLP has started a new online tax preparation business this tax season known as Henry.tax, staffed by CPAs, including stay-at-home parents who work part-time.
The online business operates separately from the New York-based accounting firm, according to Henry.tax CEO Michael Chen. It’s aimed at what he calls HENRYs, “high earning, not rich yet” clients. He sees it as an alternative to DIY software like TurboTax, tax prep chains like H&R Block and Jackson Hewitt, and traditional accounting firms.
“All of our advisors on our platform are CPAs with at least 10 years of experience,” said Chen. “When we built the system, we said, ‘Why do people charge so much?’ And after speaking with a lot of people, and being CPAs ourselves, a lot of that has to do with inefficiencies where you don’t capture everything on the front end, which requires you to have multiple communications back and forth. Then there’s billing, then there are follow-ups and collections.”
Instead the front end of the Henry.tax website asks users a series of questions and then asks them to upload some of their information. “On the back end we take that information and we convert it into a set of work papers that are extremely easy to understand for accountants, so that we can prepare the return with minimal interaction or back and forth,” said Chen. “Our system takes payment via credit cards, so there is no collection issue that we need to deal with. We hope to streamline the process and make it more efficient so that we can do more.”
His firm began developing the site last year and opened it up to users in January. As of last week, more than 50 people had signed up and approximately 10 tax returns had been completed. Approximately 30 CPAs are working for the site, according to Chen. Even though many accounting firms traditionally have trouble finding enough talent to handle the tax prep work during busy season, his firm has managed to attract parents who can work part-time from home.
“When we launched this platform we thought there are a lot of resources in the industry, because we know that in accounting firms you have part-time personnel coming in and out of most firms,” said Chen. “A lot of them are stay-at-home moms or stay-at-home dads. They’re the ones who have significant experience, but because of family environment or expansion of family they have decided to prioritize their family over work. We thought we could build a system where they tell us how many hours they can work, and based on how many hours they’ve committed to us each week, we’ll flow the right amount of returns to them, so that they’re only working for the amount of hours that they ask for.”
Another source of employees is startup tax practices that need some extra work. “In terms of talent pool we have both stay-at-home parents as well as people who recently started their own firm,” said Chen. “We have senior managers and directors of very large firms that took a couple of clients and just started their own practice, and because they started their own practice, in year one and year two, they have excess capacity that they’re willing to sign on to help absorb our excess capacity. So from a value standpoint we think our users are getting a phenomenal value for the type of people working on their returns for the cost.”
The base charge is $250 per return. “We’ve done enough returns to see that most returns will be covered by our base charge,” said Chen.
He doesn’t see the online tax prep site competing for clients with his accounting firm, CWS CPA LLP, which caters to high net worth individuals and family offices. “We have families on the Forbes list,” said Chen. “We have hedge fund managers. We have private equity funds and managers. We have real estate developers, and our firm is located in New York City. … We’re very hands on, we’re not a compliance shop. We’re so much more of a consulting shop, so we do very few tax returns. Most of our work relates to consulting and advisory.”
The two businesses can work hand in hand as needed, though. “It’s currently two separate entities, but obviously because of the resources we have at CWS, it’s a tremendous help in building Henry,” said Chen. “We don’t view the two businesses having any conflicts between them. It’s two distinct, separate client bases. But I think what we know is that if you’re a HENRY in the marketplace, there is a need for you, and we think we have the solution to address that need.”