How to Start a Tax Preparation Business From Home in 2022

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An increasing number of people are starting their own businesses from home. In fact, it is estimated that there are approximately 15 million home-based companies in the United States. 

There are plenty of different businesses that you can run from the comfort of your home. One option is a tax preparation business. Companies in this sector offer a wide range of tax return preparation services for professionals and organizations. 

How to Start a Tax Preparation Business from Home

In this post, we will take you through the steps you need to follow to start a tax preparation business from home.

1. Make sure you adhere to the laws that are in place

There is only one place to begin, and this is by making sure that your business is compliant. There are a number of different laws that govern the tax sector, as you are going to be handling a lot of confidential information.

For example, you need to make sure you adhere to the data protection laws that are in place, as well as industry-specific laws, including the US Tax Reform Legislation of 2017. 

2. Figure out what niche you want to focus on

A lot of tax preparers begin their own companies because they want to assist individual taxpayers and local company owners. However, they have not considered how they are going to narrow down their approach so that they can develop an area of focus and position themselves as an expert at an area of tax that drives higher profit margins. 

Some of the different areas that you may want to consider include:  

  • Forensic/business valuation
  • Expert consultancy on tax services
  • Insurance
  • Bookkeeping
  • IRA problem resolution
  • Mobile tax office

3. Understand the main businesses you will be competing against

There are a lot of different companies operating within the tax industry at the moment. This includes a lot of big players that have a nationwide presence. It is important to know who you are going to be up against so that you can find ways to make your company the most appealing. 

Some of the most well-known companies in the tax industry include the following: 

  • Intuit ProSeries
  • H&R Block at Home (previously known as TaxCut)
  • TaxACT
  • Boston tax services
  • Liberty tax services
  • Jackson Hewitt tax
  • TaxSlayer

4. Learn about the challenges you need to overcome and the risks you will face

When it comes to starting any new business, risk management needs to be at the core of your efforts. After all, there are always going to be risks.

Learn about the challenges you need to overcome and the risks you will face

Of course, the risks you will face are going to be specific to you. However, here are some of the typical challenges that people face when starting a tax preparation company: 

  • Registering your tax preparation company in your state
  • Selecting the right tax preparation software
  • Obtaining experience as a tax preparer
  • Getting an education as a tax preparer

There are plenty of great software solutions out there for tax preparers, including Credit Karma Tax, TaxSlayer, TaxAct, H&R Block, and TurboTax. 

5. Do you want to start from scratch?

Another key area that you need to consider is whether you want to start a business from scratch or purchase a franchise. With a franchise, you have a readymade business model. However, it can be expensive to get involved. 

On the flip side, there are a lot of benefits associated with having your own company rather than buying into a franchise. This includes the following: 

  • You do not have to worry about losing your company because of an unreasonable termination of your franchise
  • You do not have to pay for advertising fees that may not benefit your franchise
  • Freedom for non-compete provisions if you want to get out of the franchise
  • Supplies are priced responsibly, with no franchisor mark-ups
  • You do not have to worry about a lack of support from your franchisor
  • There are no requirements that are in place contractually
  • You have full creative control, meaning you will be able to run things your way
  • You can avoid any problems with your franchisor legal recourse should something go wrong
  • No need to worry about geographic restrictions 
  • No problems with financing assistance 
  • You do not have to worry about royalty fees or the large start-up expense either

6. Acquire the insurance you need

All businesses require insurance, and tax preparation companies are no different. You may want to speak with an insurance agent so that you can determine what policies you are going to require.

Some of the different insurance plans you may require for your business are as follows: 

7. Get the certification you need to provide your service

Tax preparers not only calculate income tax returns, but they sign them and file them on the behalf of organizations, companies, and individuals. They can also represent taxpayers if they are undergoing an IRS examination on their tax return.

Seeking professional certification is important because it helps to set you apart and boosts your reputation. People are going to be more inclined to trust you if they can see that you have relevant qualifications. 

There are lots of different types of certifications you can aim for, with some of the most common and respected including: 

  • California Tax Education council Registered Tax preparers – CTEC
  • Tax preparer certification – TPC
  • Certified Tax preparer – CTP
  • National Association of Tax Professionals – NATP
  • Accreditation Council for Accountancy and Taxation certification – ACAT
  • Accredited tax preparer – ATP
Get the certification you need to provide your service

8. Use patents, copyrights, and trademarks to protect your intellectual property

Aside from the steps that we have mentioned above, you can also use patents, copyrights, and trademarks to protect your assets. Understanding the rules regarding these three elements can protect your company’s work and innovation, ensuring you are safeguarded from possible legal troubles. 

Intellectual property (IP) rights play a vital role when it comes to monetizing innovation. If competitors are able to copy your ideas with ease, they can ultimately end up preventing your company from achieving success. Have you ever thought about how many individuals have access to your IP throughout the tax audit, review, and preparation process?

To make sure that your ideas are protected, some of the steps you should follow include: 

  • Discover your company advantage
  • Invest in universal IP protection wherever possible
  • Be proactive when it comes to IP protection
  • Utilize a non-disclosure agreement liberally 

9. Put together your business plan

Next, you need to put together your business plan - a lot of people underestimate just how important it is! A business plan provides you with milestones so you can gauge your success. Simply going through the process of putting your plant together is going to help you think of some critical issues you may not have thought about yet.

Before you actually start crafting your plan, spend some time exploring and evaluating your business goals. You can then use this information to put together an effective and comprehensive business plan that enables you to reach your objectives. 

A business plan will formalize the analysis of your prospective business by meaning you need to put your ideas and answers to some of the most vital questions in writing.

With your plan, you are setting forth your purpose or mission, describing the products and services you will provide, presenting an analysis of the market state, establishing your goals, and outlining how you are going to achieve these goals. You will also put together a formal financial plan as well. 

10. Prepare a detailed cost analysis

Last but not least, you need to prepare a detailed cost analysis for your business. You need to sit down and work out all of the expenses that are going to be entailed. 

Examples include the following:

  • Lease or space rent
  • Tax preparation marketing costs
  • Tax office supplies
  • Professional tax preparation software
  • Voluntary IRS annual filing season program
  • IRS registration to become a tax preparer
  • Comprehensive tax course with a business start-up package

These are just some of the costs that you are going to need to take into account. Of course, you are going to have some miscellaneous costs as well. 

The costs are going to differ based on your location and the supplies you need to acquire. Perhaps you have already undergone some training? Or, maybe you are starting from scratch?

We cannot predict the exact cost, which is why you need to sit down and include each and every expense, no matter how insignificant it may seem. This is the only way you can work out if your company is financially viable. 

Final words on starting a tax preparation business from home

So there you have it: everything that you need to know about starting a tax preparation business from the comfort of your own home. We hope that this has helped you to get a better understanding of what you need to do in order to establish this sort of company remotely.

About the author 

Peter Keszegh

Most people write this part in the third person but I won't. You're at the right place if you want to start or grow your online business. When I'm not busy scaling up my own or other people' businesses, you'll find me trying out new things and discovering new places. Connect with me on Facebook, just let me know how I can help.

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