Do you have a mind for numbers? Have you had experience helping a friend or coworker with their taxes? Maybe you have filed taxes for your relatives or for a business you worked for. If you answered yes to any of these questions, it’s time to turn your skills and experience into cash! Start a tax preparation business right from your own home, set your own hours, and be your own boss.
What you will need
Many people will look at tax prep work and assume that it requires a degree or an accounting background, but that’s not the case. As long as you are over 18 and have an IRS Preparer Tax (PTIN) Identification Number, you will be good to go.
Step 1: Set up a home office
A home office must be a dedicated workspace that eliminates distractions and helps you focus. Here are some items we highly recommend obtaining for your home office; A reliable computer, some office equipment (printer, copier, scanner, ect.), Wi-Fi, tax preparation software, IRS forms, filing system (preferable digital).
Step 2: Obtain a PTIN
The IRS makes it easy to apply for your PTIN. PTINs must be renewed every year and are individually assigned. If your business grows and you hire new preparers, they too will be required to obtain a PTIN.
Step 3: Training
The Internal Revenue Service doesn’t require formal training to be a tax preparer. However, while no training is formally required, it is crucial that you understand the U.S. tax code as a tax professional.
Consider participating in the IRS voluntary Annual Filing Season Program for you and your client’s benefit. An 18-hour program to improve your tax education comes with a certificate of completion and has you listed in the Directory of Federal Tax Return Preparers. Putting in the work to be trained and certified may not be required by law, but it shows your potential clients how serious you are about your work and lets you charge higher rates for your work.
Step 4: Name and register your business
It should go without saying that your tax business will need a name. Please make sure you are creative with your name, that it’s easy to remember and market, and that another company does not already take it. Once you have your original name, you will need to register your tax business with the state. Do some research into how you want to register your business. How you register can affect how it is taxed and what other legal requirements you need to meet.
Step 5: Obtain a Business Bank Account
Setting up a bank account for your business is essential as it separates your assets from the business. To open a business bank account or hire employees, you need an Employer Identification Number or EIN. Obtaining your EIN is easy and free through the IRS.
Step 6: Apply for relevant license and permits
Each state has different requirements, so you need to research your area’s required documentation to host a tax business there.
Step 7: Electronic Filing Identification Number
If you plan to file more than 11 tax returns in a season, you will have to obtain an EFIN. Like most things on this list, an EFIN can be obtained through the IRS by becoming an authorized e-file provider.
Step 8: Tax Preparation Software
Tax Preparation Software is essential for a large or small tax prep business. Tax prep software often has tools to streamline the filing process, ultimately saving you time and money.
We highly recommend SFP works for all your e-filing and tax preparation business needs. SFP Works is secure, so you and your clients’ data are safe and secure. As a tax preparer, you will be handling sensitive information for your clients, and you will want that to be protected.
Step 9: Market your business
You can’t expect your business to take off overnight. However, marketing your business well can be the difference between turning a profit and breaking even. So make sure to have a website, print business cards, create social media pages, and network to get the word out about your tax prep business.
