Starting a Tax Preparation Business

Before staring a tax preparation business, or tax practice, you'll increase the chances for success if you realistically assess your acquired skills, interests, experience, education and financial resources. To that end, I have advised clients who sought my advice on starting a business to simply, "do what you do best."
Reach outside your area of expertise and you will pay more to get up to speed with the particular procedures of your new business. The learning curve for the tax preparation business is pretty steep due to our complex tax laws. Taking a longer view towards the future, consideration should be given to the President's Tax Reform initiatives which could have a devastating effect on the tax preparation business.

 

  Watch these movements closely.  Tax reform results that favor simplicity may be good for the country but it may not be a boost to your tax practice. Another important consideration is the demand for tax preparers in your geographical area.  Are their sufficient customers to support your business?  Keep this in mind; everyone already has chosen someone to prepare their tax returns.  So, you will have to "pry" existing customers away from their preparer and that is sometimes very hard to accomplish.   You might want to take a look at my Starting a Business page for some general pointers. And take a look at IRS Publication 583, Starting a Business and Keeping Records .

Some additional things to think about starting a tax preparation business:
  1. Do you know how to prepare income tax returns?
  2. Do you have income tax reference books and a tax library?
  3. What tax return software will you use?
  4. What tax preparation fees will you charge?
  5. What system will you use to keep track of appointments?
  6. What computer and office equipment will you need?
  7. How will you represent your clients when they get audited by the IRS?
  8. Can you answer this question while looking the client and/or the client's wife in the eyes:  Why do I/we owe so much tax? You must not be an aggressive tax preparer.
  9. What accounting system will you use to generate invoices and keep track of receivables?
  10. How will you get clients?
  11. Will you prepare Corporate and Partnership tax returns?
  12. Will you rent an office or work out of your home?
  13. Are you familiar with IRS Circular 230: Rules for practicing before the IRS?
  14. Will you accept credit cards?
  15. Will you take a partner or work as a sole practitioner?
  16. Do you have a pleasant personality and enjoy working with the public?
  17. When is the best time to start a tax preparation business?
  18. How will you advertise your tax preparation business?

 



 



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