The tax preparation business just
keeps growing!

The tax preparation business has been growing by leaps and bounds. That's because more and more people are finding that doing their taxes is just getting too confusing and frustrating. Congress just won't wise up. Tax preparation instead of getting simpler has over the years become too complex, the 1040 instruction book is now over 100 pages long!

However, this problem has opened up an opportunity for many, maybe for you! Do you enjoy working with numbers? Then maybe your own tax preparation service would be just the right career for you!

Knowledge and Skills Needed to Start a
Tax Preparation Business

Most states and the Internal Revenue Service do not require a person to have a special license in order to run a tax preparation business, and there are not even any academic requirements! There is an IRS exam called the enrolled agent examination. This exam is highly recommended but optional.

However, you will have to enjoy working with numbers, and be able to learn, and keep up with, tax preparation procedures and laws thoroughly. If you can do that, you will probably have it made in the shade!

You need a good personality and sufficient enthusiasm to be able to communicate well with your clients, otherwise you won't get very far at all.

Be able to keep accurate records of all your business transactions. So you will need to find a bookkeeping system that works for you. There are many bookkeeping systems on-line, maybe find one that's free. Or you can purchase one at the store, for example, at Fry's Electronics, you will find bookkeeping software, or bookkeeping books galore!

Some clients might want you to do something like hide income or not report it to the income tax officials. You should be willing to decline such jobs and find other clients who will not compromise your integrity and get you into trouble.

Start-up Costs and Potential Earnings

Your initial investment will probably be between $3,000 and $12,000 but it depends on the quality of the equipment you purchase. If you already have much of the equipment needed, your initial expense could be much less than the minimum stated. But I hope this gives you some idea. You will need at least the following equipment for your tax preparation start-up if you start from scratch:

A Mac or PC laptop computer for portability, with removable hard drives.

Multifunction printer/fax/scanner/copier.

An automobile, especially if you decide on a mobile tax preparation service.

Office furniture, especially an ergonomic chair.

A typical annual gross income for a thriving tax preparation business is between $80,000 and $150,000 per year depending on how many returns you can process. The average preparer can process about 700 returns per year.

Where to Start

Learn to prepare tax forms for others. If you feel that this may be the small business for you but think you may lack the some of the skills necessary, you can learn. Most adult education and community colleges offer courses in tax preparation, some probably offer a course in starting a tax preparation service.

To gain experience you can consider working for an established tax preparation service, such as H and R Block. H and R Block also offers classroom courses to interested parties.

Take the enrolled agent examination.

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