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.
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 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
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
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
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.
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 Preparersoffering quality accounting services.
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.
Universal Accounting Center (UAC), an accounting school for small business accounting, bookkeeping and tax professionals is joining forces with Veronica Wasek to help bookkeepers grow their businesses by offering them a proven work flow (standard operating procedures) and business system to organize and operate their firm efficiently and profitably.
“It just made perfect sense for us to team up with Veronica,” said UAC President & CEO, Roger Knecht. “For years we’ve emphasized the 3 keys areas to have the premier accounting firm and she nails it when it comes to the production side of the business.”
“Universal offers accounting professionals the resources, training, certifications, coaching and support needed in today,” said Veronica Wasek. “I’m excited to work with them to help accounting professionals build successful businesses. Partnering with them is such an exciting opportunity.”
In the past few years Roger and Veronica have had various conversations about the accounting profession. Running into each other at various accounting conferences this is now the opportunity to work together.
For more information about this opportunity and how it applies to you GO HERE!
Bill came to the world of ledgers and tax returns by an unlikely route. He majored in music, and spent time as a songwriter in Los Angeles, even landing a spot on a production team for a Stevie Wonder spin-off called Writer’s Quarters West. To help make ends meet for his young family, Bill started a small business in 1988, part time, while still keeping a foot in the music industry. But it quickly consumed all his time and energy, and he discovered that he actually enjoyed running a business, which required learning how to keep the books, which led to an MBA in finance and accounting. Eventually, Bill was hired by Universal Accounting Center in Salt Lake City to teach their unique bookkeeping and tax preparation courses to students from all over the country. He has been a lead writer and editor for Universal Accounting’s Professional Tax Preparer course. He also worked several seasons as a tax professional for H&R Block. Having worked several seasons as a tax professional for H&R Block, Bill currently runs his own thriving bookkeeping, accounting and tax preparation business.
Starting and building a successful tax business takes time and effort.
Listen as Bill Brough EA, shares his experience and some advice.
As a professional tax preparer, Bill first started with just a handful of clients one tax season. In the time it went from being a supplemental income that he was doing on weeknights and weekends to a crossroad. Yes, he took the leap and started doing taxes full-time doubling and even tripling his business each tax season year-over-year.
Bill Brough EA, owner, and founder of Bottom Line Bookkeeping & Tax. Primary contributor and content writer to the Professional Tax Preparer PTP program.
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