Is a Tax Preparation Service Right for Me?

For some budding entrepreneurs, starting a tax preparation service is ideal – for others, not so much.  To determine if it is the right thing for you, let’s consider the pros and cons of your own tax preparation service and you can be the judge.

There are several good reasons to start your own tax preparation service:

1)      It can be done easily from your home.  All you need is a table to spread documents out on, a computer with tax preparation software, and a printer.  Everything can be done from the comfort of your own home. As you’ll soon find out, if you don’t know already, you may be able to deduct part of the cost of your home.

2)      Most tax returns are simple and can be completed in less than an hour by an experienced preparer.  The average charge for a single return is $150 to $450 depending on the complexity of the return.

3)      There is always a demand for tax professionals.   It is estimated that 155 million returns were filed, and 60% were prepared by one of 1.2 million professional preparers.  That calculates to an average of 80 returns per tax professional.

4)      The first clients will likely be from among your friends and family.  Many people appreciate and expect more personal attention from someone they know.  Advertising may start with an email to those you care about.  In future years, word-of-mouth advertising seems to take over allowing your practice to grow annually.

5)      The busy season will be January through April.  For most people, that’s the winter months when not much is going on.  In fact, many professional preparers earn enough during the busy season to take the rest of the year off.

6)      Each year the earnings will increase.  As the preparer becomes more proficient, it takes less time to generate a return thereby earning more income per hour when charging on a return, not an hourly basis.

Of course, it’s not all roses.  There are some things you should also consider:

1)      Tax preparation software is pricey.  The minimum cost is over $1,500 per year, with some brands nearing $3,000.  Although all professional software will get you to the same place for most returns, the higher-priced software will do the more complex and difficult business returns and often are more intuitive to use.

2)      Plan on long hours during the busy season.  As you build your practice, you will want to make “hay while the sun shines.”  Don’t plan any vacations until after Tax Day.

3)      Continuing tax education will be imperative.  The tax law changes each year and sometimes the changes can be complicated.  Several organizations, including the IRS, hold annual conferences to keep preparers up to date.

4)      A PTIN and local business license will cost money and may be restrictive.  A Professional Tax Identification Number runs under $40, and a local business license may cost from $50 to hundreds of dollars.

An income tax practice can be a great source of income for an entrepreneur that wants to work out of the home.

If this is the next step for your career, consider being in business for yourself but not by yourself with Universal Accounting Center as a certified Professional Tax Preparer.

Do I Qualify to Start an Income Tax Preparation Service?

The IRS is not restrictive in who may start an income tax preparation service, other than they require a person to get a Preparer Tax Identification Number (PTIN). To get your PTIN, go to the IRS.gov website, and it will direct you to the online application. It costs under $40 and takes about 15 minutes to complete the application to start a tax preparation service and receive the number. Generally, those having a felony conviction for tax fraud and other forms of financial crimes are not eligible.

A few states such as California have additional qualifications. If you want to prepare taxes in these states, you may have to take a test and register with the state licensing department. If you want to determine if your State is one of these, call the state department over licensing, or check it out online. They can tell you of any special requirements for tax preparation services.

Most municipalities require you to have a business license. This fee could range from $50 to hundreds of dollars. To research what it will cost you, search on “business license cost for (your city)”. In most cases, you can also complete the application online.

Contrary to a common misconception, a person need not have an accounting degree or be a CPA to prepare taxes. In fact, no specific education is necessary although it is a good idea to understand the basic definitions in the tax law before you hang out your shingle.

Though the income tax software does the hard work, a tax preparer should understand how to determine income tax status, who qualifies as a dependent, the process for calculating itemized deductions, and how to read the tax tables. With this simple knowledge and the help of software, a person can prepare more than half the returns they may be asked to prepare.

Nonetheless, the more income tax knowledge a person has, the more confident they will feel and the more returns they will be able to complete. Furthermore, the more complex a return, the higher fees, and the more income per hour a person will generate. For instance, a simple return may only generate a $75 fee. Yet, a more sophisticated return could earn hundreds of dollars and take less than one additional hour to complete.

The upfront investment, though not a qualifier, is among the lowest of any new startup. Other than the PTIN and business license fees mentioned above, the tax preparer needs a computer, printer, and tax preparation software. TurboTax and H&R Block, to name a couple, are not good software for the tax preparation business. With these individual packages, you will be limited in the number of returns, and your ability to complete all returns.

Instead, you will want a more robust package designed for professional tax preparers such as Intuit ProSeries, TaxWise, and Drake costing well over $1,500. These software packages are designed to be efficient, accurate, and for unlimited number and sophistication of returns. Take time to make the right choice, because you will likely want to use the same software for at least five years.

In summary, most people with basic knowledge of tax law and the help of a software package can thrive in a tax preparation business.

How to Get a Tax License

If you’re thinking about getting a tax license, you’re on track for a lucrative addition to your career. Becoming a certified Professional Tax Preparer is an excellent step toward a satisfying financial future. Many people obtain their tax license and use it as a stepping stone to other opportunities, such as owning a tax services business. Simply including tax preparation skills on your resume and getting a tax license is an excellent pathway for advancing your current career.

Universal Accounting leads the way in small business tax training and is approved by the California Tax Education Council (CTEC) to offer the Professional Tax Preparer (PTP) certification as a distance learning course in California. Universal Accounting offers a money-back guarantee. If you aren’t satisfied with your tax preparation course, you can simply return your materials and receive your money back.

What Is IRS Tax Certification?

An IRS-certified tax preparer has unlimited rights to represent their clients in front of the IRS. Because IRS preparation is detailed and constantly changing, IRS-certified tax preparers can help clients better navigate the complexities of the system, including tax payments, audits, and preparing appeals in the event of an IRS error. Certified tax preparers are consultants who have a right to be paid for the work they perform for clients.

When you choose a reputable tax preparation certification course, it will include current information on tax laws. It will also prepare students for changes in tax laws for the upcoming years. The course will train students in state and federal tax forms and how to prepare them accurately.

I Want to Become Certified: What’s Next?

Tax preparers don’t have to be IRS-certified to work with clients and be compensated for their work, but certification is the best route to take if they plan to pursue a career in the field. Not only can certification increase future salaries and add more opportunities to the table, but it can also increase demand for services.

Certification is possible through IRS-approved educational training courses. Those interested in taking the next step in certification can find official courses listed on the IRS website. It’s essential to ensure the IRS has vetted the courses to make the certification official in the government’s eyes.

Luckily, modern technology has made hands-on tax preparation education more accessible and flexible than ever before. Online courses are a convenient way to enhance education while juggling family life and work responsibilities because they are available on-demand, day or night.

After you make the choice to pursue your tax license, it is time to find the program that is right for you, aligns with your goals, and is within your means.

How to Choose a Program

Students pursuing an IRS certification should keep a few things in mind when searching for a program. First and most importantly, the educational provider has to be listed as an IRS-approved course provider. Other aspects include:

  • Official “PTP” designation
  • Educational tuition assistance if necessary
  • Individual counselors
  • A timeline that aligns with their goals
  • Business coaching after completion

These aspects will help students set themselves up for success in the next phase of their careers.

Partnering with an organization such as Universal Accounting is an intelligent way to get started with a training course that encompasses all the aspects of a great program and is IRS-approved. The Professional Tax Preparer certification is a self-paced online training to prepare personal and business taxes and prepare students for the IRS’ enrolled agent (EA) exam.

The best certification programs support students after completing courses by partnering them with coaches and mentors with real-world experience. This additional training is invaluable to those looking to grow in the profession. The teachers and coaches at Universal Accounting know what it’s like to be successful tax preparers because they have experience in the field.

Reasons to Consider an Online Program

When students choose online tax education courses, like those offered by Universal Accounting, they can expect to learn via workbooks, videos, and various other reference materials. High-quality online courses are cutting edge and will include many elements of visual learning, as well as self-paced. This means you can return to materials and watch them again if needed.

Universal Accounting also offers instruction provided by experts in the tax and accounting fields. Students can expect to participate in real-world scenarios, which will help them prepare them firsthand for what it’s like working in the field.

What Happens After I’m Certified?

After certification, the next step is to receive recognition from the IRS. The first step will be an IRS preparer tax identification number, or PTIN. Registration is simple—visit the IRS website and register online for the PTIN in about 15 minutes. The application takes between four and six weeks to process. Once the number is official, certified tax preparers can use the number on forms and market themselves to clients as IRS-certified. This designation tells clients they will receive exceptional service and confidentiality and tells the IRS the tax preparer understands the complexities of their business.

In addition to the PTP and PTIN number, many tax preparers take an extra step to affiliate themselves with professional organizations. These memberships can carry weight for business owners running their firms or on resumes. Some of these include:

  • National Association of Tax Professionals
  • National Society of Tax Professionals
  • American Academy of Attorneys
  • American Institute of Certified Public Accountants
  • National Society of Accountants
  • National Association of Enrolled Agents

These organizations are very picky with memberships and are an excellent way to show commitment to excellence in the field.

Ready to Get Licensed? Contact Us Today!

If you plan to grow in your career or start your own accounting business, certification is an essential part of the accounting and tax preparation industry. The extra step establishes credibility and trust that will far outweigh the costs.

Tax preparation will always be in demand, and Americans dreading tax season each year will appreciate a professional in their corner. Start your certification journey today. Contact Universal Accounting for more information.

PRESS RELEASE: Universal Announces its Approval as QAS Sponsor

QAS LogoUniversal Accounting (UA), the nation’s largest training organization for accounting, bookkeeping, and tax preparation, announced its approval as a sponsor of Quality Assurance Service (QAS) self-study courses.   The National Association of State Boards of Accountancy (NASBA) established QAS to identify the highest quality providers of self-study courses that offer Continuing Professional Educational (CPE) credits.

In regards to sponsor approval, Allen Bostrom, president, and CEO of Universal Accounting Center said, “The QAS Program has high standards that ensure the student’s experience will be a valuable one.  We’re proud that our Professional Tax Preparer Program measures up to the scrutiny of NASBA.”

UA’s Professional Tax Preparer course enables students to become proficient in the completion of individual and business returns.  Its four modules include 1) Establishing the Tax Foundation, 2) Becoming the 1040 Expert, 3) Profitable Business Returns, and 4) Building Your Successful Tax Practice.  In addition, this program helps students adhere to new IRS regulations which include passing the IRS competency exams and earning required CPE credits.

The prestigious QAS designation demonstrates that Universal Accounting Center’s Professional Tax Preparer (PTP) Program adheres to 11 rigorous criterions.  Some of those requirements include the following:

  • Develop a program that falls within one, or more, of the CPE subject areas.
  • Use activities, materials, and other delivery systems that are current, technically accurate, and effectively designed.
  • Create learning activities that are based on relevant learning objectives that clearly articulate the knowledge, skills, and abilities to be achieved by course participants.
  • Engage authors who are qualified with respect to both program content and instructional methods used.
  • Elicit participant responses to test for understanding of the material, offer evaluative feedback for incorrect responses, and provide reinforcement feedback to correct responses.
  • Provide evidence of satisfactory completion of each program.

QAS approval enables the Professional Tax Preparer Program to be listed with NASBA as a quality CPE program sponsor.  UAC will also be able to use the QAS logo and approved sponsor language on all PTP promotional materials.

If you would like to learn how the Professional Tax Program can enhance your career, call Universal Accounting at 1-877-833-7909.

We welcome all your comments on this and any of our other posts!