If you have experience in preparing tax returns, then this one’s for you. We are going to share with you vital information on how to become a tax preparer from the comforts of your home.
Most of us — if not all of us — know that tax season is a very stressful season. Thus, businesses and companies tend to hire people, particularly tax preparers, to help lessen the stress.
According to a report by IBIS World, “Unfavorable economic conditions, particularly the sharp jump in unemployment stemming from the COVID-19 (coronavirus) pandemic, is expected to constrain demand for industry-relevant services and hamper industry performance,” which include the Tax Preparation Services industry.
Although this sounds concerning, this does not entirely mean that the Tax Preparation Services industry will no longer be in-demand — after all, there are still taxes to pay regardless of the ongoing pandemic, right?
Surely, the industry will suffer the consequences of the current protocols which limits person-to-person activities – something that tax preparers normally do when preparing tax returns.
Though there are challenges, we cannot deny the fact also that industries are coping – thus the demand for work from home or remote work setup – including preparations of tax returns.
Today, tax preparers can actually work from home. Companies have managed to work with tax preparers without them having to go onsite, which is actually a good thing given the current situation. Needless to say, which also helps a lot for people working in this industry who are affected by what’s happening around.
So, having said that, today, we are going to particularly talk about how to become a tax preparer from home. This aims to help tax preparers who are new to this setup to learn more about how things are done. Needless to say, this will also serve as a guide for those who are just thinking of or considering a career as a tax preparer.
In particular, we are going to tackle the following:
- What is a tax preparer?
- What does a tax preparer do?
- Who can be a professional tax preparer?
- Does one need special training to become a professional tax preparer?
- How much does a tax preparer make?
- How to become a tax preparer from home?
WHAT IS A TAX PREPARER?
Before anything else, it is important to know what exactly a tax preparer is.
For those who have had previous experience as one or working with one, they probably have an idea already. However, for those who are totally new to this, this one’s for you.
As we always say, before you jump into something, always make sure you know where you are putting yourself into. Otherwise, you might end up having problems along the way – particularly not knowing encountering problems along the way especially when it comes to the scope of work (which is what we are going to tackle in the next section).
Moving on, according to Career Explorer, a tax preparer refers to a “professional that is qualified to calculate, file, and sign income tax returns on behalf of individuals and businesses.”
Furthermore, tax preparers can also “represent the taxpayer during IRS examinations of tax returns”.
Tax preparers do have different job titles. It also has different certifications as well as educational levels. Thus, it is important that a tax professional fully know what situation suits her best.
As mentioned earlier, during tax season, taxpayers usually hire tax preparers to handle the filing of their tax returns. A tax preparer has to be trustworthy because taxpayers entrust their most personal and sensitive information (like their income, marital status, children, as well as their social security number) to these people.
Before moving on, sharing with you this very informative video by Universal Accounting on becoming a tax preparer. This basically summarizes the most important points every aspiring tax preparer needs to know.
WHAT DOES A TAX PREPARER DO?
In this section, we are going to discuss further about the scope of work that tax preparers do.
It is important that you, as a professional tax preparer, know and understand what you are expected to do. This way, you get to ensure that you are working within binderies.
Anyway, as mentioned, it is every taxpayer’s obligation to file tax returns every year. Thus, the need to hire a tax preparer every time.
There are different types of tax preparation professionals. In the same way that there are also various levels of experience and appropriateness to a person’s personal tax situation.
If you intend to work as a tax preparer, please note that the Internal Revenue Service (IRS) requires registration for all paid tax preparers in the country.
All tax preparation professionals are required to obtain a Preparer Tax Identification Number (PTIN), which, according to CorpNet.com is “a unique nine-digit number that enables the IRS to identify who the professional preparer is — who helped a taxpayer prepare and file their income tax return”. The PTIN must be included in all returns that a tax preparer signs.
Meanwhile, below is a quick brief on the different types of tax preparation professionals:
- Tax Preparers for Chains or Local Outlets – These are tax preparers who are trained to some extent. However, their training and experience could be at any level.
- Enrolled Agents – These tax preparation professionals are licensed by the federal government. In addition, they also have either been a former IRS employee (for at least ten years), or have passed an IRS exam. These professionals also complete the required credit hours each year in both tax regulations and accounting methods.
- Certified Public Accountants – CPAs assists individuals through complex financial situations. They can configure an overall tax plan, at the same time, they can also represent them before the IRS.
- Tax Attorney – These professionals typically work with clients who have large assets as well as business dealings. They may also work for those who are interested in sheltering part of their income. Tax attorneys are basically tax experts and are experienced with challenging corporate matters, excellent in handling tax disputes, and they are also updated with the latest tax laws. Unfortunately, though, tax attorneys may not be as qualified in terms of preparing actual tax returns.
So, yeah, basically, as the information above shows, the scope of work that a tax preparer depends on what type of professional background she has.
WHO CAN BE A PROFESSIONAL TAX PREPARER?
So, you want to become a tax preparer from home. But the question is, who actually can be a professional tax preparer?
Many people thought that to become a professional tax preparer, one has to have an accounting degree or some other type of educational attainment.
Well, surprisingly, the IRS is not as strict as a lot of people thought. The only vital requirement of the IRS for an individual to be able to work as a tax preparer is to have a Preparer Tax Identification Number (PTIN). Only those with PTIN are allowed to prepare federal tax returns for particular clients.
For your reference, here’s what IRS has to say about it:
“Any tax professional with an IRS Preparer Tax Identification Number (PTIN) is authorized to prepare federal tax returns. However, tax professionals have differing levels of skills, education, and expertise.”
A little confused? Here’s the thing, the main difference between various types of tax professionals is their representation rights before the IRS. Tax professionals may actually have either Unlimited Representation Rights or Limited Representation Rights.
To give you clarity, here’s what Unlimited Representation Rights differs from Limited Representation Rights:
Tax Preparers with Unlimited Representation Rights Before the IRS
- Enrolled Agents
- Licensed Certified Public Accountants
- Licensed Attorneys
These tax professionals can represent their clients basically on any tax matters like appeals, audits, as well as payment or collection issues.
Tax Preparers with Limited Representation Rights Before the IRS
- PTIN Holders (non-credentialed tax preparers) – They are authorized to prepare tax returns.
- Annual Filing Season Program Participants (individuals who have gone through the IRS’s voluntary program) – They may only represent clients whose returns they have both prepared and signed.
DOES ONE NEED SPECIAL TRAINING TO BECOME A PROFESSIONAL TAX PREPARER?
According to IRS, they do not require specific training or licenses to become a PTIN holder to be able to provide federal income tax return preparation services for a fee. The thing, though, is that tax preparers must understand the United States tax code, and must consider enrolling in a course to become more knowledgeable especially if you are not an experienced tax preparer.
If you are new to this, and you do not have an experience as a tax preparer, you may consider completing the IRS voluntary Annual Filing Season Program. It requires a tax preparer to complete 18 hours of tax continuing education plus a six-hour federal tax law refresher course.
Once you have completed the program, the IRS issues an Annual Filing Season Program Record of Completion certificate. Apart from the certificate, going through the said programs enables you to be listed in the agency’s online database of tax preparers, which is called the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
Apart from the IRS voluntary Annual Filing Season Program, there are also other resources that provide tax preparation education like the following:
- Community Colleges
- IRS Training and Communication Tools for Tax Professionals
- National Association of Tax Professionals
- Online universities
- Tax preparation companies
- The Accreditation Council for Accountancy and Taxation (ACAT)
Furthermore, it is also important to note that there are some states that have specific education, training, as well as a registration requirement for tax preparers. Currently, these are the states that require a separate credential:
- New York
HOW MUCH DOES A TAX PREPARER MAKE?
Similar to other jobs out there, how much you make as a tax preparer depends on certain factors like your experience and expertise in the tax preparation industry.
However, for your reference, according to Payscale, the average hourly pay for a tax preparer is $13.07. It can go as low as $9.27 up to $24.76.
Meanwhile, according to Indeed, the average salary for a tax preparer in the United States is $16.35.
Basically, it varies based on certain factors as mentioned earlier. Also, your location has something to do with the rate.
HOW TO BECOME A TAX PREPARER FROM HOME?
At this point, in this section, we are going to share with you some tips on how to become a tax preparer from home.
To become successful at working remotely as a tax preparer, you must follow these steps:
- Learn the Craft
- Take Classes
- Stay Updated on Tax-Related News
- Get Your PTIN
- Consider Upgrading Status
- Build Your Home-Based Business
Now, let’s dig deeper into each step —
Learn the Craft
Technically speaking, to become a tax preparer, you do not need collegiate training, which means you do not have to go back to school and get another degree that is related to the job.
However, it doesn’t mean that you just jump in. As we have said earlier, it is important that you know and understands what being a tax preparer is all about.
Generally, tax preparers must know how to use a computer, which means if you are not that good at using computers, you better make time to know your way around a personal computer.
Also, as a tax preparer, you are working for clients, which is why it would be an advantage if you are a people person, or that you have customer service experience.
As we all know, tax preparations mean dealing with numbers, so mathematical knowledge would be a plus.
Surely, you can study the craft on your own, but sometimes, taking classes would be better. In fact, it would be a huge help to become fit for the job.
Consider signing up for training related to tax preparation or how to become an expert tax preparer.
Regardless of the fact that you are considering being self-employed, these pieces of training you have will surely help attract potential clients. Knowing that you have these, clients will feel assured of getting you to take care of their taxes.
While there are different organizations and institutions that provide training programs on tax preparation. One of them is the Accreditation Council for Accountancy and Taxation, which offers an Accredited Tax Preparer Credential program.
You may also check the National Association of Tax Professionals as they also have courses offered or endorsed.
Meanwhile, there is also free online training particularly for those planning to start a tax preparation business. The training will particularly discuss: Earning Potential of a Tax Pro, Day in the Life of a Tax Pro, and Keys to Success as a Tax Pro. These classes also come with lots of bonuses including worksheets, business plan templates, as well as calculators.
Stay Updated on Tax-Related News
Another important step to becoming a tax preparer remotely is to ensure that you are updated on the latest tax-related news. You have to particularly be aware of changes in regulations, as well as new rules or laws if there’s any.
Knowing the latest news is an essential part of being a tax preparer.
As someone in charge of your client’s tax returns, it is important to note that changes and minor tweaks can have a huge impact on your client’s taxes.
Get Your PTIN
Of course, to be a professional tax preparer, and to be recognized by the IRS, you have to work on getting your Preparer Tax Identity Number (PTIN).
Getting a PTIN is actually the primary requirement to become a tax preparer. Without your PTIN, as per IRS rules, you are not allowed to accept money in return for your tax preparation services.
To put it simply, without a PTIN, you cannot get paid for the services you offer.
Now, in order to get your PTIN, all you need to do is to log on to the IRS website. You will be asked to submit your personal information including your social security number. You will also need to submit a previous tax filing you made for yourself.
Also, should you have had criminal convictions in the past, make sure to disclose them.
To finish the whole process, you will have to pay the $50 fee.
As soon as you have your PTIN, you will immediately earn an “unenrolled preparer” status. Eventually, you can have an “enrolled preparer” later on.
Consider Upgrading Status
As mentioned above, you can eventually upgrade your unenrolled preparer status to the enrolled preparer.
An enrolled preparer is licensed by the IRS to practice. However, to gain that status, you have to work for it.
You will have to go through a three-part examination that basically covers individual and business tax preparation, as well as federal tax planning and representation.
In addition, you will also have to maintain your status with 72 hours of continued education every three years.
More so, you may also consider upgrading beyond this. You may consider going back to school and earn a degree related to the job or become a tax attorney, a CPA, or a licensed tax accountant.
Build Your Home-Based Tax Preparation Business
Of course, the last but certainly not the least, start your home-based tax preparation business.
Initially, you can reach out to family and friends. Offer your tax preparation services to them. This is to gain a portfolio so that if once you decide to cater to clients outside your circle, you have the experience to back you.
Needless to say, it’s also a good way to create references for yourself as well as your skills.
Once you decide to kick off your home-based tax preparation business, make sure you have all the essentials you need to be able to do the job. Essentials include a computer, a reliable internet provider, and of course, a room to ensure you have a professional set up to provide more integrity.
FINAL THOUGHTS ON HOW TO BECOME A TAX PREPARER REMOTELY
There you have it! Certainly, you can become a tax preparer anytime you want to for as long as you have the ability and the eagerness to pursue this career path – regardless of what the situation around you is.
Are you planning to become a tax preparer? How do you intend to do it?