The Fundamentals of an In-Home Tax Preparation Business
Nowadays, thousands of independent Tax Preparation Business are operating from within a single household. If you have ample experience preparing tax returns as a full-time employee and feel you’re ready to spearhead operations, why not start a business on your terms?
The U.S. tax code is complex and ever-changing, which means your services are more than likely to come into demand. Operating an in-home tax preparation business allows you a steady income with significant flexibility—here’s all you need to know.
Who Qualifies as a Professional Tax Preparation Business?
Just because you’re good with numbers doesn’t necessarily qualify you as a licensed tax preparer. However, applying for an IRS Preparer Tax Identification Number (PTIN) isn’t typically a grueling process.
All tax professionals will demonstrate varying levels of skill and education. What separates preparers from other practitioners is their representation rights, whether limited or unlimited.
1. Unlimited Representation Rights
Tax Preparation Business with these types of rights are usually:
- Enrolled agents who have passed an IRS exam and demonstrated proficiency in tax return preparation, federal tax planning, and representation
- Licensed and certified public accountants
- Licensed attorneys
Tax Preparer Business with unlimited representation rights can tackle any matters from audits, appeals, payments, and collections.
2. Limited Representation Rights
Preparers with limited representation rights don’t have the credentials of enrolled agents, CPAs, or attorneys. As such, this population consists:
- PTIN holders without professional credentials and who don’t participate in the IRS’ Annual Filing Season Program – they are authorized only to prepare tax returns
- Annual Filing Season Program participants who have enrolled in the voluntary program to achieve a higher level of professionalism – they can only represent clients who they’ve already prepared returns for
What is a PTIN?
A Preparer Tax Identification Number (PTIN) is required of all tax professionals who prepare federal tax returns in exchange for compensation. This unique, 9-digit number allows the IRS to identify professional preparers according to taxpayer data. PTINs are free but need to be renewed annually.
When requesting a PTIN from the IRS, tax preparers must provide their social security numbers. They obtain their 9-digit code online in as quickly as 15 minutes. If submitting a W-12 form by mail, the process can take much longer, between four to six weeks.
Do Professional Tax Preparers Need Special Training to Qualify?
Tax preparers obtaining a PTIN don’t need to undergo any specialized training or certification. Furthermore, the IRS itself offers federal income tax return preparation services for pay.
Despite the lack of a need to obtain a license, tax preparers must have a thorough understanding of the U.S. tax code. If you lack experience in tax preparation, don’t hesitate to advance your skills through an online course or class.
Conclusion
Despite an obligation to do so, nobody likes filing their taxes. As such, those who do have ample opportunity to take over the responsibility for busy-bodies who would rather concern themselves with what matters most to them.
Tax preparation is seasonal, which allows you to explore other revenue-generating experiences throughout the year. Get started on your tax preparation business with professional tax software from Keystone Tax Solutions. Our all-in-one system’s thousands of diagnostics increase accuracy while easing complicated features and streamlining your process.
