10 Dos and Don’ts of Starting a Tax Preparation Business

Dos:

1. Find tax software that meets your needs. Do you need the ability do corporate returns or other special module types of returns? Do you need the ability to prepare prior year returns? Generally speaking, additional years and specialty modules are not included so be mindful of what you are actually getting in your software package.

2. Figure out what you need as it pertains to technical support. What are your personal technical capabilities? Does your software provider grant you access to technical support for free? It is unlimited technical support or a one-time call? Do you need to acquire in-house technical support?

3. Do think about tax support. What is your level of expertise when it comes to tax preparation? How much support might you need and in what areas? Does your software provider allow you to call for tax advice? What sort of tax support system will you need in place? Once you find your support system, be sure to treat them with respect. Often times, complex situations require researching tax law and precedence which may prevent a quick or simple answer.

4. Plan a budget for your tax office. Whether you work from a home office or a brick and mortar store front, a budget will help you stay organized and make it easier to realize gains if you can stay within your limitations. While you can always amend your budget, this also makes it easier to make financial decisions when you know that you’ve already set aside money for any given endeavor, like marketing your tax business name.

5. Do consider online security importance. Pay close attention to securing their own internet habits. Make sure passwords are strong and secure, use 2 factor authentication on EVERYTHING. Even personal accounts such as social media can be attacked, and if everything isn’t secured, it could potentially create a security breach into their professional online presence. Additionally, be wary of all emails that are from unknown sources, emails that are unexpected, and/or emails with questionable content such as attachments or links. Don’t use email as secure document storage. Sure, everything may be nice and backed up, but email is where 89% of security breaches start (Kinney Group/Verizon 2016). 

Don’ts:

1. Don’t pay for resources that you do not need. If you plan to focus on preparing individual returns, you may not need to spend the additional capital on specialty tax software modules. If you decide to offer specialty returns, you can always purchase those modules when the need arises.

2. Don’t be partners with your best friend.  It may sound like a great idea, but rarely this works out.  At a minimum, there needs to be a clearly defined chain of command. If anyone in your organization can call and reset passwords to gain access, then it’s not a secure organization.

3. Don’t think that you’re going to do 500 tax returns right out of the gate. Set the bar to something more achievable for your first year. It will take years to build your goodwill within the community before you are single-handedly preparing 500+ returns a year.  With a well-executed and well received marketing plan you will grow your business every single year.

4. Do NOT disregard training. You’ve spent all this time, effort and money into creating a real business for yourself and your family. Training is the foundation on which all of your work will rest. Once you get them in the door, you want to be able to serve them as you’ve promised. Even if you’ve been preparing for years, a new software platform can really shake things up and create confusion.

5. DO NOT wait till the last minute to get IRS registration done. The process to obtain an EFIN can take as few as 4-5 weeks or as long as two months. There is a background check as well. Have you ever been convicted of a crime? This may impact your ability to obtain an EFIN depending on your previous infraction.  How will you handle an appeal if you get denied? Know what requirements you have. Does your particular state have special requirements for tax preparer registration? Are you up to date on your own tax filings?

These are just a few items on how to start a tax preparation business. We hope this list will help you plan and prepare for your upcoming journey! Federal Direct has been in the tax preparation industry for 15 years and we’d love to help you do the same.  If you have any questions or would like to speak to a friendly team member about starting your own tax preparation business, call us at 1-877-357-2052.