Starting a tax preparation business is one of the most accessible paths to self-employment. The demand is consistent, the startup costs are low, and you can begin part-time while keeping your day job. Here's exactly how to get started.
Step 1: Get Your PTIN
Every paid tax preparer must have a Preparer Tax Identification Number (PTIN) from the IRS. Apply online at the IRS Tax Professional PTIN System. The cost is approximately $30.75, and you'll need to renew annually.
You'll need your Social Security Number, personal tax return information from the prior year, and a valid email address. Most applications are processed within 15 minutes.
Step 2: Choose Your Credentials
While a PTIN is the minimum requirement, having additional credentials significantly increases your earning potential and client trust.
Enrolled Agent (EA)
The most popular credential for tax preparers. Pass the three-part Special Enrollment Examination (SEE) to earn the right to represent taxpayers before the IRS. EAs can handle audits, appeals, and collections on behalf of clients.
Annual Filing Season Program (AFSP)
A voluntary IRS program that provides a record of completion for non-credentialed preparers. Requires 18 hours of continuing education annually. Good for beginners building toward EA status.
Step 3: Get an EFIN
To e-file tax returns, you need an Electronic Filing Identification Number (EFIN). Apply through the IRS e-Services portal. The process includes a background check via fingerprinting, so allow 45-60 days for processing. Start this early.
Step 4: Set Up Your Business
Legal Structure
Most solo preparers start as a sole proprietorship or single-member LLC. An LLC provides liability protection with minimal complexity. Register with your state and obtain any required local business licenses.
Insurance
Professional liability insurance (errors and omissions) is essential. Even a simple mistake on a client's return can lead to costly disputes. Policies typically cost $300-500/year for solo preparers.
Bank Account
Open a separate business checking account. This makes bookkeeping easier and is required if you form an LLC. Many banks offer free business checking for low-volume accounts.
Step 5: Choose Your Software Stack
You'll need two categories of software:
Tax Preparation Software
For actually preparing and filing returns. Popular options include Drake Tax, Lacerte, ProConnect, and UltraTax. Pricing is typically per-return or annual subscription.
Practice Management Software
For managing clients, documents, invoicing, and workflow. This is where tools like FinishTax come in — handling everything outside of the actual return preparation.
Step 6: Get Your First Clients
The hardest part of starting is building your initial client base. Here are proven strategies:
- Friends and family: Offer to prepare returns for people you know. Word-of-mouth referrals from satisfied clients are your best marketing.
- Social media: Create a professional presence on Facebook and LinkedIn. Share tax tips and deadline reminders.
- Local networking: Join your local Chamber of Commerce. Partner with bookkeepers, real estate agents, and financial advisors for referrals.
- VITA volunteering: Volunteer with the IRS Volunteer Income Tax Assistance program. Great experience and community visibility.
Step 7: Set Your Pricing
New preparers typically charge $150-300 for a basic 1040 with a W-2. Complex returns with business income, rental properties, or multi-state filing can command $400-800+. Research local rates and position yourself competitively while you build your reputation.
What to Expect Year One
Most first-year preparers handle 20-50 returns. At an average of $250 per return, that's $5,000-12,500 in your first season. Not enough to quit your day job, but a solid foundation. By year three, successful preparers typically handle 100-200+ returns and earn $25,000-60,000+ seasonally.