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How to a Start Tax Preparation Business of Your Own

A man wondering how to start his own tax preparation practice

Many tax preparers find that their passion lies within helping others, going above and beyond to guarantee the most favorable tax outcome possible for families in their community. Sometimes, this drive leads them to pursue an independent tax business of their own, but the question of where to begin can be daunting.

If you are an experienced tax preparation specialist interested in starting your own business, TaxAct Professional can help guide you through the process from start to finish. To begin, here is a checklist of the fundamental steps to establishing yourself as an independent tax preparation professional. More details on each below.

  • Register your tax practice with your state
  • Obtain your PTIN
  • Apply for your EFIN
  • Take measures to protect your data and your clients' information
  • Get your name out there!

State, Local and IRS Requirements

First, register your business with your state. This can be done relatively easily; simply file a “Doing Business As” name with the state in which your practice will reside. If you'd prefer, creating a limited liability company — mosre commonly known as an LLC — removes the step of registering with the state, as this is already included in the process. Your state government can also provide you with invaluable resources as you take the first steps toward registration.

Preparer Tax Identification Number (PTIN)

Individuals who charge any fee for tax return preparation services are required to obtain a PTIN, or Preparer Tax Identification Number. To get your PTIN, simply register and apply online. It is important to note that your PTIN is unique to you as an individual, and if you hire anyone else to prepare returns as part of your business, each employee must also obtain a valid PTIN. Your PTIN must be renewed each year, but doing so is a quick and simple process.

Electronic Filing Identification Number (EFIN)

If you've worked as part of a tax preparation franchise or private practice before, you are probably already familiar with this particular requirement. If you plan to file 11 or more tax returns, you must do so electronically as determined by the IRS.

To do this, you must first successfully obtain an EFIN and become an Authorized e-File Provider. Fortunately, this process is straightforward and free of cost. Simply submit your application and follow the provided steps to complete any necessary suitability checks. This process may include a:

  • Tax compliance check
  • Criminal background check
  • Credit check
  • A check for prior IRS e-File non-compliance

While this step in founding your tax preparation business does require a substantial amount of your time, the reward of establishing your own successful practice is well worth the initial commitment. Upon approval of your application, you will receive your EFIN and an acceptance letter from the IRS.

It is also advised that you confirm whether or not your state requires separate applications for e-File practices that prepare returns for businesses or individuals. Again, state government agencies are an often untapped resource for answers to questions you may have during this step.

Depending on the size and type of your business, the IRS may require that you obtain an EIN as well. Fortunately, doing so is easy online or by mail, fax or phone.

Establishing Your Business

Selecting the right tax preparation software is another important step in the process of beginning your own business. TaxAct Professional makes it easy to find exactly what you need based on a variety of factors, including the number of clients you expect to serve, which forms you'll be using, how many states in which you'll file, and more.

Whether you've just recently made the decision to pursue your own business as a tax preparer or this career has been a longtime professional goal, you'll discover that TaxAct Professional offers everything you need to get your practice off the ground. From guidance surrounding continuing education and certifications to invaluable tools and time-saving resources at your fingertips, TaxAct has you covered throughout the lifetime of your business.

Get Your Name Out There

If you're like many individuals who have recently left a tax preparation franchise, you already know a lot about how to serve your clients' needs. However, if you aren't marketing yourself in an impactful way, you may find it difficult to gain traction in an already competitive industry.

The first step to attaining the awareness of potential clients is building a website. Nearly everyone searches for tax preparation services online, and it is vital that your name is visible to those in need of the services you offer.

Be genuine and straightforward in your explanation of your business model and your personal connection with your clients. People seek out and choose a CPA based not only on experience and licensure, but also on trustworthiness and an approachable, personable nature.

Protect Your New Business

Just as in any other field that serves the public, tax preparation professionals must be sure that they'll be protected in the case of any unexpected liability. Regardless of your skill, dedication and experience, there is always a margin of potential error to be considered, and it is invariably wiser to err on the side of caution.

Malpractice insurance serves as an invaluable safety net in situations involving claims of error, omission or alleged negligence performed during the preparation of a client's return. And, whether you are working from a home office or choose to own or rent an office, it is advised that you purchase an insurance policy to cover the contents of that space as well.

Helpful Resources

Starting your own business is a complex process, but help is available. Remember to reach out to your state's CPA society with questions as they arise, and visit for useful tips and resources from the U.S. Small Business Administration.

Getting Started

Establishing yourself as an independent tax preparation professional is a great way to acquire financial independence, whether you're practicing full time or supplementing your income from another source. With the right tools, experience and an entrepreneurial drive, you can become one of the many tax return preparation businesses that help 80 million Americans file each year.

Learn more about how TaxAct Professional helps individual tax filing professionals like yourself earn a living doing what they love every day. Download your free evaluation now.