4 Tips for Starting a Professional Tax Practice

July 24, 2020 (Investorideas.com Newswire) April 15th. A date engrained in the hearts and minds of Americans. Tax day. Whether you love to file and get your best return or you dread the paperwork every year, filing taxes is a necessary part of being an American citizen.

A majority of individuals choose not to embark on this journey alone. During tax season, there are a lot of people looking for professionals to help them file their tax returns. If you're successful in the area of finance and accounting, perhaps you'd like to enter the lucrative business of preparing tax returns. Starting a professional tax practice takes brains and dedication, but can be a great outlet for you to earn an income within a high-demand field. Here are a few tips for you to consider when starting your own professional tax practice.

Know the Requirements

It's clear you know and understand tax law, so you may already be aware of the steps you need to take to become a business. You can choose to do business as yourself and simply file that way, or you can choose to start a limited liability company (LLC). Becoming an LLC may be the best step if you expect your tax business to become your main line of work.

Charging to file taxes requires its own tax number that you'll need to secure. This is called the Preparer Tax Identification Number (PTIN) which you can get and renew easily online. Every person in your operation will need their own PTIN. If you plan on filing for multiple clients you will also need to secure an Electronic Filing Identification Number (EFIN). While this step requires a bit more work and preparation, you'll need an EFIN to be approved by the IRS before you can officially become a tax preparer.

Get the Right Tools

To have success in your tax business, you need to have the right tools. It's true, anyone can file their own taxes, so what creative solutions do you bring to the table that make your services necessary? What key differences will your clients experience with you vs. filing on their own?

This can be as simple as maintaining a first-class level of professionalism. Stay organized and specific with your tax return mailing envelopes. You're running a specific business for a niche market, so general documents, forms, and envelopes won't do the trick. You need compatible envelopes that are capable of mailing very important documents to the IRS.

A lot of your work may take place online before you mail in a client's returns. In this case, you'll want to commit to the best tax preparation software. Find something that helps you with efficiency and professionalism. As you're starting out, you can't afford to make a lot of mistakes, so invest in the right tools to lower your chances of a costly mess up.

Protect Yourself

People tend to be protective of their finances, so you have a big responsibility of keeping your client's sensitive records secure. Increase the security of your workplace, physically and digitally. Identity theft is no joke, and hackers tend to be more active during tax season. Require strong passwords, keep classified documents in a secure place, and keep sensitive correspondence secure. These are small steps you can take now to protect your client's information and the future of your company.

In addition to protecting your clients, you need a level of protection for yourself. You could be the most experienced tax preparer in history, but there is still a margin for error. Consider getting malpractice insurance in case you encounter any unexpected liability.

Stay on Track

As with any business, you need to set goals and have a business plan. Especially during your busy season of January through April, you may need extra assistance keeping your team on track and communicating effectively. Objective and Key Results (OKR) software helps do just that. The OKR process streamlines goal-setting and creates a work environment that achieves key results at a high volume. Rely on OKRs to keep you on track and help you turn the best profit in your busiest season.

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