Become a Tax Preparer - Generational Wealth Now

BECOME A TAX PREPARER

Are you feeling unmotivated? Need a second career or job to make ends meet? Relocating? Or are you looking for a new business venture? Guess what you can become a tax preparer!

It may seem as though becoming a tax preparer requires a lot of training and education. What if I told you that you do not need an accounting or finance background – almost anyone can become a tax preparer!

Did you know… that of the more than 152,000,000 income tax returns that were filed through December 2017, around 78,000,000 returns were prepared and submitted (filed) by professional tax return preparers.

As a tax preparer, you can:

Start your own tax preparation business
Keep all your profits as a business owner (compared to being an employee)
Work flexible hours
Keep your full-time job
Get a professional career, quickly and easily
Expand your real estate, auto, financial planning, or insurance business

A career in tax preparation is recession-resistant and is ideal for retirees, stay-at-home moms, and military spouses! Regardless of how well the United States economy performs, people must file their taxes every year – it is a legal requirement.

Tax preparers ensure that their clients are well served and receive the correct tax refund amount, or pay the required amount of tax.

Did you know… in the United States, independent tax preparers, and not national tax preparation franchise chains, prepare 70% of the professionally prepared tax. Most of these are Small and Medium Enterprises (SMEs), and the rest are “Mom & Pop” outfits.

There are a few items you should be aware of, as you consider becoming a tax preparer:

There are minimal start-up costs
No franchise or royalty fees are required
No previous tax experience is required. Becoming a tax preparer only requires some math, reading and comprehension abilities – previous accounting experience is not necessary
We provide a course that trains you on the various tax laws and regulations. Through our comprehensive course, you will become familiar with exemptions, filing status, deductions, credits (e.g., Earned Income Tax Credit, the Credit for the Elderly or Disabled, and the Child Tax Credit), etc. Upon completion of our {your course name}, you will receive a Certificate of Completion
Tax preparation work is seasonal. Therefore, the vast majority of tax preparers only work during tax season. Think about it; you can work only three months of the year and make good money! Tax preparers generally work from January 1st to April 15^th
Because over 150 million Americans must file tax returns yearly, career opportunities in the tax preparation field are readily available
Self-employment can be financially rewarding. Self-employed people also have job security
Tax preparation is a fantastic opportunity for people who want a flexible work schedule. Summers and holidays are work-free seasons, allowing you to travel and spend time with your friends and family. Military spouses can prepare taxes at bases located anywhere in the world, and earn extra income in the process
The average American pays a tax professional to prepare and file their tax return each year. Because Congress changes the tax code every year, most taxpayers prefer to hire professional tax preparers to avoid the inevitable errors caused by the confusion surrounding various tax laws
New and used car dealerships, insurance agents, auto repair shops, check cashing stores, grocery stores, daycare centers, barbershops, convenience stores, beauty salons, laundromats, retail stores, and nail spas can include tax preparation to their existing business services
Tax preparers who are gainfully employed in other fields have a fallback plan, should they get laid off
Should you decide to get specialized training and the required licenses, you will able to provide your clients with additional financial services, for example, IRAs, insurance, retirement plans, investments, financial planning, auditing, accounting, etc. You will be a valued and highly trusted confidante to your clients
Contrary to popular opinion, tax preparation is a highly interactive people-based business and not a numbers business. You’ll do very well as a tax preparer if you enjoy building relationships with people. Personal relationships and client retention are vital to continued success

If you are seeking a career with good pay, flexible hours, and growth opportunities, becoming a tax preparer is highly recommended.

Let’s Talk Money

Becoming a tax preparer is suitable for those inclined to entrepreneurship. The amount of money you’ll make is dependent on how good a marketer you are, and your business overhead. It goes without saying that a home-based tax preparer can charge less than their competition.

Income potential also depends on the season in which you provide tax preparation services for your clients.

Peak Filing Season

There are two “Peak Filing Seasons.”

First Phase: Begins in the 2^nd week of January, until the 3rd week/end of February. In this phase, those hoping to get tax refunds file their tax returns

Second Phase: Begins usually in the last week of March until April 15^th, which is the tax filing deadline. In this phase, those paying tax due(s) and those with complicated tax returns, file their tax returns.

The above two seasons are the busiest and most profitable for most tax professionals. You stand to make quite a bit of money during this season. Income opportunities also exist beyond tax season, for example, complementary services such as financial planning, bookkeeping, or payroll processing.

According to a U.S. Bureau of Labor Statistics report, $22.64 per hour is the average hourly wage for tax preparers. That adds up to $47,090 annually. Low earners earned $9.70 per hour, or $20,170 annually, while top earners made $39.30 per hour or $81,740 annually.

The National Society of Accountants reported in 2017 that $273 was the average fee to file Form 1040 with Itemized Deductions (Schedule A) and a state tax return. A Form 1040 without Itemized Deductions and including a state tax return was priced at $176.

The survey also reported the following average fees:

$656 – Form 1065 (United States Return of Partnership Income)
$826 – Form 1120 (United States Corporation Income Tax Return)
$809 – Form 1120 (United States Income Tax Return for an S-Corporation)
$482 – Form 1041 (United States Income Tax Returns for Estates and Trusts)
$733 – Form 990 (Return of Organization Exempt From Income Tax)

Self-employed individuals who run established tax preparation businesses (firms) earn more than $100,000 annually. The more the clients, the more the money you stand to make. Be patient, prepare well by studying the various tax laws and filing requirements, provide fast and efficient excellent tax filing services, work hard, and you will succeed.

Becoming a Tax Preparer

So, how much money do you need to become a tax preparer? It is pretty affordable to become a tax preparer. Only four states require licensing, i.e., California, Maryland, New York, and Oregon. You don’t need any formal education.

While an EFIN, aka Electronic Filing Identification Number, is free, it costs only $50 to get a Preparer Tax Identification Number (PTIN) from the IRS.

If you decide to enroll in a tax preparation course, be informed – they vary significantly in price. Tax preparation courses start with free online tax preparation courses, which become paid courses, which gradually increase in pricing. Community college and university tax preparation courses are known to run into thousands of dollars.

Upon meeting the above requirements, voila, you are a tax preparer!

Starting a Tax Preparation Business: Home-Based

A tax preparation business has minimal start-up costs.

You’ll need the following items; however, you probably own a few of them:

A computer, copier, and printer
High-speed internet connection
Phone
Professional tax preparation software
Basic office supplies
Business cards

If you have the above items, as most people do, your initial expenses should not be more than $1,000 in total for your first year of operation. This amount does not consider tuition fees or any other educational costs.

Advertising expenses haven’t been considered either. The low-stress and cost-effective way to advertise is to market your tax preparation services to your friends, family, and co-workers, before reaching out to the general public. Distribute your business cards to all and sundry and ALWAYS ASK FOR REFERRALS! Patience pays.

Overview of the Steps

Whether you are a newbie tax preparer or branching out from a tax preparation firm to start your own business, you’ll need to complete the following steps:

Step 1 – Please Note

Steps 2-7 are reference steps and can be completed in any order.

Step 2 – Educational Requirements

You do not need to have a college degree to become a tax preparer. However, you should have the following skills:

Mathematics – arithmetic, etc.
Computer operation
Customer service skills
A basic understanding of United States tax laws and regulations (see Step 6). Tax preparers must undergo an amount of training before they can serve their clients

Step 3 – Licensing Requirements

There are a few federal and or state licensure/registration requirements that tax preparers must adhere to. The required documentation varies from state to state.

Step 4 – Obtain a Preparer Tax Identification Number (PTIN)

According to IRS laws, a tax preparer must obtain a PTIN before filing a tax return on behalf of a client. A PTIN must be available before receiving compensation from their client. Getting a PTIN online is a quick and straightforward process.

Step 5 – Obtain an Electronic Filing Identification Number (EFIN)

An EFIN allows you to file federal and some state tax returns electronically. i.e., e-filing. The process is complicated and slow and can take up to six weeks to complete.

Step 6 – Obtain Tax Software

Purchase tax preparation software.

Step 7 – Obtain Tax Preparation Training

There are training programs that tax preparers should enroll in to learn how to prepare tax returns. Learn more about our courses by visiting our page “TaxPreparationTraining.”

Educational Requirements

To participate in the Annual Filing Season Program, the tax preparer must obtain or renew a PTIN for the upcoming year and also follow the instructions listed in the Treasury Department Circular 230, Subpart B, and section 10.51.

On fulfilling these requirements, the tax preparer will receive an Annual Filing Season Program – Record of Completion, which will be included in the IRS’ database/directory. The IRS Directory of Federal Tax Return Preparers also contains the credentials, name, city, state, and zip code of all CPAs, enrolled agents, attorneys, enrolled actuaries and enrolled retirement plan agents with valid PTINs.

There aren’t any formal educational requirements. However, community colleges and universities offer certificate level courses that can be used to qualify for entry-level tax preparation jobs. The Accreditation Council for Accountancy and Taxation (ACAT) and the National Association of Tax Professionals also offer training programs.

Basic certificate coursework covers topics such as tax credits, deductions, exemptions, etc. Advanced courses cover topics like corporate taxes, partnership taxes, estate and gift taxes, and fiduciary taxes.

IRS Annual Filing Season Program

The IRS has a voluntary program, the Annual Filing Season Program, that tax preparers can enroll in. The program is designed to ensure that tax preparers complete Continuing Education each year and meet a minimum competency level.

The AFSP aims to recognize non-credentialed tax preparers who desire to increase their professional skills. To participate in the AFSP, tax preparers must obtain 18 hours of continuing education from an IRS Approved Continuing Education Provider, including:

a 6-hour AFTR (Annual Federal Tax Refresher) course which covers tax law updates and filing season issues, as well as a tax and general knowledge comprehension test administered by the C.E. Provider
10 hours minimum of federal tax law topics
and 2 hours minimum of ethics

Enrolled Agents

An enrolled agent is one who was previously an IRS employee or an individual who has passed the IRS’s three-part comprehensive Special Enrollment Examination – business and individual tax returns, and IRS representation. Enrolled agents also complete a tax compliance check to ensure that they do not have any outstanding tax liabilities.

Enrolled agents, for example, certified public accountants (CPAs) and attorneys, are tax preparers with elite status. In addition to being required to adhere to strict ethical standards, they must complete 72 hours of Continuing Education courses every three years. Enrolled agents have unlimited practicing rights.

Licensing Requirements

There is no national regulation of tax preparers at the moment. Tax preparers are neither required to take Continuing Education nor complete competency testing. Tax resolution specialists come in many forms and may have requirements of their own, outside of taxes.

PTIN Applicants

When applying for a PTIN, the tax preparer must clearly indicate whether they prepare Form 1040 series returns and whether they are supervised. Supervised tax preparers do not sign, or are not required to sign tax returns because they are:

Employed by CPA firms or attorneys
Employed by firms that are 80% owned by Enrolled Agents, CPAs or attorneys and are supervised by a CPA, attorney, Enrolled Actuary, Enrolled Retirement Plan Agent, or Enrolled Agent who signs any tax returns prepared by the tax preparer (supervised), as a compensated tax preparer
Required to provide their supervisors active and valid PTIN when applying for or renewing their PTIN

If supervised, a tax preparer may not:

Sign the tax returns that they prepare
Represent taxpayers to the IRS – in any capacity
Present themselves as a Circular 230 tax preparer

Please Note: Non-Form 1040 Series Tax Preparers

These are individuals who don’t prepare or assist in the preparation of Form 1040 series tax returns in exchange for compensation or claim for any refunds, EXCEPT for Form 1040-SS or Form 1040-PR.

Obtaining a PTIN

The IRS requires PTINs since January 2011. Tax preparers must sign all the tax returns they complete and provide their PTIN. Tax preparers who are supervised and don’t sign tax returns are exempt from this regulation

PTINs cannot be shared.

To obtain a PTIN, a tax preparer submits their personal information, Social Security Number, the previous year’s tax return, and the $50 annual IRS fee. A tax preparer must disclose any felonies or problems with their tax obligations. Tax preparers must be older than 18, and PTINs must be renewed annually.

Unenrolled Preparers are tax preparers who have a PTIN but are not Enrolled Agents, attorneys or CPAs. They possess minimum qualifications to prepare federal tax returns. Filing tax returns on behalf of a paying client without a PTIN attracts the Internal Revenue Code (IRC) § 6695 penalties, an injunction, and disciplinary action from the IRS.

Does a Tax Preparer Need Both PTIN and EFIN?

A PTIN identifies an individual tax preparer to the IRS. It is, in essence, the tax preparers IRS “identification number.” The PTIN must be written on a tax returns Paid Preparer section.

On the flip side, the EFIN or Electronic Filing Identification Number is issued by the IRS to both firms and individuals who have been approved by the IRS to become e-file providers. The EFIN is included in all electronic tax return data transmitted to the IRS. The EFIN is provided free of charge.

Get your PTIN online in 15 minutes on the IRS website.

Obtaining an EFIN

Unless a tax preparer is administratively exempt, or a tax return is mailed with a hardship waiver, a tax preparer who intends to file more than 11 forms in a calendar year, i.e., Forms 1040, 1040A, 1040EZ and 1041, must use IRS e-file.

IRS e-file is the most convenient and fastest way to file tax returns. You receive a response from the IRS within 24 hours, or sooner when you transmit e-files to the IRS.

Get Started

On applying for EFIN, you become an authorized IRS e-file Provider. It’s best to apply asap because the entire registration and application process can take ten weeks! Do not procrastinate!

Steps to Become an Authorized e-file Provider

Step 1: Create an IRS e-services Account

Find definitions of tax principles and responsible officials, and step-by-step guidance in IRS Publication 3112, IRS e-file Application and Participation. Create an IRS e-services account here.

Step 2: Submit Your Application

Your firm can begin the application process to be authorized as an e-file Provider, as soon as the essential principals are approved for e-services.

Step 3: Pass a Suitability Check

Upon submission of application documents, the IRS will conduct a suitability, aka background check on each person listed as a responsible official or principal on the application, and the entire firm in general.

This check may include:

A credit check
A criminal background check
A tax compliance check
A check for any non-compliance with e-file requirements

Once approved by the IRS, you and your firm will receive an Acceptance Letter bearing your EFIN.

E-filing State Tax Returns

Typically, with an IRS EFIN, you can e-file state return taxes. However, the tax rules vary from state to state. Some states may have additional or different e-file requirements. Please be advised that most states require that individual income tax returns be e-filed. Therefore, tax preparers who submit paper returns may be penalized.

Important IRS Publications

The IRS strongly encourages you to read the three handbooks Publication 3112, IRS Publication 1345, the Handbook for Authorized IRS e-file Providers and get IRS Publication 4600 – Safeguarding Taxpayer Information Quick Reference Guide for Businesses.

These handbooks contain the rules and regulations that Electronic Return Originators are required to follow. Failure to learn the rules is no defense, and the IRS will take action against any preparer who flouts the rules.

Obtain Training

You can learn how to become a tax preparer from the convenience of your home through our online program! You do not need to pay for an overpriced school. An affordable basic tax preparation course includes everything you need to become a tax preparer. The curriculum is easily accessible, comprehensive, and high-quality. You may need to learn more about how to choose a tax preparation course.

Due to the continually changing tax laws and tax preparer responsibilities, it is essential to obtain an education in how to file taxes and keep updating the information. There are numerous tax courses that enable you to earn IRS Continuing Education (C.E.) credits.

Tax courses accelerate your learning, build a competitive advantage, and elevate your performance by:

Complementing your daily schedule
Not having inconvenient classes
Omitting commute to class
Enabling you to train on your personal computer
Allowing you to study after work, any day, any hour (so that you don’t take time off work)
Providing exciting and engaging course material
Being convenient and flexible