Do you handle your own tax return every year when tax season rolls around? Better yet, do you help your friends and family fill out their taxes because the entire process is a piece of cake for you?
Filing your taxes comes easy to you, so why pay for someone else to take care of your taxes when you could just do them yourself? And on top of that, if you have a way with numbers and don’t mind completing paperwork, you could become a tax preparer and get paid to do other people’s taxes.
Becoming a tax preparer may be easier than you think. In this article, we’ll go over what a tax preparer does, the different types of job titles you can have, and how you can become a tax preparer today.
What Is a Tax Preparer?
Tax preparers are responsible for filing taxes on behalf of other people and businesses. Preparing income tax returns for others is easy to get into and is provides excellent job security since companies and people need to fill out a tax return every year.
A tax return preparer will work with individuals and help them file their federal tax returns and state returns. Tax preparers provide tax planning guidance and expertise to help individuals and businesses maximize the amount they receive back on their tax return. This includes finding any and all available tax write-offs for their clients.
Let’s take a look at the different types of tax preparers out there.
Different Types of Tax Preparers
There are a few different types of tax preparers that you should consider when getting into the field. These range from entry-level non-credentialed tax preparers to full-on CPAs and tax attorneys.
Non-Credentialed Tax Preparers
A non-credentialed tax preparer is the easiest title to obtain in this space. In many cases, non-credentialed tax preparers are seasonal workers who pick up shifts during peak tax season. They can be employed at places like H&R Block or Jackson Hewitt Tax Service.
Typically, non-credentialed tax preparers will handle simple tax returns for individuals. It’s not often this level of tax employee will be in charge of complex business tax returns.
To become a non-credentialed tax preparer, you only need a high school diploma and some additional training. You can also seek out further certifications, which we’ll cover below.
According to Glassdoor.com, tax preparers make just under $28,000 per year. You should note that much of this income likely comes during peak tax filing season.
Enrolled agents are tax preparers who have obtained a license through the Internal Revenue Service. Like non-credentialed tax preparers, there isn’t any particular level of education you must obtain, however, you must pass a difficult test that’s administered by the IRS. If you’re able to pass the test, you can become an enrolled agent.
Enrolled agents are one step up from non-credentialed agents. They have additional privileges, like being able to represent taxpayers in front of IRS proceedings and court.
Enrolled agents make around $16 per hour or $33,000 per year according to Glassdoor.com.
Certified Public Accountants (CPAs)
Certified public accountants are the top dogs in the tax preparation game. CPAs have received extensive education and training and have a significant amount of experience. CPAs have the ability to represent small businesses and larger corporations in the highest level of IRS tax court. Not only can they file tax returns, but they also represent corporations and businesses of all kinds.
It is common for CPAs to have an accounting degree through an accredited university. They also are required to have taken at least 150 hours’ worth of accounting courses in college. On top of that, they must pass a comprehensive CPA exam before they can be licensed in their state.
According to Glassdoor.com, CPAs make on average $67,000 per year. The more training and experience you can obtain, the more you’ll be paid.
Tax attorneys are more like lawyers who understand taxation laws. Tax attorneys can have a background in accounting, however, they don’t need to be a CPA. A tax attorney typically won’t assist with filing tax returns, however, they do come in handy if an individual or business needs legal guidance in the realm of taxation. Tax attorneys must possess a law degree and have passed the state bar.
On average, tax attorneys make $115,000 per year according to Glassdoor.com.
So what will it take for you to do this job? Let’s show you how to become a tax preparer.
How to Become a Tax Preparer
There are three steps you can take to becoming a tax preparer. These consist of seeking out education and training, getting certified, and finding a job or getting clients.
1. Get Educated
As we mentioned above, if you want to become a non-credentialed tax preparer, you only need a GED or a diploma. Further education isn’t required, however, the more education and certifications you receive, the higher you’ll likely be paid.
If you want to receive training or education, you can attend accounting and tax preparation courses at your local community college or go through on-the-job training programs at local tax services like H&R Block or Jackson Hewitt. These tax services will give you the training you need and show you how to become a tax preparer.
You can also complete certification through the Accreditation Council for Accountancy and Taxation — or ACAT. This isn’t necessarily required, however, it will help you stand out from your competitors.
If you’d like to be more than a non-credential tax preparer, then you can seek out secondary education at universities all across the United States. If you want to be a CPA, then you’ll need to complete a four-year degree and pass your CPA exam.
Generally, the best tax professionals will be good at math, are detail-oriented, and are extremely thorough. They also have great computer and customer service skills and have a general understanding of tax laws and tax codes.
2. Get Certified
Before you start preparing taxes for others, you’ll need to get the proper certifications and tax numbers to legally file tax returns. This includes a PTIN, EFIN, and additional state licenses.
Preparer Tax Identification Number (PTIN)
If you want to prepare taxes on behalf of others for money, you’ll need a PTIN. Your PTIN will be used to identify yourself as an “unenrolled preparer” when filing taxes for third parties. You can obtain your PTIN at the IRS website.
You’ll need to provide the following information when applying:
- Proof that you at least 18 years old
- Social Security number
- Street address
- Explanation of felony convictions
- Explanation of owed money to the IRS
Having a felony conviction or owing money to the IRS may put a hold on your application, but other than that, obtaining your PTIN is relatively easy.
Electronic Filing Identification Number (EFIN)
EFINs are for those who plan on filing more than 11 tax returns per year. In comparison, PTINs will give you the basic access needed to file under 11 tax returns for money. EFINs are for tax preparers who will be filing more than 11 returns on their own and are required to e-file these returns. Your EFIN will enable you to e-file tax returns, which is filing returns online. You can also apply for your EFIN at the IRS website.
You’ll need to do the following things when applying:
- Create your own IRS e-services account online
- Fill out an online e-file application with the IRS
- Pass a suitability check
You may also need to pass a credit check and criminal background check before officially getting your EFIN. You might be charged to get fingerprinted, which may cost $50. Other than that, your EFIN is free to get. Since you’ll be dealing with your clients’ personal tax information and returns, it will be helpful to understand other taxpayer identification numbers here.
State Registration and License
Depending on which state you’re in, you may be required to obtain a license to do business as a tax preparer. Not every state requires a license and some may not even require you to become registered through the state. Each state is different, so make sure you look into your state’s tax laws, which can be found on their respective tax department websites.
3. Find Clients
You know how to become a tax preparer. Now it’s time to find clients. Once you’ve jumped through all the hoops of getting trained, certified, and licensed, it’s time to start finding work. There are a few ways you can go about finding work.
One way is to pick up seasonal hours at a tax preparation service like Liberty Tax Service. This will pay you an hourly wage with potential for some commission-based pay. This is a great way to get experience starting off because they already have a built-in source of client leads.
You can also work at an accounting firm or law office. These jobs are more geared towards CPAs and tax attorneys who have gone through extensive schooling and are prepared to deal with large business accounts.
Lastly, you can start taking clients on the side and grow it into your own tax preparation business. You can prepare taxes right out of the comfort of your own home and on your own time. If you get the word out to your network of family and friends, you can have several paying clients in no time.
As a freelancer you’re your own boss, so you’ll need to stay focused and disciplined with your work. Check out these 100 must-have tools for freelancers and five ways you can maintain a healthy work-life balance.
Prepare Taxes for a Living
If you’re good with numbers and don’t mind doing paperwork, learning how to become a tax preparer might not be a bad option for you. The nice part is that it doesn’t require much training to receive an entry-level job. You also can opt to work part-time or full-time and pick up hours when the busy season rolls around. Since numbers and details are your thing, you might also enjoy exploring remote bookkeeping jobs after tax season ends.