How to Start a Professional Tax Practice

Register your business with your state

Once you have decided on a type of entity for your business, you can register your business with your state. A common way that small businesses register is by filing a Doing Business As (DBA) name with their state. This can be a simple way to become registered with your state without creating a formal business structure for your company. Another option is to form a limited liability company (LLC) or corporation for your business, which automatically registers your business with the state. Contact your state government to find more information about registering with your state.

Some business types may also require a Federal Employer Identification Number (EIN). While some states enable you to apply for an EIN during the business registration process, some states require a separate application.

Find out from the IRS if you need an EIN for your business.

Some cities may require additional registration, licenses or permits, so please contact your county clerk for additional information.

Obtain an Electronic Filing Identification Number (EFIN) from the IRS

The IRS requires that all tax preparers or firms filing 11 or more returns must electronically file. Before you can electronically file tax returns, you or your firm must apply to become an Authorized e-File Provider with the IRS and obtain an electronic filing identification number (EFIN). You will need to complete a separate EFIN application for each location from which your business will electronically file returns. Once you have submitted your application to become an Authorized e-File Provider, you will need to send a fingerprint set to the IRS so they can administer a suitability check. This may include a credit check, a criminal background check, a tax compliance check and a check for previous non-compliance with IRS e-File requirements. This process may take up to 45 days. There is no fee to obtain an EFIN.

To begin the application process, create an IRS e-services account, and then fill out your e-File application online. The application is comprehensive, but you can save the information, take a break and continue to fill out the application when convenient. When your application has been approved, the IRS will send an acceptance letter and your EFIN.

It’s important to note that some states require e-File providers to submit a separate enrollment application for authorization to e-File individual or business tax returns. Check with relevant state tax agencies to understand state-level e-file requirements.

Obtain a Preparer Tax Identification Number (PTIN) from the IRS

Anyone who prepares or assists in the preparation of federal tax returns for compensation must have a valid preparer tax identification number (PTIN). The IRS issues PTINs to anyone authorized to legally prepare and defend tax documents for individuals and companies. PTINs expire and need to be renewed every year. If you are starting a firm, keep in mind that PTINs cannot be shared by a firm. Every paid preparer must have their own PTIN before they can assist in preparing federal tax returns.

To obtain a PTIN number, you can register on the IRS website. Applying online takes about 15 minutes.

Determine your business model

The next challenge is determining how your business will bring in revenue, or what your business model will be. Will you provide year-around accounting services to your clients in addition to your tax expertise, or will you be a tax practice that operates on a largely seasonal basis? Within your tax practice, will you focus on business tax, individual tax, or both? And, what kind of clients do you want if you could choose? If you will offer business tax services, you could become an expert in certain verticals or businesses of a specific size; if you will offer individual tax services, will you focus on high-net-worth individuals, self-employed clients, or perhaps target your services more broadly? It’s important to decide so that you can choose the right tax software and tools as well as marketing tools for your model.

Pricing Your Tax Services

Use this Tax Fee Wizard to help benchmark and price your tax services. The wizard will give you the average price that pros with similar designations and years of experience charge for their tax preparation services, though you may want to adjust your pricing based on several other factors, including clients’ form complexity, your costs of doing business, your pricing strategy, and whether you offer the added value of year-round services.

If you’re unsure about the best model for you and your practice, talk to one of our experts for tips and advice. Making these decisions early on will help you make other important decisions down the road.

Understand tax certification options

Prospective clients appreciate credentials, and there are many education and credential options for you and your new tax business, including certification in the IRS Annual Filing Program, education and certification from The Income Tax School, the IRS Enrolled Agent program for preparers who plan to represent clients in examinations, or even a Certified Public Accountant certificate for degreed accountants who plan to issue financial statements.

• The IRS Annual Filing Season Program: This program aims to recognize the efforts of non-credentialed return preparers who aspire to a higher level of professionalism.
• The Income Tax School: The Income Tax School provides Chartered Tax Professional, Chartered Tax Consultant and Chartered Tax Advisor certificate programs.
• Enrolled Agents (EAs): An Enrolled Agent is a person licensed by the Internal Revenue Service required to pass a suitability check, take an extensive test covering individual and business taxes as well as representation issues, and undergo 72 hours of additional education every three years. They have the most extensive licensing provided by the IRS, valid across the entire country.
• Certified Public Accountants (CPAs): CPAs are licensed by states or U.S. territories, and must pass the Uniform CPA Examination. Each state or territory establishes additional tax preparation requirements like education and review of certification requirements as well. Many CPAs will specialize in tax planning or preparation of returns.
• Tax attorneys: Attorneys must be licensed by a state court or state bar after having earned a law degree and passed the bar exam. Not only are attorneys a registered tax return preparer, they also can prepare a legal defense for a client involved in a tax-related court case, even for taxes they did not prepare.

Some states, including Oregon, California, Maryland and New York, have their own certification or registration requirements for professional tax preparers. Check with your state to find out if they have any additional regulations. 

Consider which professional tax software is right for your business

The next step is to determine what professional tax software is right for you. There are a number of important factors to consider when choosing software:

• Does the software you’re considering offer the forms you need to support your clients?
• Does the software offer diagnostics to help you feel confident in the accuracy of the tax return?
• Does the software provider offer a free trial so you can assess the ease of use of the software?
• Does the software integrate with other key software that you may use, including accounting software, practice management software, a client portal, and more?
• Are you interested in cloud-based tax preparation software to help you prepare returns from any device, anywhere, and to eliminate the need for manual software updates?
• Does the software provider offer free onboarding, training and support on the software so you can quickly get and stay up to speed?
• Would you benefit from a simple pay-per-return package for low volumes of specific types of tax returns, or do you need a package that’s more economical for a larger number of returns?

Intuit® ProConnect™ is the industry leader providing professional tax solutions for every budget and every style of practice. Whether you plan to prepare simple returns or complex returns, whether you prefer desktop solutions or online solutions, whether you plan to deliver professionally bound paper returns or tech-forward mobile device tax return delivery, Intuit ProConnect can customize a solution as unique as you.

• ProConnect Tax Online: ProConnect Tax Online is cutting-edge, web-based professional tax software dedicated to innovating, re-imagining and streamlining tax preparation. It saves you time, money and helps you work more efficiently.
• Lacerte®: Perfect for tax and accounting firms with individual and business clients, Lacerte Tax helps professionals complete far more returns in far less time. From helping you move data seamlessly across your accounting and tax workflow to speeding you through preparation, Lacerte helps you finish faster.
• ProSeries®: ProSeries helps you service your clients faster and confidently beyond just the tax return with easy-to-enter forms, extensive error-checking, integrated tax research, and automated client service tools. You get an end-to-end solution to help you handle and attract more clients, resulting in a more successful tax practice. For former TurboTax users, ProSeries is often an easy transition because of similarities in the product.

Compare these ProConnect professional software options to find out which may be the best fit for you.

Consider other tax tools to help you streamline your workflow

In addition to this core software, Intuit and other companies often offer other integrated tools to help you drive more efficiency and growth in your practice. For example, Intuit offers the Link portal to help tax pros simplify client collaboration and data collection, and eSignature to digitally collect client signatures for their tax documents, including Form 8879, in hours, not days. And don’t forget to consider QuickBooks® Online Accountant, which you can use for your own books—free! QuickBooks Online Accountant now includes the free Practice Management features to help you manage and communicate with your clients, your tasks, and your staff across all the services your practice offers.

Ensure you stay up to date with continuing education

Tax laws, technology and even client expectations are constantly changing, and it’s essential to stay up to date to run a successful practice. Intuit offers several resources in the Intuit ProConnect Training Center to help you continue learning, including live and recorded webinars(including many that offer free CPE credit), how-to videos and peer training via forums. We keep our customers up to date on the latest tax law changes and the impact they have on ProConnect software, the latest technology updates, best practices to help keep your client’s data secure, how to grow your firm, and more.

Intuit ProConnect also offers the Tax Pro Center — a collection of valuable content, including articles, infographics, and more, that provides insights on tax laws, building client relationships, and workflow efficiency to help you take your practice to the next level.

Lastly, use trade publications to help stay education on the latest in the industry. AccountingWEB, Accounting Today and The Journal of Accountancy are just a few examples of the publications out there to help you stay up to date.

Market yourself

While there many ways to market your new practice, here are a few common ways that tax pros get the word out about their practices so that you can start to develop a plan around marketing your own practice:

• Build a website: A website is a must-have for a business today. Use your website to tell your potential customers about you and your business model, and to list contact information. Our tax pros have found that it’s important to include your picture on the website, and that understanding SEO is also a key factor in success. Some of our other recommended marketing tactics below will cover additional ways to build out your website.
• Connect on social media: Social media can help you connect with potential clients and others in the industry, and develop a brand that represents your practice. Twitter, Facebook and LinkedIn are all great platforms to establish a social presence and connect with clients, peers and others in the industry, and some tax pros link to their social channels on their websites. With a large and growing number of social groups and communities online, finding trusted and useful online communities to turn to for networking, information and help can sometimes be a challenge, so read our article on “5 Online and Social Communities for Tax Professionals” to get our recommendation on where to start.
• Network: In-person networking is important to growing your business as well. Many states and some cities offer local tax and accounting associations. A few national associations such as the National Association of Tax Professionals (NATP) have local chapters, and major accounting organizations like the AICPA and the National Association of Enrolled Agents (NAEA) have national conferences every year to help you network with industry experts and earn continuing education credits. Don’t forget your business cards at home! Read our article on "5 Reasons you Should Join a Professional Association" to learn about more of the benefits.
• Use content marketing: From testimonials and case studies to articles that showcase your expertise, content marketing can be a way to stand out in the industry. You can host content marketing on your own site and share it via your social media channels to spread the word. Read this article to get lessons from a pro about how to use content marketing to grow your practice
• Use direct marketing: Flyers, brochures and emails can be helpful vehicles as you spread the word about your services. Some tax professionals include discounts and other incentives in their collateral.
• Ask existing clients for referrals: Word of mouth is important to many clients who are looking for a tax pro, so don’t be afraid to ask your current clients for referrals. You may also consider rewarding clients for referrals with discounts or other incentives. Visit this article to get tips on how to ask for referrals.

Expand your practice to serve small- and medium-sized businesses (SMBs)

If your business offers accounting services, the Intuit QuickBooks ProAdvisor Program can help you grow your business. Once certified in QuickBooks, you would get a listing on the Find-a-ProAdvisor online directory, searched by 700,000+ small businesses each year. You would receive access to a comprehensive suite of QuickBooks software, including discounts for you and your clients, as well as unlimited U.S.-based QuickBooks support to help you resolve any issues quickly.

For other marketing tips to help you grow your practice, read this article from our Tax Pro Center, “5 Secrets to Finding New Clients.”

• How do You Know When it’s Time to Start Your Own Firm?
• Should You Stay or Should You Go? Opening Your Own Practice.
• The Best Places to Find CPE and CE Credits.
• Find more help on “How to start a business” from QuickBooks.