The 2022 tax season will begin less than a month from now. If you are going to set up your own tax practice, now is the time to do it!

But how do you start a tax preparation business? You’ve done your research, you’ve made a plan… what more do you need to do? Here’s some advice from our team of experienced tax preparers! Obtain all your business requirements, invest in your equipment and software and develop the mindset for success.

Let’s discuss these essential steps in more detail.

Tax Business Requirements

To become a tax preparer in the USA, you need to acquire certain registrations and permits. These include an Employer Identification Number (EIN), Preparer Tax Identification Number (PTIN), Electronic Filing Identification Number (EFIN) and State licenses or permits for business.

EIN is sometimes referred to as a Federal Tax Identification Number. It is a different thing from the EFIN—don’t get them mixed up! An Employer Identification Number is a unique designation used by the IRS to identify a business entity. It is the equivalent of a Social Security Number, except that it applies to an American business rather than a citizen.

In addition to the EIN, some States may also require a State tax identification number.

States generally require licenses or permits for doing business. You may need to get county or local government permits as well. The requirements will vary depending on location and type of business. Keep in mind that many licenses and permits have an expiration date. Be prepared to renew them on a regular basis.

PTIN and EFIN

Since 2010, anyone who gets paid to do federal return tax preparation has been required to obtain a PTIN with the IRS. To get one, a would-be tax preparer needs to pass an initial suitability check. PTINs will also need to be renewed every calendar year.

Each year, the IRS opens the PTIN renewal season in mid-October. That allows tax preparers more than enough time to renew the PTIN prior to the start of the next tax season. In any case, the PTIN renewal can be processed online in a matter of minutes—a fast and convenient option.

As tax preparers generally need to file tax returns electronically, your business will also need to obtain an EFIN. This is a number assigned to every business that has successfully applied to become an authorized IRS e-file provider. This application also involves a suitability check.

An EFIN does not have an expiration date, and it applies to every tax preparer working in your practice. But if the business has a change of EIN or business name, then the EFIN will need to be changed as well.

Getting Equipment for Your Office

You’ll need an office, of course. Though working from home can be an option. Even if you are managing a team of tax preparers! A remote office setup is quite viable nowadays.

Whatever your setup, you will need to get equipment for your office. You will definitely need a computer. You can choose between a desktop computer and a laptop device. Or you can have both! If you are using UltimateTax software, you can easily jump from laptop to workstation and back again—your work will sync up across all devices.

Your office is almost certainly going to need a printer. Even if you prefer to run a paperless office, you may still need to print documents on occasion. So it’s good to have a printer ready as a backup.

You’re also going to need paper. And the quality of the paper is important. IRS scanning devices are known to be quite sensitive. You don’t want your printed tax form submissions to get rejected by the IRS due to issues with the paper!

When you are ordering paper, you should look into purchasing tax forms as well. Make sure to order tax forms from a supplier whose forms adhere to the IRS guidelines.

Getting the Right Software

As a tax preparer, you can expect to be sending tax returns electronically to the IRS. That’s why you got an EFIN, after all! E-filing is an efficient and convenient method for submitting tax returns. It saves you time, which means you can allot more time toward building up your business.

Basically, you will want to use professional tax preparation software. You may be aware of some consumer-grade tax return preparation programs. Those are not what you need. They can process some tax returns, but they are not designed to handle large volumes of returns. They also lack many of the tax forms that you’ll need.

Professional tax preparation software is designed for tax preparation businesses. The software supports many tax forms. It can handle the processing and filing of a large volume of tax returns. It also contains features that guide you in completing tax forms completely and accurately. Features such as tax return validation and line-by-line entry assistance.

UltimateTax is one of the best professional tax software options. It offers a fast and accurate system for processing and e-filing tax returns for clients. And it is very affordable compared to other professional tax software products on the market. Try a free demo of UltimateTax here.

For more information about getting the best tax office equipment and software, check out this well-researched article: The Ultimate Guide for New Tax Preparers

Getting the Right Mindset!

At the end of the day, the most well-equipped business still depends on the people that work for it. Especially the top dog! If you want your tax preparation business to prosper, you have to acquire a mindset that leads to success!

So what is the right mindset? For a tax preparer, you need to be positive, meticulous, adaptive and growth-oriented.

• Positive Attitude. Running a business isn’t all smooth sailing. You’re going to experience some setbacks. But you can respond with a positive attitude that views problems as challenges. Face issues with the attitude that you will overcome them and come out with a better-run business.
• Meticulousness. Tax preparation is a task that requires accuracy and demands accountability. That means you should pay close attention to details. You need to balance efficiency with quality of output. For some tax preparers, this may mean additional professional training or continuing education.
• Adaptability. The tax code sees changes every year. Changes in society and technology can have an impactful effect on tax return preparation. Recently, the emergence of cryptocurrency has created new sources of income generation. The IRS is adapting to this change, and tax preparers will need to adapt as well.
• Growth. One good thing to bring to a business is a growth mindset. Yes, you may be content with the clients you have. But what if you lose a client or two? Don’t wait for that to happen. Keep working to get new clients. If you can’t handle all the clients yourself, consider expanding your team. Expanding your practice. Keep the business growing!

But do keep in mind that there is another way to view growth—as personal development. You’re not only improving your business… you’re improving yourself!