In February and March every year, it probably feels like there are more sign spinners on the streets than there are Starbucks locations. As booming as tax filing services are from one spring to the next, starting your own tax preparation business can seem like an excellent way to earn a bit of extra dough during the first few months of the year. Right now, it probably feels like tax preparation season is pretty far off, which means now is the time to get started on starting your business! Here’s what you need to know before you dive in:
An Ever-Growing Market
You’ve probably heard that old Benjamin Franklin quote once or twice about nothing in life being certain except for death and taxes. Well, he was certainly right there. Tax preparation is an ever-growing industry and offers a wealth of options to make a living, whether you choose to dive in full time or only part of the year. With a bit of training, you can capitalize on those in your area who seek help with how to fill out and file a tax return. It can be a great way to simply earn a bit extra during the first few months of the year or turn it into a year-round career. Of course, in order to do so legally, you’ll need to take a few steps.
Register Your Business
As with any other business, in order to be a recognized legal entity, you’ll need to register your business. You will need to check to see what the requirements are in your state, as they do vary somewhat. Commonly, the first step is to choose what sort of entity your business will be—are you thinking of starting up a corporation or a limited liability company (LLC)? If you’re unsure, you can often register your small business through a “Doing Business As” (DBA) form, which will start the registration process without declaring which type of entity yours will be. You’ll also need to follow the registration process and obtain any necessary licenses or certifications according to the legalities where you live.
In addition to registering your business with your city and state, you will likely need to register and obtain an Employer Identification Number (EIN) and an Electronic Filing Identification Number (EFIN) from the IRS. The IRS requires that, if you’re filing more than 11 tax returns a year, you also must become an Authorized e-File Provider. You can begin that process online through the IRS website by creating an IRS e-services account. You and anyone who will prepare and file a tax return through your business will need a Preparer Tax Identification Number (PTIN), which you can get from the IRS during this process.
Plan The Type of Business
Operating a tax preparation business is a bit more complex than sticking up a sign and opening your doors when tax season rolls around. You’ll need to consider precisely what sort of business yours will be and what range of tax filing services your office will offer. Are you planning on operating year-round, or just for the few months of tax season? Do you want to focus on helping individuals file a tax return, or would you prefer to work primarily with businesses? Will you offer supplemental services like bookkeeping or payroll? The quantity, level, and variety of services you want to offer will determine the certifications and qualifications you and your staff will need.
Your answers to the questions above will dictate a lot of the education and credentialing process you’ll need. If your business will be just you offering tax filing services, and you only plan on doing so during the peak season, you probably don’t need to go as far as becoming a certified public accountant (CPA). However, choosing to earn your CPA credentials may be beneficial and necessary if you want to also offer bookkeeping and payroll for local businesses.
Get Help Getting Started
At Umbrella Financial Services, we offer two different options to help you offer tax filing services. As a licensee, you’d own your own tax preparation business. Or become a VTax independent agent and offer tax filing services on your own schedule. Learn more about both options here or contact our team today to get started!