Secrets of Tax Preparer Earnings
Now that we've gotten the basics out of the way, let's delve a little deeper on this topic of tax preparer earning potential.
First, towards the bottom of the BLS page, you will note that California is by a large margin the best market for tax preparation, with 66 percent more tax preparers working in California than in the second best tax preparation market, Texas. According to a 2011 report by Anything Research. the market for tax and accounting services in the State of California is approximately $15 billion per year—far and away the biggest statewide market for tax and accounting services in the United States.
Notice, too, that the mean annual wage for California tax preparers is higher than the national mean, at $21.56 per hour or $44,840 per year.
If you are a California resident, then, and are thinking of getting your tax license, you might be onto something here.
Factors That Affect Your Income Potential
There are many factors that can affect your earning power as a tax preparer.
The first factor that affects every tax preparer's ability to earn money is how busy your place of employment is during tax season. If you are working in a tax office that has 200 clients, you are likely to make a lot less money as a tax preparer than if you're working as a tax preparer in a tax office that has 2,000 clients. No matter what tax company you work for, or if you're self-employed, the size of your client base matters immensely. The more clients you have, the more money will be coming in the door.
Secondly, you'll need to look closely at the pay structure being offered by your employer. Are you being paid hourly, on commission, or some combination of the two? Many tax companies start new tax preparers at a low hourly rate, but may offer performance bonuses or the ability to work on commission once you know what you're doing and don't need constant handholding. As you gain experience as a tax pro, you will almost certainly make more money working on commission than at an hourly rate; at that point, it will just depend what the commission rate is and, as noted above, how many clients you can expect to serve (and, of course, what the average fee is being paid by each client!).
Thirdly, do you have any special qualifications or attributes that make you worth more as a tax preparer? For example, do you have an Enrolled Agent designation. do you have prior tax preparation experience, do you have an established base of clients that you will be bringing with you to your new office? These are the kinds of things that can make you stand out in the mind of an employer, and in turn may enable you to command a higher salary and/or commission.
A fourth and widely underestimated factor that can affect your earnings as a tax preparer is the quality of the other tax preparers in your office. This can be a double-edged sword as far as your own earning power. On the one hand, you want to work with skilled tax pros, but on the other hand, if the preparers in your office are far more experienced some clients may prefer a well seasoned tax person and the "big fish" may eat up all the fees that come in the door.
Self-Employed Tax Preparer Earning Potential
The fifth major factor that we would identify that can affect your earnings as a tax preparer is whether or not you are self-employed. If you're a self-employed tax preparer, operating a company either under your own name or as a franchisee of an existing tax preparation brand, you can make substantially more money than a tax preparer who is an employee. It is in "running your own show" that the potential income go to $100,000 per tax season or higher.
Many owners of tax preparation businesses personally earn between $100,000-$200,000 per tax season.
However, those kind of earnings don't happen overnight! You have to put in the work. You have to be patient and you have to be good to your clients.
despite the vastly superior earning potential of self-employed tax preparers, self-employed tax prep professionals can also make substantially less money than tax preparers who work as employees. Starting your own business can be daunting; not impossible at all, but not easy.
In today's extremely competitive tax preparation marketplace, you must earn every client that you get. Believe us on this, competing with established and aggressive national brands like H&R Block® and TurboTax® is no joke!
That being said, if you are good at attracting and retaining tax clients, you can make great money by starting up your own tax preparation and consulting business.
Certainly if you want to make "big money" in the tax business, it should be your goal to someday run your own office(s), either under your own name or as a franchisee. An employer will never pay you as much as you could make on your own.
Pronto Tax Class is considered by many students to be the best option for tax preparers who want to eventually become self-employed, just because our basic income tax is focused on teaching new tax preparers not only about tax laws but also about how to deliver excellent service to real-life tax clients.
Here is a link to another article that talks about why starting a tax preparation business can be a great idea if you are entrepreneurially-inclined.
Can Tax Preparers Get Unemployment in the Off-Season?
We also would briefly point out that the Bureau of Labor Statistics page does not take into account a little-known fact about being a tax preparer, and that is: as long as your employer pays the appropriate unemployment taxes during the year, and "approves" your claim when you file it, many tax preparers should be able to receive unemployment income if they are laid off at the end of tax season. Because tax preparation is by nature seasonal work and often tax preparers are laid off as of April 15 th. eligibility for unemployment is a big deal for tax preparers.
Unemployment insurance, in California, is based on an "income replacement" model, so how much unemployment benefit you may receive in the off-season will be based upon the wages you earned while you were working during tax season. Make more money, get a bigger unemployment check if you get laid off; that's the general formula.
Tax pros who make good money during tax season customarily qualify for the maximum unemployment benefit, which in California is currently set at $1,800 per month.
For the sake of example, then, let's assume that a tax preparer earns the mean annual wage of $37,060, and then gets $1,800 per month for eight months (May to December). This would put the total income received by that tax preparer, between wages earned from tax preparation and unemployment insurance for eight months, at $50,470 for the year.
If you use the higher mean annual wage for California tax preparers, at $44,840, and then add the $1,800 per month for eight months figure to that, you come up with a yearly income of $59,240.
Learn More to Earn More
Because your knowledge of tax law and practice is so directly tied to your clients' abilities to receive big tax refunds and/or lower their tax obligations, you will find no matter what company you work for, no matter what area of the country you work in, that the more you know how to help your clients with their tax needs, the more clients you will have and the more these clients will pay you. Your service will "pay for itself" and clients will see that and know that.
The more you learn, the more you can earn in the field of tax preparation.
Pronto Tax Class, meanwhile, starts at $177 for all the tax education you need to become a professional tax preparer.
Buy Pronto Tax Class if you want to become a tax preparer for right around $300 total, including all education, bonding, and registration cost--thanks to our insanely low tax course price, we are the ONLY education provider on the Internet today that can get you up and running as a tax pro for around $300 total investment .