How Much Can You Make Doing Taxes?
The salary of a tax preparer depends on a few things. How much you charge and how many people you charge are the two biggest factors. As with any service business, how much you can make depends quite a bit on how well you market yourself and your service. In this post, we’ll try and answer the question, "How much can you make doing taxes?" and give some examples of how to increase that number.
Average Salary of a Tax Preparer
According to the Bureau of Labor Statistics (published May 201, but last modified March 30, 2016), the average tax preparer makes $36,450 annually. So if you start your tax preparation business and work your way up to average, that’s what you can expect.
How Much Can You Make Doing Taxes?
Tax prepares in the top 10% of their business earn $79,460 annualy, according to the Bureau of Labor Statistics
If you are able to grow your business though, you can expect to make more than double that. According to that same report, tax preparers in the top 10% of their business earn $79,460 annually on average. That equates to $38.20 an hour.
It is important to realize that $38.20 is based on a 40 hour week, 52 weeks a year. Many (if not most) tax preparers make the bulk of their income from January through April. There may be some returns that require an extension that will take a tax preparer past the traditional April 15th deadline, but for the most part, the busy season ends in April.
This presents a tax preparer with the option to take time off after the busy season, or focus on other business activities. Many people choose a career in tax preparation specifically for this kind of flexibility in business and lifestyle.
How To Price Your Services
As mentioned previously, a tax preparer salary depends largely on how much you charge. A survey by the National Society of Accountants conducted in 2015 found that the cost for an itemized Form 1040 with Schedule A and a state tax return was $273. A 1040 with a itemized deductions had an average of $159. Both of those figures were an increase of over 4% from the prior year. This is good to know that online tax preparation is not causing tax preparers fees to compress further.
It is important to note that these figures vary by region. One way to find out what price to charge is to find out what local competition charges for various cases. If you are just starting out with your tax business, you may want to charge towards the lower end of the price range to get some initial opportunities. It can be difficult to raise prices later on though, so keep in mind what price you ultimately want to get to when you first start out.
How To Get New Clients
When you are first starting out as a tax preparer, it can be difficult getting those first few clients. Most people do not have a big budget for marketing early on, so you have to do a lot of prospecting on your own to find clients. Here are a few cheap ways to find clients early on.
Craigslist - You probably won’t get a ton of clients this way, it is a free way to promote yourself, and if you do it consistently, you will surely get a few. The benefit to getting a few clients early on using Craigslist, is the ability to probe for referrals from these new clients.
LinkedIn - Do you have all of your connections on LinkedIn? Then post about your new tax preparation business, and ask your connections to share the update. The bigger you build your LinkedIn network, the further your reach and the more opportunities you will have.
Cold Calling - I know. Everyone hates it. But it still works. The ratio of calls to get a new client will be daunting, but if you have no money, and a lot of time when you are first starting out, cold calling is a great option.
You can do cold outreach by phone, or by actually visiting businesses or homes with your business card. You can take two approaches to a cold call. 1) Ask for the business right away or 2) Build a relationship first and then ask for business. Option 1 is more immediate, but will have a lower probability, while Option 2 is easier to do, but takes longer to work.
We’ve discussed how much a tax preparer can make. We’ve talked about the two primary variables that drive a tax preparer salary, the price you charge, and how many people you charge that price to. There are more ways to drive your business, but this is a good place to start. If you are interested in taxes, the flexibility in scheduling is excellent. You just need to put in the hard work to build the business.