How to start a tax business

To start a tax business, you need to get the appropriate education and training, obtain your PTIN, and get an Electronic Filing Identification Number (EFIN). For details on each of these steps, reference this guide:

• Get the appropriate education and training. You can seek to obtain a bachelor's degree in accounting or another related field.

However, this is not a requirement. The IRS only requires those who want to be tax preparers to obtain their IRS Preparer Tax Identification Number (PTIN).

While this is the case, getting an education in accounting can help prepare you for all of the different scenarios you might face when you start a tax business.

You might also want to look into certifications that can help display your expertise in this field. Here are some examples:

• Accredited Tax Preparer (ATP)

• Certified Financial Planner (CFP)

• Certified Public Accountant (CPA)

There are also many cheap, and sometimes even free, options for deepening your knowledge on taxes. Look into online courses, and video tutorials to get a strong foundation, and then decide if you want to further your education with a college degree.

• Obtain your IRS Preparer Tax Identification Number (PTIN). This is a requirement to legally run your tax business.

It is fairly simple to apply for your PTIN online via the IRS. Tax preparers and businesses must renew their PTIN annually.

It is also important to note that a PTIN is unique to one individual, so if you want to eventually hire other tax preparers for your business, make sure they all get PTINs.

• Get an Electronic Filing Identification Number (EFIN). This is a requirement if you want your business to file 11 or more tax returns every tax season.

To do this you must become an Authorized e-file Provider, and obtain an EFIN. Here are the steps involved in this process:

• Create an account for IRS e-services

• Submit your application

• Pass a background and suitability check

Once the IRS approves your application, it sends you an acceptance letter with the EFIN assigned to your specific tax business. This process may take up to 45 days, so it is important to prepare for this possible wait time.

Certain states also require you to complete a separate application for state income tax fillings.

The type of software you purchase depends on the kinds of tax returns you will be filing for clients, as well as the volume of returns, and any budget limitations.

Here are some of the pricing scenarios for tax preparer software:

• A one-time fee in addition to a fee for each tax return

• A yearly fee for an unlimited number of tax returns

• A yearly fee for a specific number of tax returns

• No annual fee and a volume-based tax return fee

When selecting tax software it is important to consider:

• The kinds of clients your business will serve (individuals, businesses, certain types of businesses, or a broad-based client service)

• The number of clients you aim to serve

• Which tax forms your business will use

• Which states your business is going to file tax returns in