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Ideas for Home Business: Tax Preparation Business

What Does It Take to Start a Tax Preparation Business?

By Ron Dicker

(LifeWire) - Overview of the Tax Preparation Business

Entrepreneurs who know their way around a 1040 and don't mind seasonal work can have a successful tax preparation home business. Although formal education for tax preparation is required in only four states, all tax practitioners would be wise to take basic training and refresher classes from a large tax outfit such as H&R Block, a community college or the IRS, as tax laws are constantly changing. As a tax preparer, you'll need to be familiar with the schedules and forms used in preparing an individual return, as well as the basics of credits and deductions. Clients of tax preparation services are usually individuals and small businesses.

Tax preparers can earn a high hourly rate, especially with repeat customers who have consistent annual incomes. A preparer might charge a single taxpayer as little as $50 for filing federal and state returns, although tax preparation fees may be much higher in metropolitan regions. Software is a must for electronic filing, the preferred way to transmit tax returns.

Not all tax preparers have an accounting background. With efficient, friendly service, the unlicensed can fare just as well as their formally trained competition. All tax preparers can benefit by joining the National Association of Tax Professionals.

Pros of a Tax Preparation Home Business

  • No matter how advanced software has become, many people have an aversion to doing their own taxes.
  • Annual repeat business if you do a good job
  • The tax preparation busy season is between Jan. 1 and Apr. 15, leaving you time to pursue other interests, or possibly pursue other ideas for a home business to keep you busy the rest of the year.
  • Tax preparation can be done effectively with very little overhead.
Cons of a Tax Preparation Home Business
  • Incomplete or misleading information from clients will make your job more difficult.
  • Mistakes in tax preparation can land your client in hot water with the IRS (and repeated errors may get you in trouble as well).
  • Tax laws are constant changing, requiring ongoing training to stay abreast of current tax laws.

What You Need to Get Started in a Tax Preparation Home Business

  • A computer, tax software, printer and fax
  • A neat office space if clients are coming to you; in many cases you can just offer to come to their home or office
  • Ability to network and drum up business
  • Business cards and a website, along with testimonials from satisfied clients, to promote your tax preparation business
  • Licensing and/or formal training if you live in California, Oregon, Maryland and New Jersey

Tax Preparer: Real-Life Example

Kyle Rovira of Baton Rouge, La., sees clients on nights and weekends year-round. According to his website, Taxrefundman.com, an individual taxpayer with a simple return might pay $50 while a family with a more complicated return might pay $120.

More Ideas for a Home Business

More on Starting a Business at Home

LifeWire, a part of The New York Times Company, provides original and syndicated online lifestyle content. Ron Dicker is a New York-based freelance writer who covered sports for the New York Times from 1996 to 2005.
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