If you’ve ever wondered how to start a tax preparation business or dreamed of opening your own tax office, you’re in the right place. Whether you’re an experienced preparer or just entering the industry, launching your own practice can be a game-changer for your career and income.
In this guide, we’ll walk you through five essential steps to start a tax prep business, from registering your business and setting up your office to choosing the right technology, marketing your services, and planning for long-term growth. By the end, you’ll know exactly how to open a tax business and build a profitable tax practice that can scale over time.
1. Register your tax prep business
If you’re an established tax preparer, you’ve probably already taken care of this step. However, if you’re new to tax preparation, opening a tax office will involve structuring your business and gaining the necessary credentials with the IRS. The most basic steps for starting a tax business include:
- Structuring your business: Most tax prep businesses either file a DBA (Doing Business As) with their state or form an LLC for liability protection and credibility.
- Obtaining an EFIN (Electronic Filing Identification Number): Now that you’re on your own, you won’t be able to use your previous employer’s EFIN. Make sure to apply for one well before tax season, as approval can take over a month.
- Applying for a PTIN (Preparer Tax Identification Number),
- Registering your business with your state
Once your business is registered and your credentials are in place, you can start building your client base. Leveraging your network and asking for referrals is a great way to get started, but be sure not to violate any non-compete clauses you may have signed with your previous employer.
2. Choosing and running an office space
Even if you forgo a traditional office for a home office or co-working space, you’ll still have plenty of logistics to work out. You’ll need a business address and phone number, equipment like printers and computers, and a professional space for client meetings.
When setting up your office, consider these key factors:
- Size: The size of your office will largely depend on how many employees you plan to have. If you’re opening a whole office with multiple employees, you may need an entire suite, while a single-room office could work if you are the only preparer.
- Location: In addition to considering the proximity to your home, you’ll also want to consider the types of clients you’ll serve. If they tend to live or do business in a particular area of town, choosing a space that’s farther from you but closer to them may make sense.
- Cost: Office space can feel like a big expense, especially if you’ve been running your business from home. However, a dedicated office can help you expand your business and attract more clients. As you set your budget, project how much additional revenue you could earn by having an office space. If your projected revenue outweighs the cost of rent, opening an office likely makes sense for you.
- Technology: A tax office relies heavily on secure and efficient technology. In addition to computers and printers, make sure you have a strong internet connection and proper computer networking in place to support secure data transfers and multi-user access if you plan to hire staff. This is critical for maintaining compliance and protecting client information.
- Coworking: If traditional office space isn’t within your budget, coworking spaces can be a great alternative. Membership fees for a coworking space are often far less than rent payments for a traditional office. You’ll typically have access to communal workspaces on the least expensive plans. When you need to take a client meeting, most coworking spaces offer conference rooms that you can reserve as part of your membership or for an additional fee.
3. Set up technology & tax software
When you worked for an employer, most of the technology and software you needed was provided for you. Now that you’re starting a tax practice, you’ll need to choose, purchase, and manage these tools yourself. Start with the essentials:
- Computers and internet: Invest in fast, reliable computers and a strong internet connection. These are the backbone of your tax office.
- Tax preparation software: Choose software based on how you prefer to work and the types of tax forms your clients will need. If you plan to work remotely at times, cloud-based software is ideal because it allows access from multiple devices.
In order to save and share data more easily, some larger tax offices set up a network server. If your office has more than one computer working on taxes, the desktop version of TaxSlayer Pro can be easily configured for multiple users.
While tax preparation software is the most important software you’ll use at your tax office, it’s not the only one you need. You’ll need a few more products, like firewalls and PDF readers, to help you work efficiently. Our Tax Office Checklist will help you make sure you have everything you need to get your new office ready for tax season.
4. Start marketing your tax practice
At your previous firm, you may have had no role in finding clients. Now, client acquisition will be a part of your responsibilities. Now, as an independent tax professional, client acquisition will become one of your most important responsibilities. Building a steady stream of customers will be essential to the success of your new office, so it’s worth investing time (and some money) in marketing and promotion.
Here are some ideas to get you started:
- Create a web presence: Build a professional website or update your existing one with your new business address and contact information.
- Set up social media profiles: Platforms like Facebook, LinkedIn,
and Instagram can help you connect with potential clients and showcase your expertise.
- Leverage your network: Ask existing clients and professional contacts for referrals—but make sure you’re not violating any non-compete clauses from your previous employer.
You can also expand your marketing efforts by identifying your target audience and leverage different avenues of customer engagement.
Learning about small-business marketing will be just as critical to your success as your tax knowledge. Carefully planned customer acquisition strategies and consistent lead nurturing will help you gain traction and see growth quickly.
5. Plan for growth and expansion
Once you’ve adjusted to life as a business owner, your focus will naturally shift from day-to-day operations to long-term growth. Scaling your tax practice requires strategic planning and flexibility. Here are key areas to consider as your business evolves:
Hiring employees
As you shift from solo practitioner to employer, you’ll be responsible for creating a productive and positive work culture at your business. Whether you’re bringing on full-time administrative support or a seasonal tax preparer, devote time to learning about management strategies and leadership styles.
Opening new locations
If your current office is thriving, expanding to a second location may be the next logical step. Before making the leap, ask yourself: Will a new location complement my existing business or cannibalize it? Will word-of-mouth marketing extend to this area, or will I need to start from scratch? Do I have trusted employees who can manage the new location independently? Careful planning will help ensure your expansion strengthens your tax brand rather than stretching resources too thin.
Reevaluating business tools
Some tools that worked fine for your practice in the early days may not serve you as well anymore. By periodically evaluating the current needs of your business, you can avoid drains on productivity and continue scaling your business.
For example, if your bargain printer is disrupting your office’s workflows, it may be time to invest in a commercial printer. Or if you’re now operating from multiple locations, switching to a cloud-based tax software can help keep you collaborate easily and work more efficiently.
The tools that worked when you started may not meet your needs as you grow. Periodically review your technology and office equipment to avoid productivity bottlenecks. For example:
- If your bargain printer slows down workflows, upgrade to a commercial-grade model.
- If you’re managing multiple locations, switching to cloud-based tax software can improve collaboration and efficiency.
Staying proactive with your tax prep tools ensures your business scales smoothly.
Expanding services
You can grow and diversify your income by offering additional services like bookkeeping, financial planning, or payroll. These are steps that move you closer to operating as a full-service accounting firm. Even if you want to focus purely on tax preparation, you can still expand your services by partnering with refund settlement banks or gaining additional credentials like Enrolled Agent status.
Are you ready to dive into tax preparation? It’s easy to find the right tax prep software by visiting our compare tax software page.
