How To Start Your Own Tax Business – Starting your own professional tax practice is a unique and complicated process, with Internal Revenue Service (IRS) requirements and ever-changing laws adding to the complexity. Whether you are planning to become a solo practitioner or start a larger practice, this page provides a detailed explanation of the steps you can take to start your own professional tax practice to help you along the process facilitated.
Once you have decided on an entity type for your business, you can register your business with your state. A common way small businesses register is by filing a Doing Business As (DBA) name with their state. This can be a simple way to get registered with your state without creating a formal business structure for your company. Another option is to form a limited liability company (LLC) or corporation for your business, which automatically registers your business with the state. Contact your state government to get more information about registering with your state.
How To Start Your Own Tax Business
Some business types may also require a Federal Employer Identification Number (EIN). While some states allow you to apply for an EIN during the business registration process, some states require a separate application.
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Click here to see if you need an EIN. Some cities may require additional registration, licenses or permits, so please contact your county clerk for additional information.
The IRS requires all tax preparers or firms that file 11 or more returns to file electronically. Before you can file tax returns electronically, you or your firm must apply to become an Authorized e-File Provider with the IRS and obtain an Electronic Filing Identification Number (EFIN). You will need to complete a separate EFIN application for each location from which your business will file returns electronically. Once you submit your application to become an authorized e-file provider, non-certified professionals will need to send a fingerprint kit to the IRS so they can perform an eligibility test. This may include a credit check, a criminal background check, a tax compliance check, and a check for past non-compliance with IRS e-file requirements. This process can take up to 45 days. There is no fee to obtain an EFIN.
To begin the application process, create an IRS e-Services account, then complete your e-file application online. First, you will provide identification information for your firm. Next, you will enter information about each principal and responsible official in your organization. You choose your e-file provider option. If you are a return preparer and want to e-file for clients, choose electronic return originator, or ERO. If the principal or responsible official is someone who is certified or licensed, such as an attorney, CPA, or enrolled agent, they must enter current professional status information. All other individuals must provide fingerprints to the IRS. You can find the most up-to-date information about the EFIN application process on the IRS “Become an Authorized E-File Provider” webpage.
It is important to note that some states require e-file providers to submit a separate enrollment application for authorization to e-file individual or business tax returns. Check with relevant state tax agencies to understand state-level e-file requirements.
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Anyone who prepares or assists in the preparation of federal tax returns for compensation must have a valid preparer tax identification number (PTIN). The IRS issues PTINs to anyone authorized to legally prepare and defend tax documents for individuals and companies. PTINs expire and must be renewed each year. If you are starting a firm, keep in mind that PTINs cannot be shared by a firm. Each paid preparer must have their own PTIN before they can assist in the preparation of federal tax returns.
The next challenge is to determine how your business will bring in revenue, or what your business model will be. Will you provide year-round advisory and/or accounting services to your clients in addition to your tax expertise, or will you be a tax practice that operates primarily on a seasonal basis? Within your tax practice, will you focus on business taxes, individual taxes, or both? And what kind of customers would you want if you could choose? If you will offer business tax services, you can become an expert in certain industries or businesses of a specific size; if you will offer individual tax services, will you focus on high net worth individuals, self-employed clients, or perhaps target your services more broadly?
This is also the time to determine where your practice will be located. Will you open a dedicated office, share an office space, work from home or use a virtual office?
It is important to make decisions about these elements of your business model now so that you can choose the right professional tax software and tools as well as marketing tools for your practice.
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Use this Tax Fee Wizard to help compare and price your tax services. The wizard will give you the average price that professionals with similar designations and years of experience charge for their tax preparation services, although you may want to adjust your prices based on several other factors, including clients’ form complexity, your cost of doing business, your pricing strategy, and whether you offer the added value of services throughout the year.
If you’re unsure about the best model for you and your practice, talk to one of our experts for tips and advice. Making these decisions early on will help you make other important decisions down the road.
Prospective clients value credentials, and there are many training and credentialing options for you and your new tax business, including certification in the IRS Annual Filing Program, education and certification from The Income Tax School, the IRS Enrolled Agent program for preparers planning to represent clients in exams, or even a Certified Public Accountant certificate for rated accountants who plan to issue financial statements.
Some states, including Oregon, California, Maryland, and New York, have their own certification or registration requirements for professional tax preparers. Check with your state to find out if they have any additional regulations.
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The next step is to determine which professional tax software is right for you. There are a number of important factors to consider when choosing software:
Intuit® is the industry leader in providing professional tax solutions for every budget and every practice style. Whether you plan to prepare simple returns or complex returns, whether you prefer desktop solutions or online solutions, whether you plan to deliver professionally bound paper returns or technology-forward tax returns for mobile devices, Intuit can provide a solution that unique as you adapt.
In addition to this core software, Intuit and other companies offer other integrated tools to help you work efficiently and collaborate with your customers or whatever you are.
To work with your staff in a virtual office, Intuit offers desktop hosting for Lacerte and ProSeries, providing the freedom and flexibility to work anytime, from anywhere.
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To work with your clients in a virtual office, you can use Intuit Link as a client portal for document collection and management and eSignature to collect and track digital signatures on a wide variety of tax forms and documents.
Finally, Intuit Pay-by-Refund gives you an easier way for customers to pay your preparation fee, ensuring they get their refund and you get paid.
Tax laws, technology and even client expectations are constantly changing, and staying current is essential to running a successful practice. Intuit offers several resources in the Intuit Accountant Training Center to help you continue learning, including live and recorded webinars (including many that offer free CPE credit), how-to videos, and peer-to-peer training via forums. We keep our clients informed of the latest tax law changes and their impact on Intuit software, the latest technology updates, best practices to help keep your client’s data safe, how to grow your firm, and more.
Intuit Accountants also offers the Tax Pro Center — a collection of valuable content, including articles, infographics and more, that provide insights on tax law, client relationship building and workflow efficiency to help you take your practice to the next level.
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Finally, trade associations, such as the National Association of Tax Professionals, as well as trade publications, such as
While there are many ways to market your new practice, here are some common ways tax chairs get the word out about their practices so you can start developing a plan for marketing your own practice:
To further help your business clients and generate another revenue stream, consider adding accounting and bookkeeping services to your practice’s offerings when you’re ready. Intuit’s QuickBooks Online Accountants portfolio has many tools to help you expand your client base, sharpen your skills, and become more efficient. By becoming certified as a QuickBooks ProAdvisor, you earn perks like a free listing in the Find-A-ProAdvisor directory, free or discounted products for you and your clients, and preferred support.
Download our “How to Start Your Tax Preparation Business” checklist to guide you as you take the necessary steps to start your own tax preparation business.
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Visit the IRS Site for Tax Professionals for additional resources, including Circular 230 regarding “Regulations Governing Practices Before the Internal Revenue Service”.
Intuit, QuickBooks, QB, TurboTax, and Mint are registered trademarks of Intuit Inc. Terms and conditions, features, support, pricing and service options are subject to change without notice. Whether you take advantage of the extensive
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