You’ve got questions, and we’ve got answers! Here are the most commonly asked questions about starting a career in tax preparation.
Do You Need a License to Be a Tax Preparer?
The IRS doesn’t impose mandatory licensing on tax professionals, but there are a few things you’ll need before you can legally prepare tax returns.
All tax preparers must obtain a Preparer Tax Identification Number (PTIN). To file electronically, you’ll also need an Electronic Filing Identification Number (EFIN) from the IRS. The PTIN online application typically only takes around 15 minutes, but approval for an EFIN can take up to 45 days. Also, some states will require you to register your business before you begin accepting clients.
What Education Do You Need to Be a Tax Preparer?
Tax preparers can practice without any formal education in accounting or tax law. However, there are several credentials and continuing education opportunities that can improve your credibility as a tax preparer, and some require a high school or college education.
Do Tax Preparers Work All Year?
Most do, though not solely in tax preparation (more on that below). Even those that only offer tax preparation services still keep up with these tasks throughout the year:
- Keeping their own books
- Managing their employees
- Preparing taxes for late filers
- Preparing quarterly taxes for businesses and freelancers
- Marketing and maintaining relationships with existing clients
- Obtaining continuing education hours
What Do Tax Preparers Do in the Offseason?
In addition to managing their business, many tax preparers offer one or more of these services to earn money in the offseason:
- Accounting and bookkeeping
- Financial advising
- Notary services
How Do I Start a Tax Business from Home?
Forgoing an office can save you a significant amount of money as you start your practice. If you go this route, you’ll need a tax preparation software that simplifies remote communication with your clients and a space for occasional client meetings like a home office or even a favorite coffee shop.
Before you start, check your city’s regulations on running a business from your home. If it isn’t an option, consider co-working spaces as a lower-cost alternative to traditional office space. For more advice, our Ultimate Guide to Starting a Tax Preparation Business has everything you need to get started.
Should You Work for a Tax Office Before Starting Your Own Tax Practice?
It’s up to you, but we typically recommend this as an early step for tax preparers who are just starting out. You’ll learn more about taxes and gain credibility as a professional, helping you earn more money once you do start your own business.
Do Tax Preparers Need Liability Insurance?
You aren’t required to carry liability insurance, but it’s a good idea. If a client sues you for costly mistakes on their returns, professional liability insurance protects you from financial disaster. This post covers everything you should know.
How Much Do Tax Preparers Charge?
Most tax preparers charge according to the type of forms they are filing rather than by hour. According to the National Society of Accountants (NSA)’s 2018-2019 Income and Fee Survey, on average, tax preparers charge $188 for filing a 1040 with the standard deduction and a state return. The average fee for 1040 with itemized deductions and a state return is $294.
Keep in mind these are only averages, and how much you charge will vary according to your level of certification and geographic area. With the NSA’s Tax Preparation Fee Calculator, you see average fees for the most common forms according to your state, your credentials, and the population of your city.
How Much Do Tax Preparers Make?
According to the Bureau of Labor Statistics, the average annual wage for tax preparers is $46,860, and the median annual wage is $39,390. The lowest-earning 10% of tax preparers average $20,550 per year, while the highest-earning 10% average $81,720 per year.
Which Tax Software is Best for Tax Preparers?
Your ideal software depends on the needs of your business. For example, if you handle taxes for businesses, you’ll need software that supports corporate forms. If you work from multiple devices, you’ll prefer software that’s based in the cloud. Our How to Choose the Right Tax Software guide will walk you through the questions you should consider before making a purchase.
For more help finding your perfect tax software, get in touch with the TaxSlayer Pro reps for expert support and advice.