How to Set Up a Tax Business

How to Set Up a Tax Business
Written by Kimberly Fowler

Starting your own professional tax business can be a detailed process, especially when you consider the rules, regulations, and constantly changing IRS legislation. Whether you're looking to become a solo practitioner or grow a larger practice, here’s an overview of the steps you can take to successfully start your professional tax practice.

1. Register Your Tax Business with Your State

Consult a professional for guidance

Before you start operating, you need to register your business with your state. This involves choosing the type of entity for your company. You can either file a Doing Business As (DBA) name or form a Limited Liability Company (LLC) or corporation. The structure you choose will affect your taxes, liability, and overall business operations, so it’s essential to consult a professional to ensure you make the right choice.

2. Obtain Your PTIN and Apply for Your EFIN

If you plan to charge for tax preparation services, you must obtain a Preparer Tax Identification Number (PTIN). This number is unique to you as a tax preparer and is required by the IRS. You can register for your PTIN online.

Additionally, if you’re going to file 11 or more tax returns electronically as a business, you must obtain an Electronic Filing Identification Number (EFIN) and become an Authorized e-File Provider. This step is necessary for streamlining your business’s tax filing process.

3. Determine Your Business Model

You need to decide on the type of services you will offer:

• Will your business be open year-round or just during tax season?

• Will you specialize in individual taxes, business taxes, or offer both?

• Will you provide additional financial services such as bookkeeping, consulting, or financial planning?

Your answers to these questions will help shape the direction of your business and guide your marketing efforts. Whether you want a solo practice or an expansive operation, defining your model early will help you focus on the right client base and growth strategy.

4. Market Your Business

While tax professionals are always in demand, marketing is still crucial to getting your business noticed. To begin:

• Define your marketing message: What sets you apart from other tax preparers? Why should clients choose you for their tax needs? Clearly define your value proposition so you can stand out.

• Build a website: A professional website is essential for credibility and attracting clients. It’s the foundation of your online presence.

• Leverage social media: Create social media profiles and run ads to promote your services. Connect with potential clients through posts and ads.

• Tap into your network: Don’t forget to ask friends and family for referrals. Word-of-mouth marketing is powerful, especially when you’re just getting started.

Remember, successful tax business marketing requires consistency and clarity. Focus on targeting a specific type of client so you can build a reputation for solving their unique tax problems.

Get Started with a Tax Business Plan

If you’re ready to set up your tax business or want to take your skills and income to the next level, I’m here to help! Schedule a call with me, and we can create a tailored tax business plan to improve your approach and guide you toward building a profitable 5- to 6-figure business.