How to Become a Tax Preparer
Tax preparers prepare and file federal and state tax returns for paying clients. In some states, they may work independently, but in other states, they are required to work under the supervision of a Certified Public Accountant (CPA), attorney, or other tax professional.
Tax preparers must be familiar with the various tax forms and schedules that the Internal Revenue Service (IRS) and state tax boards issue, and they should be comfortable using math and computers. Tax preparers examine their client’s financial records and work with them to determine their tax obligation and to identify tax credits and deductions for which they qualify. They then fill out the appropriate forms and submit them to the state and federal government on their client’s behalf, signing their name on the return to identify themselves as the preparer.
What kind of training is required to become a tax preparer?
Tax preparers are generally not required to have any specific educational background beyond a high school diploma, but there are courses and training programs they can complete to learn what they need to know to prepare tax returns.
Tax preparer training courses are offered by tax preparation companies and tax schools. These courses cover topics like filing status, standard deductions, dependents, wages, taxable benefits, income from interest, retirement plans and pensions, social security income, health savings accounts, business expenses, charitable contributions, foreign tax, tax as it relates to real estate transactions, and various credits and deductions.
Students in tax preparer courses also learn about the various forms and schedules their clients may be required to file. Some clients have complicated finances that require the use of forms beyond the standard forms most people file. Clients who own businesses, are independent contractors, or earn income from a farm, for example, have special filing requirements.
Tax preparer courses also teach students state-specific tax information. Each state has its own tax code and preparers should be as familiar with the requirements for filing taxes in their state as they are with federal tax requirements.
Are there any certification or licensure requirements?
Tax preparers must meet both federal and state licensure and registration requirements. The IRS requires tax preparers to obtain a Preparer Tax Identification Number (PTIN) before they can accept payment for preparing tax returns. To apply for a PTIN, prospective tax preparers submit their social security number, personal information, and previous year’s tax return to the IRS. Applicants must also disclose any past felony convictions or problems with their tax obligations. Tax preparers who have been granted a PTIN but are not CPAs, attorneys, or “enrolled agents” are known as “unenrolled preparers” and possess the minimum qualifications required to prepare federal taxes. Unenrolled preparers are limited to filing only certain types of tax returns and cannot represent their clients before the IRS beyond the basic audit level.
Some tax preparers become enrolled agents so they can file returns for and represent all types of taxpayers. To become an enrolled agent,
preparers must pass a three-part examination that tests knowledge of individual tax returns, business tax returns, and representation before the IRS. In addition to passing this exam, enrolled agent applicants must pass a compliance check on their tax history. Once they are licensed, enrolled agents must complete 16 hours of continuing education per year to maintain their status.
Individual states set their own requirements for the licensure and registration of tax preparers. Some states require only that tax preparers have a valid PTIN, while others require education and testing. Preparers who are CPAs, attorneys, or enrolled agents may be exempt from some or all state registration requirements.
How long does it take to become a tax preparer?
Tax preparers can request a PTIN before completing any tax education, but it may take some time for the IRS to issue the number. It can take several weeks to complete a tax preparation course and additional time beyond that to pass any examinations required for state registration or licensure.
What does a tax preparer earn?
The median yearly pay for tax preparers in the United States was $43,350 in 2012. The lowest ten percent of this group earned less than $18,820 that year, and the top ten percent made more than $80,360.
What are the job prospects?
The Bureau of Labor Statistics projects that employment of tax preparers will grow 10 percent between 2012 and 2020, about as fast as the average growth for all occupations.
What are the long term career prospects for tax preparers?
Tax preparers who start out as unenrolled preparers can pursue additional training and become enrolled agents, which allows them to provide services to a wider range of clients and possibly charge more for their services. Some tax preparers go to work for themselves, and if they are successful, their businesses may expand.
How can I find a job as a tax preparer?
If you are qualified by your state’s standards to work as an independent tax preparer, you can get started by advertising your services in your community. As you build a client base, you should start receiving more referrals for your business.
If you cannot yet work independently or want to work for an established business, you can apply for positions with accounting or law firms that offer tax services. There are several large corporations that provide tax preparation services, and you can look for work with these companies as well.
How can I learn more about becoming a tax preparer?
The IRS devotes a section of its website to information for tax professionals, and this can be a good resource for you to learn about providing tax preparation services. You can also search your state tax board or department’s web site for information about the registration or licensure requirements for tax preparers in your state.
Professional associations like the National Association of Tax Professionals and the National Association of Enrolled Agents can be helpful sources of information as well.