How to become a Tax Return Preparer

Thinking about becoming a tax return preparer? If you are feeling overwhelmed by the tax code changes, business start up costs, or timeliness of your endeavor, stop.  Becoming a tax return preparer is easier than it may seem.  At least the technical aspects are not too difficult.  Finding time to develop your stills may be the most difficult aspect of becoming a tax preparer if you have family and work constraints. 

The first thing you’ll need to do to become a tax preparer is make the decision. Firmly, make it. Be ready to invest money into yourself.  You are going to have to purchase several things to become a tax return preparer.  For example, you will need a tax software program that will allow you to e-file the tax returns.  Tax software varies between developers, but most have an interview mode and a forms mode.  If you’re serious about becoming a tax preparer, you will want software with full forms.  Once you get the software, you need to learn the software.  If software training is included, take advantage of that.  If it’s not, seek out tutorials in order to learn the program.

Knowing your tax software is very different than knowing tax code, but if you’re just starting out, you can start learning the new code and not the old code.  The new tax law changes are what we’ll be working with until further notice.  One of the best ways to learn the tax code is to study hard, of course, but you may find that doing practice returns really helps to solidify that knowledge as you’ll see the how the code affects the calculations on the forms.  Another way to learn how to become a tax return preparer is by taking tax prep courses.  Some courses give you continuing education credit, while others do not.  Some are locally taught, while many are online.  Go with which ever way you learn best as the content will be nearly identical.

You’ll need an Electronic Filing Identification Number (EFIN) and a Preparer Tax Identification Number (PTIN).  Both of these required registration numbers can be acquired on the website of the IRS without charge (currently).  Some states have requirements to become a tax preparer as well.  New York requires its preparers to have an NYTPRIN which is the state’s version of a PTIN.  California has special requirements including state specialized continuing education, tax preparer bonds, and annual CTEC registration.  Be sure to check with your state for any specialized requirements for becoming a tax return preparer.  Many states do not currently have special requirements, but that is changing year to year.

Decide where you are going to prepare.  Are you going to work out of a home office? Will you rent a space? Are you thinking of doing mobile tax preparation?

Consider marketing your business. How much are you able to put into marketing your tax preparation business? Marketing should be one of your larger budgetary expenses because if you don’t get clients in the door, everything else will have gone to waste.  If you already own a business, you can start by marketing toward your current client base.  While there are more inexpensive ways to market, still expect to spend good money on marketing, digital or otherwise.

One of the most important and overlooked items is support.  What will you do if you aren’t as prepared as you thought?  Do you have a support system ready to help you tackle tough tax scenarios?  If your computer crashes, who will you call?  If you don’t know your software as well as you thought, will your tax software vendor be willing to assist you? These are very real problems that many tax return preparers and small business accountants face due to inadequate support planning.

Another item to consider is how you’ll be paid. Will you only take cash? Will you accept payment from the tax returns? If the answer is yes, you’ll need to be enrolled with a bank to offer rapid refund or refund advance products from which your tax preparation fees will be extracted.

If you are thinking about becoming  a tax preparer and would like to speak with a friendly representative about how Federal Direct can help, give us a call at (866) 357-2052 today and ask about preseason discounts!





Posted: June 25, 2018

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