start your tax prep business and pass a competency exam to prove

Do you have a background on accountancy and are the person everybody calls when tax time arrives and everybody is busy trying to understand forms and fill in the right paperwork? Working as a tax assistant from home is a viable and lucrative business idea, and can even be a seasonal business to complement your income.


You will need to register with the IRS as a federal tax return preparer to start your tax prep business and pass a competency exam to prove that you actually know what you are talking about. You should also apply for an IRS Electronic Filing Identification Number (EFIN) so you can file tax returns online for your clients, and a IRS Tax Prepared Identification Number (PTIN) so you can protect your social security number.

Unless you already are an experienced accountant you may need to take a tax preparation course so you can successfully pass the basic competency exam that checks your tax knowledge and allows you to prepare individual tax reports for your clients. Every year going forward you’ll need another 15 hours of continuing education to stay up to date with the changes to tax. If you also wish to offer your services for small businesses you’ll need to take another course on small business income tax.

Tax Filling Software

No software is a replacement for your knowledge and particular skills, or there wouldn’t be much of a market for tax businesses, but it’s true that the right program can make your life much easier. There are many different offers in terms of tax software, and choosing the right one will depend on your expectations in terms of number of clients and the features you require. From simple programs that help you prepare and fill basic returns to expensive fully fledged tax suites that allow you to prepare all sorts of personal and business returns, the choice is yours. If you aren’t sure you may want to download demos and try them ahead of the tax season so once you start working you already are familiar with it.

Income Potential And Seasonality

A tax business from home has very little overheads, so the income potential depends mostly on your market and how good you are at justifying your fees to your clients. Some people opt to charge more for express tax return filling, or if they spend a lot of time explaining their clients all about their tax return. Others just charge a lower fee but demand that their clients send them absolutely all the paperwork, correctly formatted, and basically charge for filling in the forms. You can offer your services online, reaching a wider range of clients to increase your business income.

However, keep in mind that tax business is mostly seasonal (from mid-january to mid-april) so while that means you can enjoy a nice chunk of holidays you may want to offer additional services to generate income during the rest of the year.

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