How To Start a Tax Practice in 2022
There is a wide range of possible businesses you could start if you want to be an entrepreneur. If you are an accountant or are good with finances and numbers, starting up a tax preparation practice is one of the best choices you could make. Unfortunately, the market for needing tax help will never run dry, and even if someone uses an online filing tool, it can still be frustrating and complicated.
There are several other benefits to being a tax preparer. For one, you can make a lot of money. Many tax practices charge clients upwards of $100 an hour for services. That means you can make enough during the three months or so of tax season to take the rest of the year off. You can also do it from home and complete your hours. Does that sound like a career for you? Here’s how to start a tax practice in 2022 so you’ll be ready for next year.
Get a License
Every state has different licensing requirements for someone who wants to be a tax preparer. This is because you will be working with sensitive client information and will be in a position of trust. You will need to pass applicable certification tests for the state and possibly multiple states if you are expanding your business.
Starting a tax practice requires careful planning and a solid knowledge base. In many states, you can operate without credentials. However, the competition in the field may limit your client base since many individuals and businesses prefer to work with credentialed professionals. This preference for credentials is due to a variety of reasons, such as the potential complexity of tax laws and regulations, the sensitivity of the information involved, and the reassurance of expertise.
It is worth noting that there’s a strong interplay between the tax field and legal sector, and understanding the legal implications of tax decisions is often vital. Working with a qualified legal professional, such as a tax attorney, can help mitigate potential legal issues related to taxation. If you find yourself in need of legal advice, don’t hesitate to consult with a professional.
Get a Tax Identification Number
A tax identification number (PTIN) is required for any tax preparer who is not a certified accountant. You can order a number directly from the IRS; it is free. All you have to do is provide your business information, and within a few weeks, you will receive your PTIN. You should also get an electronic filing identification number (EFIN) if you submit your clients’ taxes online. This is also free. However, it requires some additional security, such as a fingerprint check.
Practice Management Software
No matter what kind of business you operate, you need to be prepared and organized. Investing in a tax practice management software solution can keep yourself and everyone at your business on the same page. It allows you to delegate tasks, schedule meetings, and appointments, and keep track of your interactions and hours with clients. A tax practice management software must ensure that you are running your business efficiently and effectively.
Develop a Business Plan
A business plan will provide you with a guide for how you want to run your business. You can lay out your projected expenses and revenues to see where you can be more efficient. This plan will also describe your target audience and how you will market to them. A business plan is a document you need to prove to yourself and others that your business can be profitable. For example, if you want to pursue government funds or a business loan, you will need to provide a plan. Be as detailed as possible, and refer back to it regularly to ensure you remain on the right path.
Have a Website
There are very few businesses nowadays that can operate successfully without a website. A tax preparer is no different. You need your website to be the hub for your online presence. Your social media pages will link back to it, and your search engine optimization (SEO) will help you get more organic traffic. So don’t think that you can get by without one. As more of the population is born in a digital world, having a quality website with the right hosting is an absolute must.
Decide On Your Team
Do you plan on being a sole proprietor? Are you going to have partners or employees? These are important questions. Many entrepreneurs start off small with no team around them. However, as you grow, you will need help from others. Your team can take the form of employees, but it can also be something else. For example, you may decide you want to outsource certain tasks rather than hire somebody to do them. Your outsourcers can also be your team, and you should work on having a trusting relationship with all of them.
Marketing Your Business
There are many ways that you can market your business. One of the best ways is through networking. Since being a tax preparer involves a leap of faith from a client, they will be more likely to hire you if they feel they can trust you. Networking at chamber of commerce functions, charity events, and other gatherings will help you build rapport with potential clients and people who can recommend you to others. Make sure to have a large batch of business cards on hand at all times. You can also produce targeted ads that will reach prospects who have already shown a predisposition to purchase your services.
As you can see, there is some work to do before you can open your tax practice. However, by taking all the steps, you will set your business up for success upon launch and in the future.