Why in the world would anyone want to learn how to become a tax preparer or how to start a tax preparation business when AI is taking over and DIY tax software is everywhere? Taxes and tax preparation have a stigma of being intimidating and confusing, and while that is not necessarily untrue, I do not blame you a bit for your initial trepidation, but these tips should help your decision making process when considering starting a virtual or retail tax preparation business in the face of vast industry change.
• You DO NOT have to be a CPA to start an income tax office.
Since you don’t have to be a CPA, starting a tax prep business is easier than you think! If you go into a franchise tax office to have your individual return prepared, I can guarantee that you are not having a CPA or IRS Enrolled Agent prepare your taxes! The fact is the software available to tax retail tax offices does the bulk of the work for you. There are a number of programs available to retail tax offices that range from interview-based return preparation to assist beginner tax preparers to forms-based programs for professional tax preparers with years of experience. Most tax returns can be completed in modern programs in under an hour, with the preparer simply needing base-level training and an understanding of the tax software functionality.
• You DO NOT have to own a franchise to offer rapid refunds or bank products to your clients.
Franchises have their place, but require considerable up front capital investment and typically project new offices to operate at a LOSS for their first 5 years or longer. There are alternative options available for opening a tax preparation business that offer professional retail tax preparation software, training, support, licensing, and marketing programs which allow considerably more flexibility than the franchise options and require dramatically less in start-up capital. Spending a few hundred or thousand dollars for startup costs for a tax partnership and support program versus spending $50,000 to $100,000 for a franchise startup license, certainly allows for a quicker return on investment, including year-1 profitability.
• When starting a tax prep business, your business model should fit your business and your goals, NOT the other way around.
Many tax preparers operate profitable tax businesses without conforming to the traditional brick and mortar business model. Bundling income tax services along with other business lines is a turn-key option to increasing revenue with low overhead; the list of complementary businesses is extensive! If you are already in a personal service industry it is hard to find a client that does not have to file a tax return each year! The affordability of tax start-up programs also allows for success and profitability of a smaller virtual, seasonal, or a home based tax preparation business. When you don’t have much overhead, you don’t need to do hundreds of return to be profitable.
• One of the biggest mistakes new tax business makes is UNDER MARKETING.
More important than any aspect of your business is the ability to get and retain paying customers. Marketing Campaigns do not need to be expensive. When starting a tax business, you do not have to invest thousands on television or radio campaigns to have successful tax advertising. If you have more time than money, there are many different methods available to get the word out that your tax service business is here to compete with the franchise options in your area. Social media marketing, business door hangers, postcards, and specific network marketing programs are just a few cost-effective options available to help you advertise your tax preparation business. When starting a tax preparation business, be sure to have a marketing strategy. If you do nothing, clients WILL NOT show up on their own…You have to invite and entice them!
• The tax industry itself is booming and changing.
There’s never a bad time to start a tax preparation business, and with the growing complexity of the IRS tax code, the demand for professional services continues to rise. One tax business or another is always in the Franchise top 10. Currently it is H&R Block, but Liberty, Jackson Hewitt and Instant Tax have all historically been flirting with the top startup spots since their inception. This shows the appeal of owning a tax business. Even with consumer filing options such as Turbo Tax enjoying DIY dominance in the marketplace, tax filers still want and seek out professional review and preparation of their returns, especially their complicated business tax returns. Who wouldn’t like to make as much money as other start-up business opportunities, while only having to operate your business four or five months out of the year? The IRS tax code grows in complexity each year with constantly changing tax provisions put into law. This complexity continues to push consumers to seek the services of a professional for their tax preparation needs.
If you are considering becoming a tax preparer or starting a tax preparation business, do yourself a favor, and at least take advantage of Federal Direct’s free target marketing demographic breakdown. Whether you choose us to help get your startup tax prep business off on the right foot or not, we will at least give you all the information you need to know your market for your surrounding zip code all for FREE!
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