How to Start a Tax Preparation Business

Business Overview:

If you’re looking for an opportunity to generate a great income working part or full time, consider learning how to start a tax preparation business. With an income tax preparation business you prepare and file income tax returns for individuals and possibly small business owners. Preparing income tax returns can be a time consuming and confusing process for most people, which is why many individuals prefer to have experts prepare their tax returns for them. By providing a fast and accurate tax preparation service you’ll be saving many people a lot of stress and hassle, allowing them to focus on other important areas of their lives. In order to run this business you’ll need to be trained in taxes and accounting. If you aren’t currently qualified in theses areas there are many courses that you can take to acquire the necessary skills in a relatively short period of time. Alternatively you could hire people to do the tax returns for you, and focus exclusively on marketing your company. With a tax preparation business there’s real potential to generate excellent profits. Many tax preparation businesses charge based on the number of pages that they have to fill out. Typically $15 USD is charged per page, so if you were to serve 20 clients each week (4 a day) at an average of $90 USD (6 pages) per return you would generate $1,800 USD per week. Most likely you will generate the largest proportion of your profits during the tax season (January to April if you live in the USA), although this can be supplemented by preparing quarterly returns for self-employed individuals and small businesses. As we’ve seen, starting a tax preparation business can clearly generate a lucrative full time income, but you could also run this business part time. Another attractive feature to this business idea is that you can easily run a tax preparation business from home, be it on a full time or a part time basis. In order to make your tax preparation service a lucrative success, you’ll need to ensure you provide a fast and accurate service. Your clients will value you highly for preparing their tax returns quickly and accurately—and by doing so you’ll earn repeat customers. As a result you’ll increase your profits further down the line because you won’t need to invest as much in marketing and advertising to win customers. With this in mind, you may also choose to invest in tax return software. While you can complete your tax returns by hand, using tax return software will increase your accuracy and efficiency while giving your service a more professional image and further enhancing customer satisfaction.

A Day in the Life of a Tax Preparation Business Owner:

As a tax preparation business owner your primary focus will always be to quickly and accurately prepare and file your clients’ income tax returns. Therefore, the first thing you will do on a typical day will be to review the tax returns you have to complete for your clients, and to get straight on with preparing and filing them—with the goal of completing them the same day. Alternatively, you may have chosen to hire people to complete the tax returns for you. In this case a typical day will be spent focusing on identifying new opportunities to market and grow your business.

About Your Customers:

Your customers will be individuals looking for help with their tax returns and possibly small business owners as well.

What You Need to Start:

• Tax preparation qualifications (or you could hire people who are experts in taxes and accounting to work for you)
• Tax return software (recommended, but not essential)
• Advertising (i.e., website, phone book, flyers, brochures, newspaper advertisements, networking, etc.)
• Computer and printer
• Business license
• Business insurance
• Tax preparation business plan
• Financial tracking software

The Good:

• It can be very lucrative—20 clients a week can generate $1,800 USD per week.
• You can run this business from the comfort of your own home.
• You could choose to run this business part time.
• You can train relatively quickly if you’re not an expert on taxes and accounting.
• You could hire people to do the tax returns for you.

The Bad:

• Preparing and filing tax returns can become repetitive.
• A large proportion of your profits will be made during tax season (January to April in the USA), so your business may dip during non tax season (though this can be supplemented by preparing quarterly returns for self-employed individuals and small businesses).

Resources:

• National Association of Tax Consultants
• National Association of Tax Professionals
• Bureau of Labor Statistics on Tax Preparers
• Wikipedia on Tax Preparation

About The Author

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