- What You Need for a Thriving Tax Preparation Business
What You Need for a Thriving Tax Preparation Business
Tax preparation is a growing industry in the U.S. Services for completing and filing government forms are responsible for more than 82 million income tax returns and generate about $9 billion in revenue. According to the Bureau of Labor Statistics, tax preparation is growing at an average of ten percent per year, with 1.2 million professionals in the industry.
What does tax preparation entail?
Tax preparers have four primary responsibilities. They interview the client, gather the information for the return, complete the forms, and file them. This type of business covers everything from W-2 and 1099-MISC forms to health care coverage and deductions. Preparers use tax return software to help them fill out forms to make the job quicker. They also use their expertise in looking for deductions and other tax-saving opportunities for their clients.
Why do people hire tax preparers?
Many taxpayers would rather pay for services rather than file their tax returns. Hiring someone else would make the filings more accurate, which means fewer chances of auditing. The tax code is also complicated; the federal tax code alone has more than 70,000 pages, making filing impractical for business owners. If you are thinking of establishing a tax preparation business, here are things you should keep in mind.
- Do you have the capabilities and training? Aside from an inclination towards or skill in numbers, you need to train to become a tax preparer. It means you need to invest at least 60 hours of training in classes starting from $150. This business involves helping other people, which means fostering relationships through your skills.
- Do you have the right credentials? In some states like California, Oregon, and New York, tax preparation is a regulated industry. The IRS is working on an accreditation program, and soon tax preparers would need to register as government-recognized tax professionals. In the meantime, there are the IRS PTIN or Preparer Tax Identification Pin and the EFIN, or the Electronic Filing Identification Number (EFIN).
- Do you have a network? If you already have prospective clients, that’s great. However, if you’re starting from scratch, you need to find people to serve. The Tax Business Owners of America, which has 7,000 members, is one place to find prospective clients. You also could network through LinkedIn or look through lists of associations catering to business owners.
- Do you have what you need to start the business? Tax preparing businesses must prepare things that other enterprises have. For example, the owner should have an EIN or Employer Identification Number, a business address, and registration as an LLC, corporation, or sole proprietorship. An attorney can help you prepare these. Besides the paperwork, you will need tax preparation software, computers, scanners, printers, and other technology.
- Do you have a business bank account? You should allow the processing of payments on Visa and MasterCard, and business bank accounts enable that. Business accounts also allow expense tracking and reinforce your image as a professional.
Starting a tax preparation business does not take a lot of financial investment. What it does need is time and attention. If you take the time to develop it properly, though, you will have a robust enterprise that people will need for many years.
Get your business off the ground with Keystone’s award-winning tax software. Don’t overpay for services that won’t do the job; our product lets you perform unlimited e-filing for unlimited users, with absolutely no hidden fees. Get a free demo now or contact us today for more information!