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How to be a Tax Preparer

how to be a tax preparer

Why Become a Tax Preparer?

In tax year 2011 there were 143,607,800 individual tax returns filed. In 2010 (the most recent year data is available) 56.7% of all individual returns used a paid preparer – that’s 81,426,000 potential clients   – a huge potential market whether you are an employee of a large tax firm or working as a self-employed tax preparer.

In California, tax preparers earn an hourly mean wage of $22.51 or an annual salary of $46,810! Not bad considering many tax preparers only work less than 4 months out of the year (see the Bureau of Labor Statistics ).

And with the ever-changing tax laws, job security is virtually guaranteed to knowledgeable individuals.

How to be a Tax Preparer

Step 1 – Take a Tax Course. First, take a tax course specifically designed to teach you the information you need to do the majority of individual returns you’ll see. In California, our course is approved by the California Tax Education Council (CTEC) as a 60-hour Qualifying Education course for new tax preparers. You’ll need to take a Qualifying Education course before you can begin to prepare tax returns for money. If you don’t live in California, you should still begin by taking a Qualifying Education course – you’ll gain the knowledge and confidence you need to better serve your clients and get more referrals.

Step 2 – Get a Preparer Tax Identification Number (PTIN) from the Internal Revenue Service (IRS). Anyone who prepares or assists in preparing federal tax returns for compensation must have a valid PTIN before preparing returns. Most first-time PTIN applicants can obtain a PTIN online in about 15 minutes. The fee is $64.25. View this checklist to get started.

It only takes about 15 minutes to apply for or renew your PTIN online. But if you prefer to use the paper option, Form W-12. IRS Paid Preparer Tax Identification Number (PTIN) Application, it will take 4-6 weeks to process.

Step 3 –

Purchase a $5,000 Tax Preparer Bond from an Insurance/Surety Agent. In California, you’ll need to get a tax preparer bond before you can begin preparing taxes. A tax preparer bond is a type of insurance policy intended to guarantee that you (the tax preparer) will comply with California Tax Education Council standards while acting as a tax preparer, and that any fines or fees levied for noncompliance will be paid.

Obtaining a tax preparer bond is a quick and easy process – most bonds are offered online in minutes with no lengthy forms or credit checks. You can get one for around $25/year. Companies we have worked with in the past include Dimirak Financial or BondsExpress. Other companies are available and you should choose your bond company carefully.

Step 4 – Register with the California Tax Education Council (CTEC). In California, you’ll need to register with CTEC within 18 months of completing a Qualifying Education course. The fine for preparing returns without registering with CTEC can be as much as $2,500 for a first offense.

You should wait to register until November 1 if you will NOT be preparing taxes between today’s date and/or your education will NOT expire prior to October 31st. If you complete a 60-hour Qualifying Course and register before November 1, you will be required to complete 20-hours of Continuing Education as well.

That’s It!

Of course there are other steps to take/decisions you’ll need to make as well…

  • Will you work for someone else? Or start your own business?
  • What tax software should you use?
  • Should you have a website?
  • How do you offer electronic filing?
  • What type of insurance do you need?
  • What type of business entity should you be? Sole proprietor? LLC? Corporation?

Call us/Chat with us/Email us and we’ll be glad to give you more information or answer any questions that you might have regarding how to be a tax preparer.

Category: Taxes

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