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How to Become a Self-Employed Tax Preparer

by Deb Dupree, studioD

Tax time creates a flurry of activities for many tax preparers and accountants. Many tax firms look to hire additional help during these busy periods. If you are interested in becoming a self-employed tax preparer, working for an established tax firm provides an excellent opportunity to gain experience before going it alone. Even with solid experience, you still need a business action plan before setting up shop. This includes handling Internal Revenue Service requirements, setting up your business, getting your office in order and marketing.

IRS Requirements

As a self-employed tax preparer, you must apply for a preparer tax identification number through the IRS. This number identifies you as a paid tax preparer and is used in conjunction with your signature on your clients’ tax returns. You must renew this application every year. You can apply and renew online.

Know the Code

As a tax preparer, you must have sufficient knowledge of the tax laws relevant to your customer needs. Your clients may be head of household, self-employed, have dependent children or take care of elderly parents. You must know which tax laws apply to their situations and allow maximum legal deductions. The quality of service you offer depends on your knowledge and understanding of tax codes.

Business Structure

Set up a business structure that meets your needs as a self-employed professional. Decide whether you will operate your tax business as a sole proprietor, partnership or corporation. Each structure has pros and cons, from personal liability to legal requirements. For many self-employed business owners, it is easier to start out as a sole proprietor.

Licenses and Taxes

Check with your city or county government to determine licensing requirements and the type of license or permit you need to provide a tax preparation service. There is usually a fee associated with business permits and licenses -- in addition to annual renewal and business tax payments. License applications require information on business activities, structure and location.

Location, Zoning and Insurance

You need office space to meet with tax clients. If you plan to work at home, you must check city or county zoning laws and neighborhood association bylaws. These entities may prohibit certain home-based businesses. Leasing office space is an alternative, but it can be expensive. Whether you set up shop in a home office or lease office space, check on business insurance or bonding needs.

Tools of the Trade

Basic equipment includes a computer, secure Internet access, a printer and current tax software. You also need a dedicated records filing system to keep client information confidential and secure. For business maintenance, you need a bookkeeping system and other tools, such as a business bank account and the means to keep up with federal, state and local taxes your business may owe.

Business Marketing

Regardless of the business you’re in, you must market and advertise to get customers. Print up business cards or fliers and hand them out to everyone you know. Consider volunteering your tax services to get your name out there. Marketing your business is essential, so set a monthly advertising budget and promote your business regularly.

About the Author

Deb Dupree has been an active writer throughout her career in the corporate world and in public service since 1982. She has written numerous corporate and educational documents including project reports, procedures and employee training programs. She has a Bachelor of Science in chemical engineering from the University of Tennessee.

Photo Credits

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