Tax preparation is a great business for customer-focused individuals with strong mathematical skills. According to the Bureau of Labor Statistics, tax preparers "prepare tax returns for individuals or small businesses but do not have the background or responsibilities of an accredited or certified public accountant." The median salary for professionals in this field is $29,420; preparers in the top ten percent of earners gross more than $60,000 per year. To launch and operate a successful business in this profession, one will need:
- Proper training
- Tax filing software with unlimited uses
- E-filing privileges from the Internal Revenue Service
- The ability to provide "rapid refunds" (also known as refund anticipation loans)
- An effective marketing campaign
- Note: It is not necessary to become a CPA before becoming a tax preparer
How to Obtain Training for Tax Preparation
One of the most common ways to get the training required for tax preparers is to complete a free course through an existing tax preparation chain. These courses are most commonly available through the following companies:
- H&R Block
- Jackson Hewitt
- Liberty Tax Service
Many of the courses offered by existing tax preparation companies are nine to twelve weeks long. They are typically offered during the late summer and early autumn months. Many chains will offer participating students the opportunity to purchase a tax franchise. Others may be asked to interview for open positions during tax season.
Similar courses are also available through online tax schools. A listing of online training programs can be located easily by searching the web. Interested parties should contact these organizations directly for complete details on the training courses they offer.
Choosing Professional Tax Preparation Software
It is important to note that standard tax software is not designed for the multiple uses intended by professional tax preparers. In order to file multiple returns, it will be necessary to purchase the professional edition of a high quality tax program. Some of the most popular brands are:
- Intuit
- TaxAct
- TaxWorks
- OLTPro
Professional tax preparation software can cost as much as $600. The cost of this software is considered a business expense, and is therefore tax deductible. Tax laws change yearly, so it is imperative that tax preparers update their software as often as recommended.
E-Filing and Rapid Refunds (Refund Anticipation Loans or RALs)
Most clients will request to have their taxes filed electronically. Many will ask for refund anticipation loans (also known as "rapid refunds"), direct deposit, and other specialty services. While these services may seem standard, they do require a bit of due diligence on the part of the tax preparer.
The ability to e-file is a privilege granted solely by the Internal Revenue Service (IRS). In order to become an authorized e-filer, one must:
- File form 8633, which is the application for an Electronic Filer's Identification Number (EFIN) and admission to the E-file program
- Register for e-services on the IRS's website
- Pass a suitability background check
Refund anticipation loans are typically offered by financial institutions. In order to offer this service to clients, one must:
- Apply to provide the service through their chosen tax software programs or through a separate service such as Refund Advantage
- Pass a separate criminal and credit history investigation
Launching the Business
After the tax preparation course and background checks are complete, take the necessary steps to register the tax preparation business with the appropriate authorities. Before servicing clients, comply with local regulatory bodies by:
- Registering the business with the Secretary of State
- Obtaining a business license
- Obtaining business liability insurance
After the business is registered, market the services offered by distributing flyers, advertising online, developing a website, and generating word-of-mouth advertising.
Tax preparers have satisfying careers that offer opportunities for autonomy and great pay. It is possible to develop a long career in this field when patience, perseverance, and proper training are put to good use.
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