What Do I Need to Become a Tax Preparer?
Becoming a tax preparer is a good opportunity for someone who wishes to supplement their income for the four months a year that tax preparation is a busy field. Most tax offices limit their hours and schedule to accomodate the seasonal nature of the business. Some choose to go the route of the franchised tax prep chains, others choose to attempt self employment. Either way there are requirements you must meet before beginning work as a tax preparer.
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Training - Onsite
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There are onsite options for tax prep training The major tax preparation chains offer tax preparation training beginning in the fall of the year prior to the tax year they are hiring for. These courses are more of an overview of taxation and preparation and they are anywhere from four to eight sessions in length. The cost is around $100 which covers the franchised owners' costs for books and materials, this fee is usually refunded upon hire. The locations can vary and either be located at the local central office or be offered at more than one office.
Training - Online
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Another option for training are the online courses. Several schools operate tax training courses on a year round basis and utilize CD Rom or online trainings. These courses are much more thorough than the franchised ones. The cost however, reflects the quality as these courses start at $300. If you are choosing a self-employment option, this may be the best for you. If you are not, then be aware that some of the franchised offices will not accept some of these certified training courses.
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Certification
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Beginning in tax year 2010, for someone to prepare another person's taxes, she must be certified by the IRS as either an Enrolled Agent or a Certified Public Accountant. This effort by the IRS to counter the fraud that comes from many of the mom-and-pop tax stores has severely hampered the franchised offices too. Prior to 2010, these companies hired individuals with little to no experience in taxes, and the payscale for these preparers began at minimum wage.
The cost for the training to become an Enrolled Agent starts at $2,500, taking the certification exam can be as high as $250 and it's another $125 to the IRS for the application to be processed.
PTIN, ERO and EFIN
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You will need to apply for a few items from the IRS before you begin work as a tax preparer. While the franchised offices will provide these things for you, if you are seeking the self-employment option it's up to you. First, you will need a Preparers' Tax Identification Number. This number will go on each tax return you file. It isn't essential to have a PTIN, but the alternative to having a PTIN on each return you file is having your Social Security number on each of the returns you file.
In addition, if you wish to electronically file tax returns, which is virtually essential in any tax preparation business, you will need to be an Electronic Return Originator and get an Electronic Filing Identification Number. The process to receive a PTIN, apply to be an ERO and to get your EFIN takes several months to complete. If you are planning on beginning your business in January of a given year, it would be a good idea to have all applications in to the IRS by the previous July.
Equipment
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The franchised offices will provide all the equipment as well as the certification and training needed for you to start work. Being self employed however, you will need to be able to purchase a computer, tax preparation software, a printer, a filing cabinet, a copy machine and finally a desk to put it all on. The computer should be easily portable in case you need to prepare a return on site at a clients' location, a good sturdy laptop can be as little as $600. The software must be ordered prior to the tax year and the cost starts at $1,000.
Make sure that the printer you purchase (or lease) is reasonable on ink prices because you will be printing two and three copies of each return. You will need to keep hard copies of signed returns and photocopies of documents to keep on file in case the IRS audits your business. Equipment expenses can reach up to $3,000.
In Conclusion
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For someone just starting out, spending a year or two under the tutelage of a franchised tax preparation store can be of a real benefit. The costs are significantly lower and you can get a feel for the work before launching headlong into a great deal of expense for a four month per year job. Once you have learned that you can enjoy yourself in the work, you may want to consider opening your own office.
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References
- Photo Credit A businessman calculating expenses at tax time image by Christopher Meder from Fotolia.com today image by alwayspp from Fotolia.com
