Many people assume that tax preparers have little to do during the off-season until the next busy period begins. However, savvy tax preparers excel at generating income throughout the year by diversifying their services.
One of the most effective ways you can increase revenue throughout the year is to offer tax advisory services. For many tax preparers, the off-season serves as a perfect opportunity to enhance these growth activities by pursuing continuing education and training. Here are some basics to consider if you are interested in providing tax advisory services or expanding your services year-round.
Identify which clients could use tax advisory services
Clients who know they will benefit from tax savings are more likely to appreciate the value of your advisory services. Small businesses owners, sole proprietors, high-income taxpayers, and taxpayers who itemize deductions are all potential clients who could benefit from year-round advice to minimize their tax liability. Additionally, clients with back taxes may require ongoing advisory help to understand their obligations and future compliance. There is also potential for increasing fees for these clients due to the complexity involved in filing multiple years at a time.
Separate tax advisory from tax prep
There’s a good chance your tax business is already performing some advisory services as you prepare taxes. But all too often, clients aren’t aware that they are receiving these services or how much they’re saving as a result of your services.
Consider what you do for your current clients and which services could fall under the “advisory” umbrella. Here are some examples of advisory services you may already be providing without charging an extra fee:
- Tailoring a client’s return to minimize tax liability
- Helping a client strategize for next year
- Advising your client to make business decisions that would help them qualify for certain deductions, credits, and exemptions
In many cases, your clients may not know you’ve gone the extra mile to save them money. However, when you document the savings on paper and compare them to the lower cost of your new advisory package fees, clients are more likely to understand the value of tax advisory services.
Start with advisory services relevant to your existing client base
If you try to start offering advisory services to all of your clients, you’ll likely find yourself overwhelmed. Instead, start your venture into advisory by focusing on a couple of relevant niches that align with your existing client base.
Education and retirement planning are low-barrier niches because they build on your knowledge of your clients’ financial situations and tax implications, making it easier to provide targeted and relevant advice without extensive training.
- Retirement planning: Many clients seek guidance on optimizing their retirement savings. You can use your information about their financial situations to offer personalized advice on retirement accounts, tax-advantaged savings, and distribution strategies.
- Education planning: Helping families plan for education expenses, such as college tuition, can also be a valuable advisory service. This service resonates with many families who want to save and invest in future educational costs. You can provide real value without needing extensive new expertise by offering insights into 529 plans, education tax credits, and financial aid strategies.
Other common areas of focus include tax advisory for estates and trusts, real estate investors, and high-income families with complex tax factors like itemized deductions.
Tax advisory for small businesses
Small business owners are most likely to pay for tax advisory. They know their tax situations are complex and see advisory fees as a necessary business expense that could save them money in the long run. In addition to simple tax compliance and tax estimates, you can help your business clients with the following:
- Choosing the most beneficial business structure
- Entity structuring
- Business financing options
- Quarterly planning
- Estimated payments
- Sales tax
- Depreciation strategies for different assets
- Income shifting/splitting (a tax strategy that moves income from higher tax bracket taxpayers to lower tax bracket taxpayers)
- Employee benefits and retirement
- Relevant business credits such as the R&D credit
- Of course, this list is far from exhaustive, and you can expect to invest significant time into learning the nuances of tax advisory.
Start small and learn from successful advisory firms
Venturing into tax advisory doesn’t happen overnight. You’re developing a new skill set, and you’ll need time to learn more advanced tax strategies, like communicating value to clients, pricing, and bundling your services.
Be okay with starting with just one or two advisory clients using relatively simple advisory strategies. Eventually, these strategies may become a part of your “lower tier” advisory packages. As you gain experience and expertise, you can also begin to offer more advanced packages.
If you’re considering adding tax advisory to your offerings, you don’t have to start alone. The American Institute of Certified Public Accountants (AICPA) advises interstate tax firms to expand into advisory programs and to help them get started. The AICPA’s A’s self-study Client Accounting Advisory Services Certificate and Client Advisory Roadmap Workshop are excellent places to start.
If you need more immediate ways to build your business and diversify your income, you might consider other avenues tax preparers take to work year-round.
8 additional ways tax preparers get paid year-round
Whether you’re just starting out or a veteran tax professional, here are eight ways you can make money year-round.
1. Prepare taxes for businesses
One of the simplest paths to year-round income as a tax professional is to offer tax preparation services to small businesses. Unlike individual tax filers, businesses need year-round tax services. When offering tax preparation services to small businesses, it’s important to be aware of specific tax obligations that may apply, which can help you provide comprehensive support to your clients. Your small business clients may seek support for:
- Quarterly estimated payments
- Payroll taxes
- Sales tax
- Business licenses and permits
- State income taxes
- Fiscal-year schedules
If you want more training on preparing taxes for businesses, some IRS-approved CE providers like the Latino Tax Professionals Association (LTPA) offer courses on small business taxes.
2. Offer payroll management
If you already serve small businesses, you know that they may need more than just tax help. Payroll is a task many small business owners are looking to outsource. Auxiliary services like this are a win-win for building your business – your small business clients are likely to hire you if they need payroll help and vice versa.
3. Perform bookkeeping services
Like payroll services, bookkeeping services are in high demand among small businesses. Despite popular belief, you don’t need accounting experience to be an excellent bookkeeper. While the two services have similarities, bookkeeping is different from accounting and has a much shorter learning curve.
The LTPA also offers courses in bookkeeping and payroll for small businesses, making it easy to confidently offer these services to your business clients.
4. Become a tax service bureau
As a tax service bureau, you’ll help other tax professionals find the ideal tax software for their practice. Service bureaus resell trusted tax software under their own company logo, boosting the credibility of their brand and diversifying their income sources. Find out how to become a tax service bureau with TaxSlayer Pro.
5. Represent clients before the IRS
For many taxpayers, filing their tax return isn’t the end of the story. Whether it’s handling IRS notices, amending tax returns, or assisting with tax audits, , proper representation before the IRS is needed year-round.
To have unlimited representation rights before the IRS, you’ll need to be a Certified Public Accountant (CPA), Enrolled Agent (EA), or attorney. For most tax professionals, pursuing the EA credential makes the most sense. Unlike becoming a CPA or attorney, becoming an EA doesn’t require additional college credits, and all required training is relevant to tax preparation.
You can also gain limited representation rights by participating in the IRS Annual Filing Season Program.
6. Educate other tax preparers
Properly credentialed tax education is always in demand by EAs, CPAs, and Annual Filing Season program participants. If you’re an experienced tax professional, offering tax education and becoming an IRS-approved CE provider is one way to diversify your income.
No matter how experienced you are, you’ll likely want to partner with other experienced tax preparers as you begin creating and marketing your own educational courses. While it might be time-consuming at first, tax education can be a profitable and meaningful way to increase your income.
7. Offer refund transfers
Refund transfers, also known as bank products, make it easier to get paid during tax season, giving you more time to focus on other paid work. Tax bank products deduct your fee from clients’ refunds and distribute it directly to your bank account.
Bank products allow you to offer your services at no upfront cost, so you’ll be able to attract more customers and save time on invoicing and bookkeeping. For more information, our guide to Bank Products for Tax Preparers can help you choose the right bank products for your business and clients.
8. Become a financial planner
Just as business clients often need professional help with payroll or bookkeeping, individual taxpayers often need financial planning services. Becoming a Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA) involves a significant investment of time and money. However, if you have a passion for helping people grow and manage their money, financial planning can be an ideal complementary career to professional tax preparation.
Expand and grow your business with TaxSlayer Pro. Make the switch today!
