How To Start A Home-based Income Tax Preparation Business
When I talk to other mamas about starting their own businesses, the one thing they’re looking for is something that’s easily manageable.
Some mamas want to be able to balance a home-based business around their kids or another job.
There are plenty of home-based businesses that are a perfect match for you, mama. Take for example running an income tax preparation business.
This venture not only allows you to take advantage of a seasonal market but also provides the flexibility of working from the comfort of your own home. In this blog post, we will explore the key steps, resources, and tips for starting a successful home-based income tax business.
I’m also going to show you the best ways to market your home-based tax preparation business even on a low budget. And I hope by the time you’re done reading this post, you’ll be able to decide if this would make a good business for you.
Are you ready? Let’s go!
Certification Resources
Before diving into the world of income tax preparation, it’s essential to obtain the knowledge and credentials required. You can start by:
Education:
Consider enrolling in tax preparation courses, many of which are available online or at local community colleges. These courses cover tax laws, regulations, and practical aspects of tax preparation.
Certification
To become a certified tax preparer, you may need to take the IRS’s Annual Filing Season Program (AFSP) exam. Certification enhances your credibility and ability to represent clients before the IRS.
Here are some certification resources to obtain your tax preparation license. You can take a basic tax course with these well-known tax preparation companies.
Courses normally run about 10 weeks and the cost will depend on the kind of course you take as well as the state in which you live.
You can add to your credentials by getting certified through the Accreditation Council for Accountancy and Taxation (ACAT) by taking the ACAT exam.
Income Tax Preparers must also register for a Preparer Tax Identification Number or PTIN. You can get more information about this on the IRS website.
You will also have to register with your business within the state you live in and obtain an Electronic Filing Identification Number or EFIN from the IRS.
Choose a Business Structure
Decide on the legal structure of your tax preparation business. Common options include sole proprietorship, LLC, or S corporation. Consult with a legal or financial advisor to choose the structure that best suits your needs and provides liability protection.
Will your clientele be individuals, businesses, or both?
Register Your Business
Once you’ve selected a business structure, you must register your business with the appropriate state and local authorities. This may involve obtaining a business license, employer identification number (EIN), and any required permits.
These are some of the questions you should address in your business plan.
You also want to price your tax services. You can check what local tax preparers charge or you can use a tool like Intuit ProConnect Pay-Per-Return pricing software.
Tools and Software You’ll Need
To efficiently prepare taxes from your home, invest in the necessary equipment and software. Consider acquiring a reliable computer, tax preparation software (see list below), a printer, and secure storage for client documents.
ProSeries by Intuit Proconnect
Marketing Your Income Tax Business
When you’re ready to take on clients, it’s time to start marketing your income tax business. Here are some ways to promote your business without needing a big budget to do it.
- Start promoting to family and friends
- Promote online by setting up a website and including a blog about tax tips
- Create social media profiles to promote your business
- Have a website designed for your business
- Submit your website to online directories
- Promote offline by distributing flyers around your community
How Do Income Tax Preparers Make Money?
Ah yes, the million-dollar question. The first thing that came to my mind and probably others was that tax preparers are only busy the first quarter of the year, so there would be a lapse in income. But this was a misconception on my part. There are other ways tax preparers can make money.
Yes, it’s true that a tax preparer is busiest the first four months of the year, however, there are some folks who need to file tax extensions, people and companies big and small, who need assistance with audits, and other tax documents the IRS may request during the year.
There are also businesses that file quarterly returns so there is a great possibility of making money throughout the year.
BLS data shows income tax preparers earned an average annual salary of $51,080 in 2021. Because these professionals are in demand across many industries in the U.S. and can earn several different certifications and licenses, salaries vary. For example, tax preparers in industries like management, legal services, and insurance all earn average salaries above $70,000.
These careers are expected to grow by 4% from 2021 to 2031.
Secure Professional Liability Insurance
Protect your business and clients by obtaining professional liability insurance. This safeguards you in case of errors or omissions during tax preparation.
Ensure Data Security
Given the sensitive nature of tax information, data security is paramount. Invest in secure storage and backup solutions, and follow best practices for data protection and privacy.
Stay Updated
Tax laws and regulations are constantly changing. Stay informed by attending tax seminars, subscribing to newsletters, and continuously updating your knowledge to provide the best service to your clients.
Resources and Tips For Your Income Tax Business:
- Tax Software: Invest in reliable tax software, which simplifies the tax preparation process and ensures accuracy.
- IRS Resources: The IRS offers valuable resources for tax professionals, including tax guides and e-services for electronic filing.
- Professional Organizations: Consider joining organizations like the National Association of Tax Professionals (NATP) or the National Society of Accountants (NSA) for support and resources.
- Client Relationship: Build trust and rapport with clients. Remember that tax preparation is often a personal and confidential process.
- Continuous Learning: Keep up with changing tax laws by attending tax seminars, webinars, and enrolling in advanced courses.
- Time Management: Create a schedule that balances your work and personal life. Tax season can be hectic, so plan accordingly.
Wrapping Up
Starting a home-based income tax business can be a rewarding endeavor, both personally and financially. With the right education, resources, and a commitment to excellence, you can build a successful business that not only helps your clients navigate their tax obligations but also provides the flexibility and independence of working from home.
Follow the steps, utilize the resources, and apply the tips outlined in this guide to embark on your journey toward a prosperous home-based income tax business.
