TaxReconstruct

The market for tools specifically addressing multi-year unfiled corporate tax returns with missing records is largely unserved. General tax preparation software like UltraTax, Drake Tax, and ProConnect Tax Online assume complete or near-complete financial records and do not offer reconstruction capabilities. While some accounting platforms like QuickBooks or Xero can help with basic bookkeeping, they are not designed for back-filing years of missing data. Existing solutions for reconstruction rely on manual methods: CPAs use Excel, interpret partial statements, and apply industry benchmarks ad hoc. The key gap is the lack of an automated, audit-proof system that ingests scanned receipts and partial statements to produce IRS-compliant schedules. This creates an opportunity to build a category-defining product that reduces risk and manual effort for a high-stakes pain point.

The ideal customer is a CPA firm or tax professional (buyer) who handles small to medium-sized business clients with delinquent corporate tax filings (typically 5–10 year gaps). The buyer is often a partner or senior accountant who makes purchasing decisions, while the users are staff accountants or tax preparers who perform the daily reconstruction work. Their current workflow involves manual data entry, estimate guessing, and heavy spreadsheet work—often rejecting these clients due to high risk and low profitability. The trigger to look for a solution is when a client approaches with years of unfiled returns and missing bank statements; the CPA urgently needs a tool to either take on or refer out. Budget range for a SaaS subscription per active case is likely $30–$100 per month per case, based on the implied willingness to pay and the high value of reducing audit risk.

TaxReconstruct should differentiate by being the first purpose-built tool for the niche of multi-year unfiled corporate tax reconstruction. The key differentiation lies in AI-powered estimation that uses historical patterns, industry benchmarks, and partial records to fill gaps—something general tax software cannot do. Positioning should emphasize audit-proof IRS compliance: the tool generates Form 1120 schedules with transparent work papers that explicitly show estimation methods, satisfying IRS requirements for reasonable reconstruction. The pricing model (per active case/month) aligns with the episodic nature of the work, and a free tier for single-year assessments lowers the barrier for CPAs to test the product without commitment. A strong positioning statement: 'Turn your riskiest, most manual clients into a profitable service line with IRS-compliant, AI-powered reconstruction.' Additionally, building a library of industry benchmarks and an integration with common scanning and document management tools (e.g., your clients' receipt scanners) would create stickiness.

The overall risk is medium-high. **Technical risks** are significant: the AI must accurately estimate missing transactions from sparse data, and the output must withstand IRS scrutiny. Developing defensible estimation algorithms and including transparent methodology logs will be critical. **Market risks** include a small total addressable market (only CPAs dealing with delinquent corporate filings) and uncertain willingness to pay. With only 3 signal reports and 2 explicit willingness to pay, the market may be thin. **Execution risks** involve timing: if the IRS changes delinquency resolution policies or if major tax software vendors add similar features, the opportunity window could close. **Regulatory risks** are moderate: reconstructed records must comply with IRS guidelines (e.g., IRC §446, 6001). Tax preparers may be liable for penalties if estimates are deemed unreasonable. However, the IRS does accept reconstruction using indirect methods when original records are unavailable, so the approach is defensible. To mitigate, the product should include disclaimers and a verification checklist for the CPA.

1. Conduct 10–15 in-depth interviews with CPAs who handle SMB clients, specifically asking about their experience with delinquent multi-year filings and the percentage of clients they turn away due to missing records. 2. Create a simple landing page describing the product’s value proposition and pricing, and run targeted LinkedIn ads to tax professionals (e.g., 'Stop turning away clients with unfiled returns – try TaxReconstruct beta.') Measure click-through and sign-up for a waitlist. 3. Build a low-fidelity prototype using Excel or no-code tool that simulates the reconstruction workflow (ingest a few receipts, apply benchmarks, output a schedule) and test it with 5 CPAs to gauge usability and accuracy expectations. 4. Analyze competitor offerings (e.g., ScanSnap for document capture, but no reconstruction; test if CPAs would buy a combined solution). Also research IRS guidelines on reconstruction (Rev. Proc. 80-27) to ensure feasibility. 5. Offer a free single-year assessment for 3 CPA firms in exchange for detailed feedback on the estimation logic and risk scoring. Use this to refine the AI model and validate willingness to pay for multi-year cases. 6. Assess willingness to pay via a Van Westendorp price sensitivity survey with 20 CPAs, focusing on the 'per case per month' model. Confirm if they would pay $50, $100, or $30 per case. 7. Search for existing online communities (e.g., r/taxpros, CPA forums, LinkedIn groups) and post a scenario describing the pain point to gauge interest and collect real-world examples of reconstruction methods currently used.

The TAM (total addressable market) is the number of SMBs in the US that have delinquent corporate tax filings. Estimates suggest that approximately 10–15% of SMBs have unfiled returns, totaling 1.5–2 million businesses. Not all of these are suitable for reconstruction (some may have no records at all). The SAM (serviceable addressable market) is the subset of CPAs who actively handle such clients. There are roughly 200,000 CPA firms in the US; assuming 20% have at least one delinquent client per year, that’s 40,000 potential buyers. With pricing of $50 per case/month and an average case lasting 6 months, the annual SOM for a single firm might be $300 per case. If each buyer handles 5 cases per year, the SOM could reach $60 million annually (40,000 buyers * 5 cases * $300). However, this is highly directional due to limited data; actual adoption will depend on CPAs’ willingness to offload manual work. Given only 3 signals, the market is likely early and niche, but a successful product could define a new subcategory.