Startup costs for starting a tax preparation business

Research Costs-

                Thinking about starting a tax preparation business? Or, do you need tax business help as a preparer? Perhaps you have already decided and are doing cursory research.  If you do your homework on the steps to starting a tax preparation business, it will pay off big time.  Being prepared for your new endeavor will save you time and money down the road. The more prepared and organized, you are the better off you’ll be when starting a tax preparation practice.

Software Costs-

                Tax software is going to be a yearly expense for your tax preparer business but, given the e-file mandate, it is a necessary cost.  Tax software prices can range from a few hundred dollars into the thousands.  The price varies based on several factors such as, but not limited to, functionality, usability and support.  One of the best ways to narrow down your specific needs is to decide what types of returns you are planning to prepare. 

                Do you plan to prepare corporate tax returns? Do you expect to complete fiduciary returns or estate or gift tax returns? If the answer to any of those is “yes” then you can expect a higher cost on the software (regardless of the developer or vendor).  If you plan to do individual taxes and extensions mostly, your business startup costs can be reduced by purchasing a software package that only makes you pay for the functionality that you need.  Interview tax software programs are typically less expensive than professional tax software platforms. 

Support Costs-

                Support costs are an often forgotten about or unseen cost. Tax preparation can be challenging due to constant tax law changes, form revisions and breadth of possible tax questions that your clients might have for you.  Necessary tax office support for your tax preparer business can be split into two categories: Tax support and tech support for your tax software.  Some software packages include support for both, while other vendors may offer little to no support. Oftentimes, a software purchaser may not know that they have no support until they run into a problem.  Always check the fine print. A solid support system is very important.

Marketing Costs-

                Business startup costs regarding marketing vary wildly based on your budget and method. From inexpensive methods to expensive methods, the purpose is to garner customers. If your marketing is successful in bringing in business, you can start to think of your marketing budget as unlimited. For example, if you spend one thousand dollars on marketing your business and you get two thousand dollars in business as your return on investment, you will never be wasting that money, nor will it be a wasted cost.  Marketing your business should be one of your priorities, as should the tracking of your specific marketing activities.

                Tracking metrics must be in place to help identify what is working and what is not. If you don’t get the word out, how will your customers find you? Whether you’re advertising on Facebook, Google, or handing out flyers, rest assured that if done properly, you should always see a return on investment. 

Overhead Costs-

                How will your office be set up? Will you have a store front that will require monthly rent? Do you have a home office that can be utilized? Will you have employees to pay? Will your office be paperless? Overhead expenses typically include any expenses beyond direct labor, direct materials, and direct expenses. In this case, any expense beyond your tax preparation software, paper and ink, and labor of the person doing the preparation will be considered overhead.  

                Reducing your overhead helps to increase your bottom line. For example, a signature tablet may cost about $129 and unlimited document storage is free so if you normally spend more that each year on a new printer, ink and paper, then you will realize a cost savings in year one. That one time investment in technology will mean that each year you can avoid spending money on those items thus increasing your profit though those cost savings.

Educational costs-

                Educational costs are the amounts of time and money that you spend to educate and train you and your employees.  Tax software training is important. Does your software provider train on the software? Will your software provider train your employees?  What sort of practice material is available for the training? Beyond software training, there are continuing education costs to consider. How much are you prepared to spend on your continuing education and will you pay for the continuing education of your employees? There is a wide range of costs for tax education and it can be taken or received in many different ways.  

                The IRS tax forum is three days of seminars and most people can get all of their yearly education needs satisfied. However, a forum or tax conference is more expensive than other options. IRS continuing education can be taken online as well and that is typically cheaper than a live forum. offers low cost continuing education that can be watched live or completed via archived presentation. Also offered is whole office CE which is good for up to 10 users.  As a result, this will save the office money if they have more than 4 employees.

If you have any questions, feel free to call us at (866) 357-2052.

Posted: October 3, 2016

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