How to Become a Tax Preparer - The Full Guide

If you’e looking to start a new career as a tax preparer, you’ve come to the right place. In this guide, we will take you through everything you need to know about how to become a professional tax preparer.  

Tax preparation is an increasingly popular career choice, and it is a necessary service for the community. But how does one become a tax preparer? What sort of tools does a tax preparer need? What does a tax preparer even do day to day?

In this article, we’ll cover all of these questions and more. If you want to learn in detail about the job, and everything you will need to acquire before becoming a tax preparer, then read on. 

Also read: Are Bonuses Taxed Differently?

What Does a Tax Preparer Do?

 Tax preparers are responsible for filing and assisting with tax forms, generally speaking. Apart from these services, tax preparers also defend taxpayers with the IRS, which involves audits and tax court issues. However, the amount that a tax preparer can do is reliant on their specific credentials and whether or not they have representation rights.  

Tax preparers have two masters to serve – the IRS, and their clients. They assist the clients in complying with federal and state tax codes, whilst they also try to minimize their clients’ tax burdens. While tax preparers are indeed hired to serve the client, they are also obliged to make sure they diligently follow laws and regulations and never help someone file a fraudulent tax return. 

Also read: Change My Direct Deposit Information With The IRS

What Does One Need to Become A Tax Preparer?

To become a tax preparer, you only need a few basic requirements. These are:

1. The Know-How 

For the majority of new tax payers, understanding the ins and outs of the tax business is a lot like learning a foreign language. Sometimes, this know-how comes by the way of a certification, but discovering a platform that will boost your knowledge of taxation will be a huge benefit to your success as a tax preparer. 

Also read: File Taxes for the First Time

2. The Technology 

Just like most other careers, having access to the proper technology will allow you to work with a heightened efficiency and boost your success generally in your new venture. The majority of tax professionals use software to assist them in both the knowledge and the tools to accomplish their goals in the workplace. 

3. The Clients 

It goes without saying, but a tax preparer needs to have clients for their business to be profitable. The majority of tax preparers start small and build up their clientele over the course of many months. Beginning with individual tax returns is a good idea for tax preparers who are just starting out. 

4. Preparer Tax ID Number

In order to be paid for the preparation of tax returns, the first and foremost thing is to apply for a preparer tax identification number (PTIN). 

Also read: Is Rent Tax-Deductible?

What is IRS Tax Preparer Certification?

The IRS requires all tax preparers to take a suitability assessment and be issued with a preparer tax identification number (PTIN). An enrolled agent, however, will neeed to achieve additional requirements including a state license in addition to an electronic filing identification number (EFIN). 

How to Get a PTIN 

To get yourself a preparer tax identification number, you must go through the IRS website. A PTIN needs to be renewed yearly. There aren’t any fees for registering or renewing your PTIN. 

After a PTIN has been issued, you will need to include this number on each and every tax turn you prepare. There is a lot of useful information for new tax preparers on the IRS website. 

Does One Need a License to Be a Tax Preparer 

As previously stated, the first thing any tax preparer needs is to get a PTIN. This is different to a license. A license is not required to become a tax preparer, but if you want to achieve representation rights, then you must be a licensed attorney, CPA, or an enrolled agent. 

That being said, there are 7 states in the US that do require a license to become a professional tax preparer. While some of these states do call it a license, it is similar to a federal PTIN.  

The following states require an additional credential to become a tax preparer:

• California 

• Connecticut 

• Illinois 

• Maryland 

• Nevada

• New York

• Oregon 

Also read: Are Moving Expenses Tax Deductible?

How Long Does it Take To Become A Tax Preparer?

The amount of time it takes to become a professional tax preparer depends on the time it takes to successfully apply for a PTIN and EFIN. However, the more appropriate question to ask is “how long does it take to be a seasoned tax preparer?” because the ability to make tax preparation a successful and monetarily prosperous career is dependent on a certain level of skill, knowledge, and experience.  

The majority of tax preparers need at least two seasons just to learn the foundations of tax preparation. If you want to start working as part of a firm or as a sole practitioner, the progression of a tax preparer’s career is comparable.  

The majority of tax preparers focus only on raw data entry in the first year. After this, a tax preparer can have more autonomy. In the third year, as long as you have all the necessary skills and experience, you will be able to work as a fully fledged staff preparer.  

Following this, it takes most people around 5 years to become accustomed to and learn all about the niche areas and nuances of the practice of tax preparation. In time, you will gain this niche expertise and knowledge to set you apart from other tax professionals. 

Conclusion

If you’re looking for a new career, tax preparation is a good place to start. There is a high demand for qualified tax preparers in the US, and taxes aren’t going away anytime soon! A career in tax may not sound like the most exciting prospect, but it can be a very prosperous career with enough hard work and the willingness to learn. 

Our pay stub generator allows you to create pay stubs in a simple and easy-to-use manner. Which can help massively in terms of filing taxes.