What You Need to Know to Be a Tax Preparer

July 14, 2020 •

While some jobs come and go, tax preparation is one that’s here to stay. Since everyone has to pay taxes, tax preparers will always be in high demand. 

Not to mention, tax law can get a little confusing for the average person. That’s why more than half of Americans hire a professional tax preparer to help them file their taxes. 

For these reasons, becoming a tax preparer offers you a stable career path for years to come. So how can you become a tax preparer and start your business from home? Keep reading this step-by-step guide to find out.  

Who Can Become a Tax Preparer?

Tax preparation is a career that’s available to a wide range of people. You don’t need a fancy education or a college degree to be eligible. In fact, of the 1.2 million tax preparers in the United States, many have no formal accounting education.

Here are the various types of professionals who can practice as a tax preparer: 

  • Certified Public Accountants (CPAs) – To become a CPA, you must go through an extensive formal accounting education and pass the CPA exam. CPAs are licensed and regulated by their state. Due to their expertise, CPAs are considered high-level tax professionals. In addition to preparing tax returns, they also offer a wealth of other accounting services. Furthermore, a certified public accountant is qualified to represent clients in front of the IRS. 
  • Enrolled Agents (EAs) – Enrolled agents are tax advisers that have earned an official license from the IRS. Unlike CPAs, EAs don’t need to fulfill any specific educational requirements. A licensed tax preparer just has to pass the IRS’s Enrolled Agent exam. While EAs spend most of their time preparing tax returns, they can also represent clients in front of the IRS and various other court proceedings. 
  • Non-Credentialed Income Tax Preparers – Some tax preparers don’t have any special credentials whatsoever. Thus, this subset of professionals is known as “non-credentialed” income tax preparers. These tax preparers often work part-time or own their own tax preparation business. They typically specialize in individual income tax returns, since business tax returns require additional expertise.

While becoming a CPA or an EA has greater earning potential, you can still enjoy a thriving career as a non-credentialed income tax preparer. Most notably, this career path has minimal start-up costs and educational requirements.

How to Become a Tax Preparer

There are a few basic steps you must take to become a professional tax preparer:

#1 Take a Course in Tax Preparation

While tax preparation doesn’t require a college degree, you still need to understand the ins and outs of tax law to do it properly. There are many critical tax regulations you’ll need to become familiar with. To get trained in tax preparation, sign up for a course on the topic. 

Courses are available at:

If you’d like to earn a credential through your training course, look into the courses offered by the Accreditation Council for Accountancy and Taxation (ACAT). Their credential is not required, but it can enhance your earning potential and help you attract more clients 

#2 Create Your PTIN

In order to prepare tax returns as a paid service, you must acquire a Preparer Tax Identification Number (PTIN). Your PTIN will be required on each individual tax return you prepare. Thus, if problems arise from your work, you can be held responsible. 

Creating a PTIN is simple, easy, and free. The application process takes about 15 minutes. To apply, visit the IRS website or mail them a physical W-12 form. The application will ask for the following information: 

  • Your address
  • Your social security number
  • Proof that you’re 18 years or older
  • Your felony convictions, if you have any
  • Details on whether you owe the IRS money

If you have a felony or owe money to the IRS, you can still get a PTIN, but the process may be a little more challenging. 

#3 Apply for an EFIN

Next, you’ll need to get an Electronic Filing Identification Number (EFIN). This will enable you to file your clients’ tax returns electronically. To get your EFIN, apply on the IRS’ website by following these steps:

If you’re not a CPA or attorney, you will also need to provide your fingerprints. Getting fingerprinted costs around $50, but the rest of the application process is free. Once you’ve submitted your application, you can expect to receive your EFIN in about 45 days. 

Keep in mind that the IRS will be reluctant to grant you an EFIN if you have criminal convictions, a poor credit history, or if you owe them money. 

#4 Review Your State’s Requirements

While the IRS does not require tax preparers to have specific credentials, some states do. For example, these states require tax preparers to have an official license:

  • California
  • Connecticut
  • Illinois
  • Maryland
  • Nevada
  • New York
  • Oregon

Review your state’s requirements to make sure you’ve satisfied them before opening your tax preparer business.

#5 Get Experience In The Field

If your goal is to have your own tax preparer business, consider working at a tax preparation company first. This will give you invaluable experience so you can complete each individual tax return with confidence. It will also bolster your credibility with future clients. 

#6 Choose A Tax Preparation Software

Whether you’re working at a tax preparation company or starting your own business, you’ll need to use some sort of tax preparation software. Choose this tax software wisely, as it will be crucial to the day-to-day work of your business. Do your research and find a software that suits your tax preparation needs. 

Here are some questions to consider as you compare options: 

  • Will you be preparing taxes for individuals, businesses, or both?
  • How many clients will you have?
  • Which states will you be preparing taxes in?
  • Which tax forms will you be using?

Some types of tax software use a cloud-based platform, while others need to be installed on your computer. Some even come with helpful customer service support. Thus, tax preparation software ranges in price and ease of use.

How to Become a Tax Preparer At Home

If you want to run your tax preparation service from home, you’ll enjoy the freedom of being your own boss and setting your own hours. To get your home tax preparation business up and running, follow these steps: 

#1 Register Your Business

To run any business, you need to apply for the required licenses and permits. While this paperwork can be a little tedious, it must be done to prove that you are a licensed tax return preparer. 

#2 Set Up Your Home Office

To run a tax preparation business out of your home, you need a dedicated office space where you can meet with clients and organize your records. The IRS requires tax preparers to hold onto their records for at least 3 years

Here are some important office items you’ll need:

  • A computer installed with anti-virus and anti-malware software 
  • A printer, scanner, copier, and fax machine
  • A strong internet connection
  • Tax preparation software
  • Filing cabinets for your tax return records

#3 Build Up Your Client Base

Once your business is official and your office is ready to go, it’s time to start attracting clients. Here are some basic marketing tools that can get you on the radar of new clients:

  • A professional website 
  • Business cards
  • A Google My Business Account
  • Relevant social media accounts, like LinkedIn and Facebook

Don’t forget to ask your social network to spread the word about your tax preparation business. Their word-of-mouth marketing will help you score some clients quickly. 

Earn a Positive Reputation

To establish a positive reputation with your clients, show attention to detail as you prepare their tax returns. Also, don’t forget to be friendly. Even though tax preparation is a paperwork-heavy profession, stellar customer service is what keeps clients coming back for years to come. Furthermore, happy customers are much more likely to recommend you to their friends and family. 

Get Tax Preparer Insurance

As a business owner, you are liable for the work you do. Even the most advanced tax preparers can make mistakes. To limit your tax preparer liability and protect yourself professionally, make sure you purchase tax preparer insurance

Professional insurance and general liability insurance protect you in the case of:

  • Negligence claims that arise from a tax return error 
  • Legal claims of third-party bodily injury, personal injury, or property damage 

If you choose to forgo insurance, you leave your tax preparation business vulnerable to the associated costs of such claims. Thus, it’s in your best interest to obtain adequate insurance from the start. 

Get Affordable Tax Preparer Insurance Today

Now that you know how to be a certified tax preparer, explore your insurance options today. The experts at NOW Insurance will help you get the coverage you need for your tax preparation service. 

At NOW Insurance, you can receive a competitive quote in minutes. Best of all, NOW Insurance’s comprehensive coverage comes at an affordable price, making it perfect for a home tax preparer business. 


  1. IRS. IRS Urges Taxpayers to Choose a Tax Preparer Wisely for the Filing Season Ahead.  https://www.irs.gov/newsroom/irs-urges-taxpayers-to-choose-a-tax-preparer-wisely-for-the-filing-season-ahead
  2. Face the Facts USA. Complex U.S. tax code spawns an industry.  http://www.facethefactsusa.org/facts/when-tax-complexity-puts-dinner-on-the-table/
  3. IRS. Become an Enrolled Agent.  https://www.irs.gov/tax-professionals/enrolled-agents/become-an-enrolled-agent
  4. IRS. Internal Revenue Bulletin: 2012-11.  https://www.irs.gov/irb/2012-11_IRB