Magnetic

What do they actually do

Magnetic automates the tedious parts of preparing individual tax returns for CPA firms. Firms upload mixed client documents, and Magnetic classifies them, extracts the needed fields, and assembles a single bookmarked workpapers PDF for the file magnetictax.com. It connects to the firm’s existing tax software (e.g., UltraTax, Drake, ProConnect) and pushes the structured data directly into those systems so firms don’t have to switch tools magnetictax.com, YC company page.

Every return is reviewed by US‑based tax professionals (EAs/CPAs) before final sign‑off, which is how the team maintains professional‑grade accuracy while they scale their models YC LinkedIn launch, YC jobs, Founding tax expert role. The team reports they launched mid‑season, processed hundreds of returns, and that their internal model has improved field‑level accuracy and automated a meaningful share of a return; they’re focused on expanding document coverage and raising accuracy further YC company page.

Who are their target customer(s)

• Small local CPA firms focused on individual returns: Spend peak season sorting messy client packets and re‑typing numbers into legacy tax software, which slows throughput and forces costly seasonal hiring. They need automation that fits their current tools without a heavy switch magnetictax.com, YC company page.
• Mid‑size regional CPA shops using UltraTax/Drake/ProConnect: Must keep accuracy high across many preparers while legacy workflows require manual entry and inconsistent workpapers. Scaling often means adding headcount or accepting higher error risk magnetictax.com, YC company page.
• Bookkeeping or payroll firms that bundle tax prep: Receive mixed‑format documents (PDFs/photos/handwritten notes) and lose time classifying files and building audit‑ready workpapers before return prep can start magnetictax.com.
• Tax processing teams and BPOs handling high volumes: Carry large reviewer pools to maintain consistency and accuracy at scale; they need automation that still meets professional review standards and predictable SLAs YC company page, YC LinkedIn launch.
• Independent CPAs and solo preparers: Manual data entry and messy client packets consume billable hours; they want a drop‑in tool that works with their current tax software to reclaim time for advisory work magnetictax.com, YC company page.

How would they acquire their first 10, 50, and 100 customers

• First 10: Founder‑led pilots during tax season: process a small batch of real client packets for free/low cost, include US‑based human review, and push data into the firm’s current tax software to show immediate time savings and audit‑ready workpapers magnetictax.com, YC company page.
• First 50: Turn pilot wins into case studies and target look‑alike firms via state CPA societies, webinars, and referrals; offer onboarding credits and packaged “integration + reviewer hours” to reduce operational risk, with a small inside‑sales motion focused on UltraTax/Drake/ProConnect users magnetictax.com, YC company page.
• First 100: Layer in channel/partner deals with tax‑software consultants, bookkeeping/payroll platforms, and BPOs; publish a partner playbook and API/connector so partners can route work at scale, backed by volume tiers, SLAs, and referral commissions hiretop.

What is the rough total addressable market

Top-down context:

The US tax‑preparation services market is about $14.5B in 2025 with roughly 131,212 businesses; there are about 850,000 active paid preparers (PTIN holders). These figures frame the size of the customer base Magnetic sells into IBISWorld, IRS PTIN stats.

Bottom-up calculation:

Using 131,212 potential buyer organizations and illustrative pricing: at $1k/firm/year TAM ≈ $131M; at $5k ≈ $656M; at $20k ≈ $2.6B (US only). Actual capture depends on pricing model and penetration by firm size IBISWorld.

Assumptions:

• US market only; excludes Canada/UK/Australia.
• Pricing sold at the firm level ($1k–$20k per firm per year) with usage scaling by returns/preparers.
• Buyer count approximated by 131,212 tax‑preparation businesses from IBISWorld; adoption rates not assumed.

Who are some of their notable competitors

• SurePrep 1040SCAN (Thomson Reuters): OCR and workpaper automation for 1040s that extracts data from client documents and can populate tax software; widely adopted by CPA firms.
• CCH ProSystem fx Scan with AutoFlow (Wolters Kluwer): Scans and extracts data from source documents and auto‑flows it into CCH tax products, reducing manual data entry for 1040 workflows.
• GruntWorx: Document organization and data extraction tools for tax prep (organizers, populate, trades), integrated with major professional tax suites.
• SafeSend: Client organizers, document gathering, assembly and e‑sign workflows for tax engagements; focuses on intake and delivery rather than core data extraction.
• TaxCaddy (SurePrep): Client document collection and organizer platform used by firms to reduce intake friction; often paired with workpaper automation tools.