How To Become A Tax Preparer At Home

As of 2014, the Federal Tax Code was over 74,000 pages long. So even though there are several options online for people to file their taxes, I don’t think the tax preparer career is going anywhere. If you have some basic skills, and the right temperament, becoming a tax preparer without spending a lot of money is very possible. In this guide, we’ll focus on how to become a tax preparer at home specifically, since we are all about working out of the home office here.

Many of the steps required to start a home tax preparer business overlap for someone that would like to get a tax preparation job for another company though. So even if you aren’t planning to become a self employed tax preparer, this guide will still help you.

What Kind Of Basic Education Do You Need?

According to the IRS, anyone with a Prepare Tax Identification Number (PTIN) can prepare a tax return for a client. There are higher levels of education that you can pursue, which we’ll cover below, but if you want to prepare taxes, you simply need to obtain a PTIN from the IRS.

With that said, you should have some basic skills and traits if you want to be successful as a tax preparer. You should be comfortable with basic math first of all. Just as important as being comfortable with adding and subtracting, you should be very detail oriented.

how to become a tax preparer at home

Being detail oriented is important because you will review quite a few numbers on every return. A simple mistake like missing a decimal or comma can make a big difference on a tax return. Mistakes like this can be very costly, in terms of money and aggravation, for your potential clients.

Another important skill for someone that wants to become a tax preparer is the ability to research topics they are unsure. As previously mentioned, the tax code is very large. Even with advanced training, you will very likely come across issues that you don’t know right away.

You’ll need to know how to research efficiently, because the longer it takes you to research, the less time you have to prepare other returns.

Finally, you will need to have some basic understanding of popular tax forms and topics to start. When you’re first starting out, you can focus on strictly doing basic 1040 preparation for clients, and then expand once you have more experience. You can find some free resources online to get you started.

Link & Learn Taxes is a free e-learning course that you could take to learn how to prepare taxes on a voluntary basis. It is provided by the IRS.

Advanced Tax Preparer Education

There are a few ways that you can expand your tax preparation knowledge base. I will cover 2 popular options here. Both options will cost money, so if you are trying to start out for the lowest cost possible, keep these in mind for later on in your tax preparer career.

Certified Public Accountant

This is probably the most familiar advanced tax education most people are familiar with. To become a CPA, there are significant hurdles. You will need have a college degree, along with additional class time in accounting to even qualify. If you meet these qualifications, you can then sit for the 4 tests that make up the CPA exam.

While many people think of CPAs when they think of taxes, in reality, taxation is only a piece of what the CPA designation is all about. If you are simply looking to become a tax preparer at home, the next designation is probably a better option.

IRS Enrolled Agent

In order to become an Enrolled Agent, one would need to pass a 3 part exam. According to the National Association of Enrolled Agents, EAs are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS.

The Enrolled Agent is almost like the ‘CPA light’, in that it only focuses on taxes. As such, it is more affordable than preparing for and taking the CPA exam. As of this writing, each of the 3 exams costs $109, so total cost to take the exam would be $327. You would probably want to consider a review course prior to taking the exams as well.

So Now You’re Educated, Time To Get Registered

As I mentioned above, the primary registration you will need to get is a Preparer Tax Identification Number, or PTIN. The PTIN is kind of like a tax preparation license essentially. It is the bare minimum you need to prepare taxes. There is an application process online that will cost you $50 to get a PTIN.

In addition to a PTIN, you should always check with your state to see if there is any filing or registration you need to get to prepare taxes. There may not be, but you should check before acting.

The Annual Filing Season Program is another program issued by the IRS that you may want to consider as well. While it is not necessary, especially just starting out, the AFSP participants would be able to represent clients that they prepared for, in a limited capacity. Tax preparers who only have a PTIN cannot represent their clients in front of the IRS. They are only permitted to prepare returns.

Get Your Work Space Set Up

If you are not planning to become an at home tax preparer, you can skip this section. If you are going to be an independent tax preparer working from home though, you will need to get your home office in shape.

First off, you’ll need a good computer. Assuming you will run one of the professional tax preparer programs, you will want to make sure your computer is in good shape, since you will be depending on it quite a bit.

Secondly, get a good printer. If you are preparing taxes for someone else, you will need to keep records of them signing off on allowing you to prepare. Even though you can file electronically, there is still a good amount of printing you will need to do.

Third, and maybe most important, but often overlooked, you will need plenty of desktop space. The reason is that not all of your clients will give you their documents in a neat and tidy fashion. A lot of times, you will need to spread out documents, and figure out how everything fits together before you can even start inputting numbers into the tax preparation program.

So make sure you have enough room on your desk, or an extra table, to allow you to spread things out and see the whole picture.

Now You Need To Pick A Professional Tax Preparation Software

Maybe you don’t need tax software, but it sure would make things easier on you. Many professional tax programs have different pricing structures, so you can pay on a per-return basis if you’re just starting out. This is important because you won’t have a very good idea of how many returns you will do in your first year starting out.

3 of the big players to consider are Drake, ATX and ProSeries. Drake users were the most likely to recommend their own software to a new practice in a recent survey.

File Your Business With Your State

You’re almost there. Typically, you will need to file some kind of articles of incorporation in your state to start your new business. Many states have lots of information on their websites about how to get your business started. Here is the Massachusetts Step by Step Guide to Starting a Business as an example.

Before you file any legal paperwork, consider consulting a lawyer.

OK, You’ve Got A Business Now… But You Still Need Clients

So if you’re still with me, congratulations on getting the easy parts done. Now is time where the real work comes in. You have to find interested clients that want to work with you. As with any business, everything else we’ve talked about so far doesn’t matter much if you don’t have clients to work for.

becoming a tax preparer

There are any number of things you can do to find clients. Jassen over at Tax Marketing HQ is a huge help in this area. You could spend a few hours on his site and come up with quite a few ideas on how to build your client base. Try reading his 7 Simple Ways To Find New Tax Clients just to get started. If you can make 1 or 2 of those strategies work consistently, you will be in good shape.

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  • Updated March 20, 2017
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