Starting a tax preparation business is one of the most accessible paths to self-employment. The demand is consistent, the startup costs are low, and you can begin part-time while keeping your day job. Here's exactly how to get started.
Step 1: Get Your PTIN
Every paid tax preparer must have a Preparer Tax Identification Number (PTIN) from the IRS. Apply online at the IRS Tax Professional PTIN System. There is an annual fee, set by the IRS and adjusted from time to time — the current amount is shown when you apply — and the PTIN has to be renewed every year.
You'll need your Social Security Number, personal tax return information from the prior year, and a valid email address. Most applications are processed within 15 minutes.
Step 2: Choose Your Credentials
While a PTIN is the minimum requirement, having additional credentials significantly increases your earning potential and client trust.
Enrolled Agent (EA)
The most popular credential for tax preparers. Pass the three-part Special Enrollment Examination (SEE) to earn the right to represent taxpayers before the IRS. EAs can handle audits, appeals, and collections on behalf of clients.
Annual Filing Season Program (AFSP)
A voluntary IRS program that provides a record of completion for non-credentialed preparers. Requires 18 hours of continuing education annually. Good for beginners building toward EA status.
Step 3: Get an EFIN
To e-file tax returns, you need an Electronic Filing Identification Number (EFIN). Apply through the IRS e-Services portal. The process includes a background check via fingerprinting, so allow 45-60 days for processing. Start this early. See our deep dive on EFINs for exactly what the application asks for, or our e-file setup guide for every step from PTIN to your first transmitted return.
Step 4: Set Up Your Business
Legal Structure
Most solo preparers start as a sole proprietorship or single-member LLC. An LLC provides liability protection with minimal complexity. Register with your state and obtain any required local business licenses.
Insurance
Professional liability insurance (errors and omissions) is essential. Even a simple mistake on a client's return can lead to costly disputes. Premiums vary with your revenue, the services you offer, and your state, so get a quote early rather than assuming a number — it belongs in a first-year budget either way.
Bank Account
Open a separate business checking account. This makes bookkeeping easier and is required if you form an LLC. Many banks offer free business checking for low-volume accounts.
Step 5: Choose Your Software Stack
You'll need two categories of software:
Tax Preparation Software
For actually preparing and filing returns. Popular options include Drake Tax, Lacerte, ProConnect, and UltraTax. Pricing is typically per-return or annual subscription.
Practice Management Software
For managing clients, documents, invoicing, and workflow. This is where tools like FinishTax come in — handling everything outside of the actual return preparation. Take the product tour to see what that looks like day to day.
Step 6: Get Your First Clients
The hardest part of starting is building your initial client base. Here are proven strategies:
- Friends and family: Offer to prepare returns for people you know. Word-of-mouth referrals from satisfied clients are your best marketing.
- Social media: Create a professional presence on Facebook and LinkedIn. Share tax tips and deadline reminders.
- Local networking: Join your local Chamber of Commerce. Partner with bookkeepers, real estate agents, and financial advisors for referrals.
- VITA volunteering: Volunteer with the IRS Volunteer Income Tax Assistance program. Great experience and community visibility.
Step 7: Set Your Pricing
Illustrative example. Suppose you set a base fee for a 1040 with a W-2 and one state, then add a fixed amount for each extra piece of work — a Schedule C, a rental, an additional state. Writing that list down before the season means every quote comes from the same place instead of from how the call is going. The numbers themselves are yours to choose: our guide to pricing tax preparation services works through the three common methods with an example of each, and local rates are worth checking before you set your own.
What to Expect Year One
Year one is usually about proving your process on a small book rather than replacing an income. The useful part is the arithmetic, because both terms are yours to set: a season's revenue is the number of returns you complete times your average fee. Illustrative example. Suppose you finish 30 returns at an average fee of $250 — that is $7,500 for the season. Those are made-up numbers chosen to show the shape of the calculation, not a projection; what you actually earn depends on your rates, your market, and how many clients you can serve well.