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How Much Money Can I Make As A Tax Preparer?

Starting a tax preparation business can be a great idea if you are inclined to be an entrepreneur. The amount of money you make will depend on both your market and especially on how good you are at attracting new clients. Home based tax preparers can find it easier to attract new clients because they have little overhead and can charge less than the competition.

What does the term "Peak Filing Season" mean?
There are actually two "Peak Filing Seasons". The first "Peak Filing Season" begins the second week of January and continues through the third to the last week of February, when taxpayers who are getting tax refunds file their tax returns. The second "Peak Filing Season" begins late in March (usually the last week) and continues until the tax filing deadline, April 15th, when taxpayers with difficult tax returns and those taxpayers who are paying tax due file their tax returns. These are the two busiest periods for tax preparers and therefore the most profitable periods of time for you to be preparing taxes. This is when you will make the most money.

Everything that you'll be doing as a tax preparer is time-related. Time is money! Consequently, you must always "keep pointed towards profits". Ask yourself several times throughout the day: "Will what I am doing right now result in a profit?" If the answer is no, then stop doing it! Do something that will result in a profit. This attitude is critical during the fast-paced, relatively short peak filing seasons. Time is of the essence! That is a fact of life for successful tax preparers. The more tax returns you do per hour and per day, the more money you will make. Keep in mind, that tax return accuracy is of utmost importance. Preparing tax returns quickly, but incorrectly, will get you nowhere in the long run.

During your first tax season, or two, as a tax preparer you'll still be learning and finding new clients, and thus you'll probably make less money than in future years. High earning tax preparers are fast and efficient at preparing tax returns.

When will the money start rolling in?
Unfortunately, during your first year or two of preparing tax returns, you probably won't be that fast and efficient. But with time, you will be. It generally takes three (3) years to launch a successful tax preparation business. Through effective marketing and by providing excellent client service, your tax preparation business will grow through high client retention and client referrals. You have to be patient. You have got to be in it for the long haul. It can take a long time to become an overnight success!

According to the National Society of Accountants, the average price to file Form 1040 with Schedule A (Itemized Deductions) and a state tax return was $273 in 2016. The survey also reported the average fees for preparing additional federal tax forms, including:

  • $656 for a Form 1065 (U.S. Return of Partnership Income)
  • $826 for a Form 1120 (U.S. Corporation Income Tax Return)
  • $809 for a Form 1120S (U.S. Income Tax Return for an S Corporation)
  • $482 for a Form 1041 (U.S. Income Tax Return for Estates and Trusts)
  • $733 for a Form 990 (Return of Organization Exempt From Income Tax)
Keep all of the profits by owning your own small business! Become a tax preparer today!
During the 3-month tax season, tax preparers can earn up to $50,000 or more. Year-round income opportunities also exist for tax preparers who provide complementary services such as bookkeeping, payroll processing, or financial planning.

According to the Occupational Employment and Wage report for May 2016 (released on March 31, 2017), issued by the U.S. Bureau of Labor Statistics, the national mean wage estimates for tax preparers is $21.80 per hour, $45,340 annually. The bottom ten percent of tax preparers earned $9.42 per hour, $19,600 annually. The top ten percent of tax preparers earned $38.58 per hour, $80,250 annually.

Source - U.S. Bureau of Labor Statistics: http://www.bls.gov/oes/current/oes132082.htm

Successful independent (self-employed) tax preparers, operating their own tax preparation businesses, can make substantially more money than a tax preparer who is an employee. Many independent tax preparers earn $100,000 or more per tax season.

If you are a knowledgeable tax preparer, with excellent marketing skills, you can make substantially more than that. Of course, you can also make much less than that too. It all depends on you. The size of your client base matters tremendously as the more clients you have, the more tax returns you will prepare, and the more money you will make. As you gain experience as a tax preparer, you will almost certainly have more clients and make more money.

But that won't happen overnight. You have to put in hard work, be an excellent marketer, be patient, and provide excellent service to your clients. You should be prepared to give your tax preparation business your best shot for at least three (3) tax seasons in order to build a solid client base and begin to see a substantial income. It takes time and persistence to develop a rewarding and lucrative tax preparation business, and there will be many ups and downs along the way.

Many successful tax preparers launched their tax preparation businesses part-time over three (3) or more years - then went full-time once their business was up and running.

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How Much Money Does It Cost To Become A Tax Preparer?

Becoming a Tax Preparer
It doesn't cost much at all to become a tax preparer. Our federal income tax course is free. There are no formal federal educational requirements for tax preparers. Only four (4) states require licensing. The IRS charges $50 for a Preparer Tax Identification Number (PTIN). The IRS does not charge for an Electronic Filing Identification Number (EFIN). After completing the aforementioned, you are a tax preparer.

Starting a Home-Based Tax Preparation Business
Starting a home-based tax preparation business can also be done with minimal start-up costs. With little overhead, you can charge less than the competition and still make a great profit. It's easy to run a tax preparation business out of your home and charge less than the well known tax preparation franchises.

The primary things that you will need to start a home-based tax preparation business, some of which you probably already have, are:

  • A computer, printer and a copier
  • A high-speed internet connection
  • A phone
  • Professional tax preparation software
  • Basic office supplies
  • Business cards

If you are like most people, you already have a computer, multi-function printer, an internet connection, and a phone. If so, your initial out-of-pocket expenses should run $300 - $500. $500 - $1,000 total should be sufficient to cover all of your start-up expenses the first year. Some of the expenses, such as part of the cost on the tax preparation software, can be deferred and paid for with the money that you make "in season" preparing the tax returns.

What About Advertising Expenses?
You should start by talking about your new tax preparation business to people that you already know in your community, such as family, friends, and co-workers, before advertising or marketing to the general public. Talk to your family, friends, and co-workers and pass out your business cards. This is a low-stress way to get started while you fine-tune your tax preparation business. And don't forget, when you deliver a client's tax return and they are happy with your service ALWAYS ASK FOR REFERRALS. Word-of-mouth is the number one way that independent home-based tax preparers get their business.

If you are good at attracting and retaining clients, you can make excellent money by starting your own tax preparation business. But don't forget, it can take a long time to become an overnight success!

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BUSINESS RESULTS DISCLAIMER: Every effort has been made to accurately represent the tax preparation business on this website. There is no guarantee, however, that you will experience success or earn any money using the methods and ideas described on this website. This website should not be interpreted as a promise or guarantee of earnings or success. Earning potential and success is completely dependent upon the person using these methods. Your level of success in attaining the results described on this website depends on the time you devote to your business, your marketing ability, and other personal factors. Since these factors differ from individual to individual we cannot guarantee your success or income. Many factors will determine your actual results and no guarantees whatsoever are made that you will achieve the results described herein.
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