Tax preparers can earn thousands of dollars a month at home during tax season. But, they must know how to do the job, set themselves up in business, advertise, professionally present themselves, and establish their fee schedule.
Introduction
After the holiday season, many businesses slow down. As a result, many workers have their hours reduced just as holiday bills come due. If you have found yourself in that position more than once, then you know that seasonal work patterns impact your ability to pay your bills and provide for your family. One solution is to start a home business that will supplement your income during these off-seasons. A great seasonal home business that requires minimal investment is a tax preparation business. To start, you need basic training, a computer, access to the Internet, and tax preparation software. Here’s how.
Learn Your Trade – Minimum Training
If you have worked as a CPA or as an accountant in the past then you probably already have the skills needed to prepare tax returns for a fee. However, if you have not had previous tax or accounting training, then you will want to get some training. There are several avenues that you can take to learn how to prepare a tax return for a client. The first step is to enrol in a basic tax return course. These courses cover the basics of form 1040, the schedules and forms associated with an individual tax return, and the basics of credits and deductions.
Several companies offer these types of course like H and R Block, Jackson Hewitt, and even the IRS provides tax preparation courses. The course provided by the private organisations are often less than $100, and in some cases, your only cost is your training materials. The IRS offers these types, of course, free of charge in exchange for a few hours of volunteer time on their tax helpline. To get more information on tax preparation course you can contact your local H and R Block or Jackson Hewitt office, or you can visit their websites. The IRS also provides information on their tax preparation courses and training programs on their website.
Another option to get tax preparation training is to download free tax information from the IRS website. You can study this information to learn how to handle deductions, credits, and calculate taxes, as well as learn about new tax credits and requirements. Keeping a printout of these training and reference materials will provide you with quick reference guides when you are preparing tax returns.
A professional training certificate can be an asset to your business when you are trying to recruit customers so you may want to weigh the benefits of such training against their costs. In the long run, it may make you more money to have taken an IRS or H and R Block Tax Preparation Course then to have just read through the material on the IRS website.
Setting Up Shop
Once you have your training under your belt, your next step is to organize your business. Before tax season begins (January 1), you will want to organize your office and order all of the materials that you will need once you start getting customers. You will want to visit the IRS website and download common forms that you will need such as instructions for 1040, 1040EZ, schedules, and supplemental forms, as well as 1040, 1040EZ, Schedules, and additional forms.
In addition to downloading forms you will need to stock up on the following supplies:
- Paper
- Toner
- Paper clips
- Stapler
- Staples
- Sticky flags
- Envelopes
- Labels
- Pocket folders
- Tax Preparation Software
- CD-R or CD-RW
The Benefits of Tax Preparation Software
You do not have to invest in tax preparation software, as you can complete tax returns on paper. However, tax preparation software does have many advantages over a paper return. First tax preparation software asks for the needed information and automatically fills out the appropriate schedules and supplemental forms. When you are completing a tax return on paper, you have to know what forms required for what situations and you will have to enter and transfer figures manually creating more conditions for errors to occur.
The second advantage that tax preparation software has over paper returns is that you can save it on a disc for future reference. Paper returns can get faded and damaged, while electronic returns can print out fresh clear copies on demand.
The third advantage that tax preparation software has over a paper return is that you can use it to e-file your clients’ returns. In some cases, you can e-file for free or at a reduced fee by using a specific tax preparation software package and by registering with the IRS as an e-file provider. (Check the IRS website for details.)
The final advantage that tax preparation software has over a paper return is that it looks more professional. People who consider you to do their taxes will look at how professional you seem. They will want to know about your training, and they will want to see an example of your work. If you can only show them handwritten returns with correction marks on them, you will not come off as a very professional person, and as a result, they may not want to do business with you. Tax preparation software gives the customer a sense that you have the technology and that you will be able to provide them with an accurate and professional looking return.
Determine Your Fees
You will need to set your prices so that they will be competitive with other people offering the same services, and that will provide you with enough income to cover your expenses and labour. Many people set their prices based on the number of pages that they have to fill out.
For example, if a return is primary and only involves a 1040EZ with no supplemental forms or schedules, the fee would be two pages X $15, or $30 for an essential 1040EZ return federal only. On the other hand, an average 1040 tax return for a married couple with children may include a 1040 (2 pages), Schedule A, Schedule B, Schedule EIC, and Child Care Credit form. It results in a job that involves six pages X $15 per page and a final price of $90.00.
When you work up a few scenarios based on the price per page, that you want to charge, compare it against other companies’ charges and see how you compare. You may have to adjust the rate based on your experience and your market.
Advertising
Advertising for customers will be your biggest obstacle during your first season as a tax preparer. To attract customers away from other companies you will need to be creative, and you will need to use a variety of media including website, phone book, flyers, brochures, newspaper advertisements, and networking.
You can start your advertising well before the tax season begins to generate a buzz about your services. Post flyers on grocery store bulletin boards, leave a stack of flyers with your employer, go a stack of flyers at your place of worship, and hand out flyers and brochures to your friends and family. If you have children ask if you can leave some flyers in the teacher’s lounge at your children’s school. Offer exclusive discounts for people who refer clients to you, and offer exclusive discounts for early birds. To handle after-hours inquiries you can and should set up a website that provides information about how to contact you, what fees you charge, what services you charge, how long it takes you to complete a return if you offer e-filing, and what payment methods you accept.
When you design your advertisements provide critical information about the services that you provide including what makes your service the best. It may include fast turn around time, e-filing at a reduced price, lower fees charged, and/or your expertise. Be creative when selecting layouts and graphics. Make them fun and eye-catching. Use bright and contrasting colours to catch people’s attention as they pass. Make sure that the type font is large enough to be seen from a distance and that is easy to read by all of your potential clients.
Customer Service
While advertising and expertise may attract your initial customers, excellent customer service is what will bring them back to you year after year, and it is what will generate residual business. There are several things that you can do as a tax preparer that will please your clients. First, you should be timely with your services. Try to complete tax returns and return them to your customers as quickly as possible.
Secondly printout copies of the returns for the customer to keep for their records without an additional charge. This service will let your customer know that you value their patronage and that you a considerate professional. It will also save them from having to make a copy of their return themselves.
Also, provide the client with envelopes that have the appropriate tax department address and the client’s return address printed on them. It will ensure that your customer submits the return to the suitable IRS location. It also reduces the number of steps that you clients have to complete themselves.
You will also want to place flags next to every place that your client will need to sign and date. Again this will help reduce confusion and will make sure that every area that requires a signature gets one.
Another service that you can offer it to your customers to provide them with a neatly labelled folder for their tax return. The label should include their name, the type of return that is enclosed, and the tax year. Inside the folder, you can place their federal tax return, a copy of their federal tax return, envelopes that are pre-addressed for the appropriate tax department, and any supplementary information, forms, ext.
The final things that you should always do are to return calls as quickly as possible no matter when they come in (within reason), be available to answer your customers’ questions, and make sure that you are always courteous with your responses even when they seem stupid.
If you provide your customers with excellent customer service, they will come back to you year after year, and they will refer their friends and family to you. It is the best and most effective way to build your tax preparation business.
How Much Money Can You Make
The amount of money that you can make will significantly depend on the market you are in, and your ability to attract customers. By pricing your services competitively, by providing excellent customer service, and by being creative with your advertising strategies you should be able to draw more than enough clients to keep your business during tax season.
The flow of tax clients will flux throughout the season with a big surge towards April 15th. To attract clients closer to the beginning of the season, you can offer an early bird special, or contribute to e-file for free.
To give you an idea of how much money you can make, examine the following scenarios.
Example #1: 5 clients per week (1 a day) X average $90 per return = $450 per week or $1800 per month.
Example #2: 10 clients per week (2 a day) X average $90 per return = $900 per week or $3600 per month.
Example #3: 20 clients per week (4 a day) X average $90 per return = $1800 per week or $7200 per month.
(All of these examples are on the basis of a five-day workweek. You can increase these returns by working more days per week. For example, if you do one tax return every day of the week (7 days) then you can make $630 per week or $2520 per month.)
Professional Licensing
You will want to check with your local governmental agency to see if you need to obtain a small business license before operating this type of home business.