What Is the Average Accounting Firm Profit Margin? #
Accounting, tax preparation, bookkeeping and payroll firms earned a 13.6% net profit margin, measured as net income divided by total receipts on corporate tax returns (IRS Statistics of Income, 2022).
Corporations deduct the salaries they pay their owner-officers before arriving at net income, so the figure measures profit after owner pay, not what an owner takes home.
Why the Figure Is After Owner Pay #
In an incorporated firm, the owners are officers of the corporation and their compensation is a deductible expense taken before net income. What remains is the return to the business itself.
The same firm reported under a different legal form produces a very different percentage. A sole proprietor filing Schedule C takes no deductible salary, so the profit line still contains everything the owner earns. A partnership allocates its income to partners rather than retaining it. Only the corporate return separates owner compensation from business profit, which is exactly why the corporate figure is the one worth benchmarking against and also why it looks low at first glance.
For a firm choosing how much to pay its owners, this also means the margin is partly a policy choice rather than a pure performance measure. Two profitable firms with different owner-compensation policies will report different margins on identical economics.
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Who the Figure Describes #
The margin covers incorporated firms. Most businesses in the industry have no employees at all: alongside 137,069 accounting locations with paid employees (Census CBP, 2023), there were 396,812 accounting, tax and bookkeeping businesses with no paid employees (Census Nonemployer Statistics, 2023).
Most of those owner-run businesses file as sole proprietors, whose results are reported on individual returns and are not in the corporate figure. A minority are incorporated, and their returns are inside it. Bookkeeping and other accounting services make up the largest owner-run group, at 254,312 (Census Nonemployer Statistics, 2023).
The shape of the industry follows from that. It is a profession of a few large firms, a long tail of small practices with staff, and a very large population of single-operator bookkeepers, tax preparers and contract accountants. A single national margin describes the incorporated middle of that distribution, not its ends.
What Counts as an Accounting Firm #
The IRS group is broader than what most people mean by an accounting firm, and NAICS splits the same territory four ways. The distinctions are worth knowing before comparing any two industry figures.
Offices of Certified Public Accountants (NAICS 541211) comprises establishments of accountants certified to audit the accounting records of public and private organizations and to attest to compliance with generally accepted accounting practices. Census lists the services they may provide: auditing financial statements, designing accounting systems, preparing financial statements, developing budgets and advising on accounting matters.
Other Accounting Services (NAICS 541219) takes accountants providing similar work without that certification, including general accounting and bookkeeping practices.
The boundary is certification, not size or service mix. A large practice of non-certified accountants sits in 541219; a sole CPA sits in 541211.
Tax Preparation Services (NAICS 541213) and Payroll Services (NAICS 541214) are separate industries again. Census is explicit that standalone tax preparation without accounting or bookkeeping, and standalone payroll processing without accounting services, are classified in those codes even when a CPA operates them. What the establishment primarily does decides the code, not who owns it.
How Accounting Compares With Other Professional Services #
On the same IRS measure, accounting firms earn more than management consulting firms (10.2%) and less than insurance agencies (14.3%). All three figures come from the same 2022 corporate returns and the same measure, so the comparison is like for like.
The ordering is not random. Firms that sell time against a chargeable rate, and that carry staff to deliver it, land in a fairly narrow band, because the main cost is people and the main revenue is the same people. Where a professional service earns more, it is usually because something other than chargeable hours is producing income: a commission stream that does not scale with headcount, a license, or a product.
Accounting sits toward the upper part of that band for two structural reasons. Compliance work recurs annually without being resold, which lowers the cost of winning the next engagement. And a meaningful share of the work can be delivered by staff well below partner level, so a firm with depth beneath its owners converts hours into margin more efficiently than one where the owners do most of the work.
What Moves an Accounting Firm's Margin #
Four levers explain most of the spread between firms of similar size.
Staff-to-owner ratio. How much work the firm can deliver without owner time sets the ceiling on its revenue. A practice where the owners do most of the chargeable work has capped its revenue at its owners' capacity and usually reports a lower margin than the hours would suggest.
Realisation. The gap between time recorded and fees collected, through write-offs, fixed quotes that overrun and scope creep on compliance jobs, falls directly to the bottom line. It rarely appears in a firm's own reporting until year end.
Seasonality. Compliance and tax work concentrates into a few months. A firm carries its staff cost for twelve and earns disproportionately in three or four, so the margin is sensitive to how well the quiet months are filled.
Service mix. Advisory, outsourced finance and payroll work price differently from compliance and carry different delivery costs. A shift in mix moves the margin even where revenue is flat.
Benchmarking Your Own Firm #
To compare a firm against this figure, divide its net income by its total receipts from the corporate return, after owner salaries. A sole proprietor's net profit on Schedule C includes the owner's own pay, so it will read higher than the corporate figure even for a firm that performs the same.
The margin itself is on this page and is not in the report: it comes from IRS Statistics of Income, which our reports do not carry. What the report adds is the Census picture of the industry around it.
Two further checks keep the comparison sound. Use total receipts rather than fee income net of disbursements, because that is what the IRS measure uses. And use the same tax year, since a single national margin belongs to the cost and demand conditions of its year.
| Benchmark | On this page | In the report |
|---|---|---|
| Business counts, staffed and owner-run | Yes | Yes |
| Firms and employment by state | No | See Report → |
| Industry receipts and trend | No | See Report → |
| Firms with no employees, by sub-industry | Partly | See Report → |
How This Margin Is Measured #
The margin is net income divided by total receipts for active corporations in the IRS Statistics of Income group for accounting, tax preparation, bookkeeping and payroll services for tax year 2022, the most recent year published.
The source's own limits travel with the figure. It is a tax-return measure rather than an operating margin, so it reflects tax accounting including depreciation and interest. It covers corporations only, excluding sole proprietorships and partnerships, which skews it toward larger incorporated firms. It represents the whole IRS group: CPA firms are not published separately. And Statistics of Income runs roughly three years behind, which is why 2022 is the latest year available.
Location counts are Census County Business Patterns (2023); counts of businesses with no employees are Census Nonemployer Statistics (2023). The two Census programs do not overlap, because a business with any payroll is excluded from the nonemployer file.