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 Save Money on Small Business Taxes

If you are running a small business, you have the right to pay the required taxes and nothing else. In
fact, in most cases, your small business may eligible for tax exemption. Most small business owners
are unaware of these exemptions and end up paying more money taxes than required.

Being an entrepreneur, you should be careful and grab every tax-saving opportunity available
through deductions, credits, depreciation, and payroll-tax reduction. Instead of paying
unnecessary taxes, you can pay only the required ones and keep your profits.

Following are some tips to save more on your taxes:

1. Check with a Qualified Tax Advisor
You are new in the business and confused when it comes to the payment of taxes. This is quite
normal. Before you make any major decision, you are advised to consult a qualified tax
professional. It can positively impact the business's tax return and spending on un-required
taxes.

Choose a tax consultant who is available throughout the year, especially at the time of the tax
payment. Hire an expert who can represent you and your small business in front of the IRC or the
tax authority in your country.

An enrolled agent might be the best option. These enrolled agents are designated by the IRS, and
they have qualified for a strenuous, three-part test, and they work for the IRC at the same niche.

2. Timing the Income and Costs
Timing is important for small businesses for their success. The timing of income involves the
movement of income from one year to another year. Firstly, select the year in which you aim to pay
the most in taxes.

Secondly, reconsider the current expenses before the year comes to an end. It is also advised to pay
a part of that amount so that the income of the current year is less than the expense. Also, a
business can increase its expenses and decrease income legally by making some expenditures,
including stocking up on supplies or paying the office utility or rental bills in advance.

3. Set Up a Retirement Plan
Setting up a retirement plan for yourself and your employees is an excellent way to save on taxes.
This can saves money on taxes. However, the retirement plan must be a qualified plan, so to gain
maximum savings on taxes.

For this purpose, the retirement plan must be recognized by the IRC to allow deferment on taxes on
the earnings till the earnings are withdrawn. These include IRA s and proper plans of contribution.
This is a normal practice done by most of the businesses these days not only to gain more from the
taxes but also to keep the employees loyal to the business.

4. Avail Tax Credits
Tax credits are exemptions from tax offered by the government if your business meets certain
requirements. It is a technique used by the government to reward individuals and small businesses
for good tax behavior. It encourages entities to pay taxes on time and follow good tax practices.

For example, Carpet Cleaning London takes tax credits for hiring employees, uses recycled
resources, provides access to disabled employees and the general public, and also provides health
coverage for the workers.

You can check with your local, state, or federal tax authorities to see what requirements are
mandatory to become eligible for tax credits.

5. Avail Tax Write-off on Equipment and Vehicles
Small business owners can take tax write-offs on the purchase of equipment, other machinery,
and vehicles. At times a small business can also take a tax write-off on the purchase/renting of
real estate property.

These write-offs can either be taken in the first year after the equipment or machinery is bought or
later. Did you know that the two basic types of accelerated depreciation are Section 179 deductions
and bonus depreciation?

This kind of depreciation is applied immediately when the machinery or vehicle bought comes into
service.

  • Bonus Depreciation:

This kind of depreciation is an extra benefit for the bought assets. From September 27, 2017,
through January 1, 2023, The TCJA also maximized this tax break from 40% to 100% of the cost for
assets when used.

6. Minus the Costs of the Gifts
A small business owner can also minus the costs of the gifts given to the stakeholders, including the
customers and vendors. This deduction can go up to $25 per person. However, an exception is
always there, for instance, for your business franchise.

Subtracting the costs of amusement or refreshment is a bit problematic if an entrepreneur shows
his appreciation by paying for quality time. These costs are not included unless the amusement
event t is directly related to the business.

7. Deduct Car Expenses
You can also deduct car expenses from your tax payments. What a wise entrepreneur should do is
that instead of showing the actual car expenses, they should only show the standard mileage rate
set by the IRS.

For 2012 the rate was 50 cents, and for 2013, the rate is 52 cents. A small business owner can
minus every mile that they drove in the car for business-related work, even if it is in their
personal car.

Keep a logbook so that when claiming the deduction, it is easy to look at the total number of the
trips, areas of the trip covered, and what were the readings of the odometer.

8. Hire your Family Members
Hiring your family or friends in your small business can help the business owners to save a lot on
taxes. Instead of giving your family members or kids after the tax money, why don’t you hire them
in the business? Hiring them would be helpful.

They would do real work. For the tax year 2013, a business owner can pay them up to $5,900 per
year that they collect tax-free, and it gets canceled by the standard deduction. The owner might
pay payroll taxes for them since the business can expense the family members of the kid’s payroll
and minimize the taxes.

Final Thoughts

For small business owners, the above tips must help save money on taxes, but it is to be noted
that these tips are not intended to be tax advice in actuality. These are just the ideas that can help
them in saving more.

These are items to consider when working with your tax clients as their Professional Tax Preparers offering quality accounting services.

Contact Universal Accounting School to discuss how we can help your small business succeed.

Author Bio:
Shaheryar provides ghostwriting and copywriting services. His educational background in the technical field and business studies helps him in tackling topics ranging from career and business productivity to web development and digital marketing.

IRS Tax Certification & IRS Tax Preparation Course: A Guide

IRS-certified tax preparation could become an integral and profitable part of your accounting business. Every citizen of the United States is legally obligated to prepare and pay taxes. What better way to expand your accounting business and your income than by offering tax preparation services certified to work with the IRS? If you are an individual accountant, tax preparation and certification services can mean an increase in your income by hundreds of dollars or more. If you are employed, becoming certified may mean a promotion and give you an edge over your competition. If you are looking for employment, having these certifications makes you much more employable, and if you are looking to start your own accounting firm, this is an effective way to gain clients. Whole businesses can be created that solely do tax preparation work.

What Is IRS Tax Certification?

Someone who is an IRS-certified tax preparer will have unlimited representation rights of their clients in the eyes of the IRS. They are certified to prepare all matters in dealing with the IRS, including the payment of taxes, navigating audits should they happen, and preparing and submitting appeals if an error happens on the part of the IRS. A certified tax preparer has the right to charge and be paid for their services.

What Makes a Successful Tax Preparer?

A person who is a successful tax preparer will be a professional and trusted individual their clients can rely on. People who hire an IRS-certified tax preparer are trusting that individual with very personal information. They trust this professional with sensitive income information, medical information from bills and insurance payments, marital information, and other information that could lead to some serious consequences if they fall into the wrong hands.

Certification is one of the most important aspects of being a successful tax preparer. When a certified tax preparer has learned from the best and has trusted educational courses listed on their resume, a potential client or employer will feel confident that this person is right for the job.

How Do I Become Certified as a Tax Preparer?

While some compensated tax preparers are not certified, this is not usually a realistic option for anyone serious about increasing their salary from this line of work. Certification is the only way to have unlimited representation rights of the people they are preparing taxes for. The way to this certification is through education, and these training courses should be listed on the IRS website as approved educational classes.

Many people don’t realize that hands-on tax preparation training can be done online from the convenience of their homes. Online certification courses can be completed during flexible hours when they are available. There is no need to decide between work and family responsibilities and furthering one’s education when quality certification courses when they have control over when and where to get the work done.

What Does a Quality Certification Program Include?

High-quality tax preparation certification courses such as the ones offered by Universal Accounting will include the latest up-to-date knowledge of current tax laws, as well as the changes in tax laws for each upcoming year. They will thoroughly familiarize the student with all state and federal tax forms and how to fill them out correctly.

However, quality certification education is not just about instruction on how to fill out tax forms. Quality instruction will guide students through real-life scenarios that they will encounter once they take on their clients. They will also familiarize students with the latest technology to aid in their success as tax preparers. It will give them real-world marketing skills to use when promoting their own business or accounting firm.

If you are enrolled in a high-quality certification program, you will be assigned to coaches who have real-world experience. Instead of sitting in a classroom trying to learn from someone out of touch, you should be guided through the education and certification process by someone who has worked in the industry and knows what it is like to be a successful and profitable tax preparer.

The best certification programs have courses that can aid someone in all aspects of the tax preparation business. This includes guidance on creating a resume that will make you stand out in the eyes of potential employers. They will have resources that help you practice and hone your interviewing skills to impress the people evaluating you during job interviews. Universal Accounting School offers resources that you can use to find the businesses in need of IRS-certified tax preparers so that you know where to go next once you earn that certification.

What Should I Expect After Being Certified?

Once you are certified as a tax preparer with IRS recognition, it will be time to get an IRS preparer tax identification number or PTIN. You can register for a PTIN on the IRS website. Once you receive your PTIN, it is official, and you can proudly put that number down on every tax form you prepare. This tells your clients that you are a trusted person who will handle their tax information with the highest professionalism and confidentiality and shows the IRS that you understand their business.

After receiving a PTIN, the next step many tax preparers take is to become members of several professional organizations. These organizations carefully vet their members, and once you qualify for membership, you can advertise those credentials. These organizations include:

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

Is Becoming an IRS-Certified Tax Preparer Worth My Time?

Becoming a certified tax preparer is an effective way to bring in new clients to your accounting business, and it is an integral skill to have before starting your own accounting firm. Certification looks excellent on a resume and presenting a PTIN number assures clients of your credibility and professionalism. It is common for someone’s salary to increase, sometimes very much so, once they become certified. Tax season is not something many American citizens look forward to, and having a knowledgeable person to help them through makes it a better experience for everyone. Get in touch with Universal Accounting today to find out more.