Dentistry. Construction. Real estate. Working with clients in these industry verticals can provide your firm with incremental growth. While these niches are certainly solid areas to explore as you look toward increasing your firm’s profitability next year, it’s also worth considering some of the markets where the competition is considerably less in order to get ahead of the curve when it comes to capitalizing on their profit potential. In this spirit, consider including the following untapped niches of opportunity as your firm looks ahead to 2021:
International taxes. According to 2016 data from the U.S. State Department, there are approximately 9 million American citizens residing in foreign countries—all of whom need to file their taxes and report on other financial activity as required by the IRS.
In addition, the Pew Research Center reported that in 2020 there are nearly 15 million foreign nationals living in the United States as permanent lawful residents or temporary lawful residents. These individuals must also file tax returns and report other aspects of their financial activity such as the Report of Foreign Bank and Financial Accounts (FinCEN Form 114) with the IRS.
“Whether you look at carving out a niche for your firm in the inbound international tax market (foreign national residing in the U.S.) or outbound international tax market (U.S. citizens living abroad), if your firm can help individuals and businesses navigate the often complex tax filing and compliance requirements, the opportunity can become a profit center for your firm,” said New York City CPA Jonathan Medows, Managing Member of MEDOWS CPA. “This is especially true if you focus on developing a specialization in the tax and compliance requirements of one or two countries where there is a strong client base.”
Forensic accounting. Forensic accounting is another niche of opportunity which demands specialized expertise from the firms who wish to pursue it. Market research firm IBIS World reported the market size of this niche in the United States, measured by revenue, to be $7.6 billion in 2020 while reflecting an average annual growth rate of 3.8 percent between 2015 and 2020. IBIS World projects the market will continue to see a slightly lower growth rate over the next several years of just above 2.5 percent.
While banks, investment firms and the government comprise nearly half of the market for forensic accounting services, the small business fraud and individual legal (i.e. divorce investigation) segments of this market should not be overlooked, especially for smaller firms that are better suited to serving these types of clients.
“The Association of American Fraud Examiners estimates that organizations lose five percent of revenue each year as a result of fraud,” commented Dawn Brolin, a Connecticut-based CPA who specializes in forensic accounting and fraud prevention for small businesses. “It’s a growing problem and accounting professionals are uniquely qualified to provide business owners with solutions such as implementing internal controls and handling their day-to-day accounting to help reduce the chances that these organizations are negatively impacted by fraud.”
Cryptocurrency tax and compliance. If you’ve been watching the signs, you’re already aware that the IRS is spending more time and resources scrutinizing taxpayers’ use of virtual currency (Bitcoin, Ethereum, other cryptocurrencies). Kell Canty, CEO of Verady, developer of the Legible platform which provides cryptocurrency tax and accounting technology products, calls the cryptocurrency niche a rare “white space” for firms who are willing to invest the time to educate themselves and learn the professional grade tools available to service the growing number of high-value clients and prospects.
“Essentially, the IRS has recognized its own lack of education, guidance, and compliance around this new asset class,” said Canty. “It’s clear from market data which shows that between 12 to 21 million Americans currently own cryptocurrencies with that number continuing to grow that this is an area where firms can benefit from the first-mover advantage.”
The IRS has taken actions over the past few years suggesting that it also understands that the adoption of cryptocurrencies is on a steep upward trajectory. This includes requiring taxpayers to indicate any involvement in virtual currency transactions and sending out “reminder” notices to individuals it has flagged as having done so. The IRS is also making cryptocurrency a specific training priority for all of its agents. Additionally, the new 1040 form for 2020 tax year requires crypto activity disclosure by all taxpayers on the first page.
There are two key areas of opportunity in this niche for firms: 1) Providing tax compliance and planning services as this area of taxation continues to evolve; and 2) ongoing tax, accounting, and audit advisory services for the individuals and businesses who are adopting virtual currencies at a rapid rate.
Consider the white spaces your firm can fill in the coming year.
These are just three of the niches which your firm may wish to consider in 2021 as alternatives to some of the tried-and-true industry verticals, many of which are more saturated and offer less opportunity for your firm to truly differentiate its services. While international tax, forensic accounting or cryptocurrency tax and compliance may not offer the perfect fit for your firm, you can use them as inspiration to look at different markets where your firm can leverage its expertise to expand its client base and tap into a new revenue stream.