If you have training, skills, and a wealth of tax expertise, you may have considered branching off into self-employment. This can be a natural next step for accounting or tax professionals who want to explore entrepreneurship or develop their own list of clientele.

With today’s remote work capabilities, starting a tax preparation business can happen in a variety of ways. While  “brick and mortar” or in-person options are still feasible, many tax experts take the online route to provide virtual services to new clients and customers. No matter how you approach it, starting a new small business always requires careful thought, consideration, and planning.

In this post, we’ll describe what a tax preparation business is, why you might want to start your own, and the steps to follow to generate a successful launch.

What is a Tax Preparation Business? 

A tax preparation business is any service or business that offers tax filing and tax return support to other individuals or businesses. Tax preparers usually file state and federal taxes on behalf of their clients. This requires access to in-depth financial information, profit and loss statements, income totals, and other personal data.

In today's market, many tax service providers electronically file tax returns. This process involves an in-depth and ongoing knowledge of current tax law and awareness of relevant trends in the tax industry.

Who Can Own a New Tax Business?

In the United States, a tax professional who wants to own and operate their own tax prep business must have a Preparer Tax Identification Number (PTIN), secured through the Internal Revenue Service (IRS). A preparer tax identification number certifies that the individual is qualified to provide tax prep services and submit documents on behalf of other filers. 

Even though all tax preparers must have a PTIN in order to operate lawfully, the level of skill or specialization between providers may differ. For instance, some tax preparation businesses specialize in business taxes, while others cater to individuals and family households. 

Initial Steps to Starting Your Own Tax Preparation Business

No matter what kind of small business you plan to start, establishing a strong foundation is the key to future and long-term success. This requires careful planning and preparation so that you are not only in alignment with your skills and strengths, but so you’re also on proper footing from a legal standpoint as well. 

Here’s a simplified look at the steps you must take in order to plan, launch, and grow your tax preparation services.

Step 1: Verify Your PTIN and Credentials

If you’ve worked as a federal tax preparer under another firm or agency, you may need to complete any additional steps here. But if you’re just starting out under your own umbrella, be sure that your PTIN and other federal requirements are in order before tax season. 

Although the IRS doesn’t mandate additional training for tax preparers (such as income tax school), you should brush up on any skills or tools that would help you be more effective in your particular role or that could help you prepare tax returns in the current tax season. This includes looking into new tax laws, codes, or requirements that may affect your future and current customers.

While you may not need to display (either physically or virtually) your own tax business training and credentials, be mindful that some clients may ask prior to working with you.

Step 2: Create a Sustainable Business Plan

Before you start a tax preparation business, you need to outline a process, plan of action, or business model. Business plans usually consist of official summaries for how a business expects to start, operate, and generate profit over time.

For your tax prep service, a business plan may include information related to the following “big ticket” items that should be in place before you sign clients.

• Applicable startup costs (including rent, if operating form a physical office space)
• Office equipment 
• Ongoing expenses related to daily or long-term operation
• Plan for acquiring potential customers
• Plan for revenue and profit over time
• Strategy for hiring help, employees, and other HR-related details

While there’s no right or wrong answer to many of these questions, having them solidified can ease the stress of knowing what steps are next. Moreover, if you ever want to secure a business loan or other financing to grow, you’ll need to have a plan fully documented.

Step 3: File the Proper Business Documentation

In order to do business legally, most states require tax preparers to submit documentation before you can practice or collect payment from customers. This could be as simple as securing a business license from your state or municipality, or you may need to go a step further and file as a Limited Liability Company (LLC).

There are some fees associated with these processes, but most are simple startup costs that you will only pay for one time. In other localities, you may need to officially file federally in order to obtain an EIN, which is your Employer Identification Number from the IRS.

Business licensure is one part of the process, but don’t overlook other important steps like business insurance or securing a business bank account. These additional steps can protect you on a personal level (including guarding your personal assets), regardless of what happens with your business tax returns. 

Step 4: Choose the Best Tools and Systems

Once you have the nuts and bolts in place, it’s time to get creative! Here’s where you can choose the software, tools, and processes that will help your tax preparation business structure run like a well-oiled machine. 

Some tools that can be helpful when starting any new business include:

• Secure cloud storage (for secure documents and file sharing)
• Workspace tools, such as email or shared calendars
• Accounting or bookkeeping software
• Tax preparation software
• Marketing and customer-facing platforms
• Business website 
• Social media accounts

When choosing the tools and software that you’ll use for your tax preparation business, be sure to consider cost, functionality, and return on investment. While you want to maximize ROI, each tool you select should be user-friendly, fully supported, and able to scale.

Step 5: Launch Your Marketing Efforts

Once you’ve done the prep work behind the scenes, you’ll need to start moving forward on customer acquisition. The baseline for this should always come from a well-rounded and well-researched position on your target audience—who you want and are able to help.

Then, you’ll need to consider the types of marketing strategies or programs that you’re most interested in implementing out of the gate. Whether that includes email or content marketing, direct referrals, paid ads, or social media campaigns, have an idea of how and where you want to invest both time and money. 

Marketing strategies should be specific to all parts of the marketing funnel, from top to bottom. This includes the awareness stage, where you’re educating about your brand, down the decision stage where clients are ready to collaborate.

‍

How to Set Your Tax Prep Business Up for Success

Some of the most important things you’ll do for your tax prep business will take place on a non-public level. In other words, while clients may not see these efforts directly, they will benefit from the results. This includes investing in your growth as a business owner, providing adequate training to tax professionals on your team, and choosing the marketing channels that make the most sense.

Here are a few extra tips for setting your tax preparation business up for a successful future.

• Register for the Annual Filing Season Program. This is offered by the IRS and provides additional training for tax preparers. Since there are a lot of updates to the U.S. tax code, staying up-to-date on the most recent changes can give you the edge you need to do your job well.
  
  
• Invest in the best employee onboarding. If your tax preparation business has other partners, staff members, or volunteers, make sure that these individuals are ready to do their jobs efficiently. While this doesn’t mean micromanaging, it does mean giving them the tools and support they need to provide the best service to clients.
  
  

• Set goals, then analyze data and metrics. Have a long-term vision for where you want to see your business. What does that look like in terms of the number of new clients, amount of revenue, or size of your team? Set specific and achievable goals, and then evaluate them at set intervals based on the data available to you. 

Invest in the Right Business and Marketing Software

With the sheer number of moving pieces you have in your tax preparation business, you may be hard-pressed to find extra time for collecting prospects and following up with those in your marketing funnel. This is a common problem, particularly for small business owners who are just establishing their new business.

‍

The solution is simple—choosing an automated, yet personalized platform to do some of the heavy lifting for you. A marketing automation tool like CountingWorks PRO is designed for accounting and tax professionals. Since it’s specific to the financial industry, you’ll have an easy time targeting and reaching out to potential clients who are a great fit. 

The CountingWorks PRO platform is one example of a marketing software that helps you conquer the complete customer lifecycle. This includes making a first impression with a great website, nurturing the client relationship through emails, and retaining customers with user-friendly features that boost communication and visibility.

Build Your Own Tax Business with Help from CountingWorks

If you’re considering launching your tax preparation business, it’s a great time to begin! With the right planning, preparation, and knowledge, you can build a profitable financial services business that creates flexibility for you and superior service for your clients.

No matter what your goals are, CountingWorks PRO can help you get there.

Interested in learning more?

Book a demo with our experts.
Start a free trial.