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A tax preparer is essential for helping individuals and corporations optimize their deductions and submit their taxes. Some tax preparers are licensed by the Internal Revenue Service (IRS), while others become certified public accountants (CPAs) or obtain other professional certifications. Understanding the job opportunities for tax preparers and how to pursue the field might help you decide if it’s the right fit for you.

A tax preparer fills out tax forms for submission to the IRS, advises clients on tax issues, and guarantees compliance with federal, state, and local tax regulations. They normally get the greatest work during tax season, which runs from early January until mid-April. Their clientele might be individuals or businesses, while some tax preparers only work for employers. Tax preparers can seek IRS certification or choose to remain uncertified, but their clientele may differ depending on their specific qualifications.

Aside from filing tax returns, qualified tax preparers, such as enrolled agents, tax attorneys, and CPAs, can represent clients in IRS audits, payments, and court proceedings. Individuals trust tax preparers with sensitive personal information such as their marital status, annual income, dependents, and Social Security and Medicare deductions from paychecks. As a result, tax preparers must maintain organization while prioritizing their clients’ anonymity.

There are several types of tax preparers. They include:

Enrolled agents

Enrolled agents are tax employees who have licensure from the IRS after passing a qualifying exam. This type of agent can practice anywhere nationwide without restrictions. They also participate in 72 hours of continuing education in three-year increments after they receive their initial license from the IRS.

Certified public accountants

A CPA works with clients, individuals or businesses to help them file their taxes. They can also assist clients with other financial matters, such as retirement savings, marital assets, dual proprietorships and business sales. CPAs can either be self-employed or work with a firm. The process for becoming a CPA requires tax preparers to meet state licensing requirements, which include a passing score on the CPA exam. 

Tax attorneys

A tax attorney often works for large businesses and helps them file corporate taxes. They guide clients through tax-related legal matters, so it’s essential that they stay up-to-date on laws related to accounting, finance and taxation. The clients of a tax attorney may also receive additional consultation from a CPA or an enrolled agent to handle their personal filing matters.

Non-credentialed tax preparers

Not all states require tax preparers to be credentialed. Some non-credentialed tax preparers can find employment with large tax preparation companies. Some of them are seasonal employees, while others work year-round. Non-credentialed tax preparers can be a cost-effective option for clients who have simple tax returns, so there may be a high demand for this role.

How to Become a Tax Preparer

If you’re interested in becoming a tax preparer, here are some steps to follow:

1. Complete your education

A high school diploma or GED is the minimum education requirement at many tax preparation companies. If possible, focus your course load on subjects related to writing, math and/or business, which are likely to prove useful in your career. You might also want to complete a college degree. While tax preparation companies rarely require you to have a bachelor’s degree, earning one can help you qualify for a variety of positions in this profession. Should you elect to attend college, consider majoring in a relevant subject, such as accounting.

2. Get the proper training

Technical schools and community colleges provide tax preparation courses that can help you advance in your career. You can pursue on-the-job training with a tax employee or trainer. You can also earn accreditation through the Accreditation Council for Accountancy and Taxation or the National Association of Tax Professionals. Some topics you can expect to cover in an accreditation program are:

  • Taxpayer filing status
  • Taxpayer interviews
  • State tax codes
  • Calculation of refunds
  • Annual filings
  • Tax forms

3. Receive valid ID numbers through the IRS

To become a tax preparer, it’s important to have a Preparer Tax Identification Number (PTIN) through the IRS. To acquire a PTIN, fill out an application and take part in the screening process. After your application receives approval, you can earn the title of unenrolled preparer, which provides you with the clearance to file basic tax returns for individuals and businesses. This may be the only requirement, but it depends on the state where you plan to work. 

Read Also: How Much Can I Claim for Property Taxes?

If you want to run your own tax preparation business, make sure to obtain an Electronic Filing Identification Number (EFIN), which is also through the IRS, which performs an additional credit and criminal background check as part of the process. If the IRS approves your application, you can e-file tax returns for your customers.

4. Obtain a tax preparation license in your state

Some states may require that you take extra steps to become a tax preparer. If you receive a PTIN but you’re a resident of California, Connecticut, Maryland, Nevada, New York or Oregon, then it’s necessary to get a state’s license to be a tax preparer. Additional requirements may vary from state to state. For example, California residents take 20 hours of continuing education each year, and Connecticut residents get a permit through the state’s Department of Revenue Services every two years. Always check with the state where you plan to work for the most up-to-date requirements.

The time it takes for a tax preparer to finish training and receive licensure can be as little as one year or as many as three years. Your specific time frame depends on the pace at which you progress in your development. It’s important to note that understanding the scope and responsibilities of the role is more important than a quick entrance into the profession.

What Skills Does a Tax Preparer Need?

Review the essential skills tax preparers need to work:

Customer service

Working as a tax preparer requires you to be approachable and friendly. Clients should trust you with confidential information and be confident in your ability to file tax returns accurately. Clients typically prefer to work with tax preparers. They share a genuine connection, so you must seek to build a professional relationship with them. Develop your customer service skills by requesting feedback and building trusting relationships with each client to encourage repeat business.

Computer literacy

Computer literacy refers to your ability to use computer systems and related technology. As a tax preparer, you typically perform tax deductions and enter income sources using software. Improving your computer literacy can position you for more job opportunities. Consider enhancing your ability to use computer systems by taking technology courses online and practising what you learn.

Numeracy

Numeracy is the ability to use, interpret, and communicate mathematical information to solve problems. As a tax preparer, you typically work extensively with numbers. For example, calculating tax deductions for a client would require you to understand how to calculate percentages. You can improve your numeracy skills by taking math courses online and practising math games and puzzles.

Time management

Time management is the ability to use your time well. Tax preparers typically help multiple clients to process tax returns. With excellent time management skills, they can work efficiently. Develop your time management skills by creating a to-do list, prioritizing tasks, and timing your activities.

Attention to detail

Working as a tax preparer requires attention to detail to ensure accurate tax calculations. Being detail-oriented is also important to ensure the data you collect is accurate. You can improve your attention to detail by working on projects that require you to focus.

Communication

Effective communication is the ability to exchange information with others. As a tax preparer, excellent verbal and written communication skills can help you explain the tax preparation process to clients. These skills are also important for describing how to prepare for the next tax season. Improve your communication skills by practising public speaking and requesting feedback on your ability to communicate ideas.

Critical thinking

Tax preparers use critical-thinking skills to determine the best way to prepare and file tax returns. They also apply these skills when researching laws and finding updates. You can improve your critical-thinking skills by working on projects that require you to think differently and taking critical-thinking courses.

According to Indeed Salaries, the national average salary for atax preparer is $17.54 per hour. You may negotiate higher pay with potential employers or clients after evaluating what value you can add. Tax preparers typically work in accounting firms or for businesses that provide tax preparation services. You may also work independently as a contractor or freelancer. Regardless of your type of employment, the CRA requires you to work directly with clients instead of receiving projects from another tax preparer.

How Much Does It Cost to Get Your Taxes Done?

The truth is, tax preparation could cost anywhere from $300 to $600 (or more) depending on how complicated your tax situation is, where you live, and how your tax pro charges for services.

Here are four questions to ask in order to get the information you need:

1. How qualified do you want your professional to be?

An average tax preparer will probably charge less than a high-quality pro who has loads of experience.

When it comes to buying a service, we want you to save money just as much as you do. But when you hire experts—like tax pros, doctors and mechanics—it’s worth it to spend more cash to get the job done right the first time. Paying an extra $100–300 on the front end may be worth it in the long run, especially when that expert is thorough, accurate, and finds ways to cut your tax bill.

2. How organized are your taxes?

Look, if you roll up to a pro’s office with crumpled receipts shoved in your pockets and a grocery bag stuffed with W-2s, then you’re probably going to get hit with a higher fee. They can tell just by looking that you’re unorganized, which means more work (and a higher fee!) for them—good for them, but bad for you. Here’s my rule of thumb: The more organized you are, the less work a tax pro has to do. And that means a lower cost in the end. So, this is your signal to get your papers in order now.

3. Where do you live?

The fees for hiring a tax professional differ across the country. For instance, you can expect to pay more than average on the Pacific Coast and less in the good ol’ South.

Here are the average tax preparation fees for an itemized 1040 with a Schedule A and state return in each region:

  • New England (CT, ME, MA, NH, RI, VT): $285
  • Middle Atlantic (NJ, NY, PA): $303
  • South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV): $339
  • East South Central (AL, KY, MS, TN): $217
  • West South Central (AR, LA, OK, TX): $313
  • East North Central (IL, IN, MI, OH, WI): $273
  • West North Central (IA, KS, MN, MO, ND, NE, SD): $267
  • Mountain (AZ, CO, ID, MT, NM, NV, UT, WY): $310
  • Pacific (AK, CA, HI, OR, WA): $432

You’ll notice most of these averages are higher than the $220 mentioned above. That’s because that cost is for a simple 1040 tax return with no itemization. But most people who use a tax pro have more complicated situations that require extra forms and documents. Either way, expect your price tag to vary depending on the quality and experience of the pro, where you live, and your specific needs.

4. How complicated are your taxes?

Let’s be real for a second: If you want a basic tax filing, you can probably get away with paying a fee close to the minimum range. But the more complicated your tax situation is, the more time it’ll take to prepare your return. And we all know, time is money.

For example, let’s say you have a side hustle. You’ll probably need to itemize deductions and file a Schedule C IRS form in addition to your basic 1040. In that case, the average cost is around $515.

When you sit down with a tax advisor for the first time, ask how they’re going to bill you. You don’t want there to be any surprises when it’s time to pay the piper! They will usually follow one of these five billing methods:

1. They charge a set fee for each tax form or schedule.

No ifs, ands or buts about it! They have one flat fee per form or schedule. If you’re wondering what the average costs for filing common forms are, here’s the breakdown:

  • $323 for a Form 1040 with a Schedule A and state return
  • $220 for a Form 1040 (non-itemized) and state return
  • $192 for Schedule C (business)
  • $118 for Schedule D (gains and losses)
  • $145 for Schedule E (rental)
  • $200 for Schedule F (farm)

2. They charge a fee that matches what you paid the year before.

If you work with the same tax advisor each year, you’ll often get a matching rate. That means your advisor will charge you what they charged the year before—but that’s not always the case. If, for some reason, your tax situation has gotten more complex, be ready for the chance that your price could increase.

3. They charge a minimum fee, plus more if your taxes are complicated.

Some advisors charge a flat fee, but if you make them think too hard, they’ll have to charge you more to compensate for their time. Definitely ask up front if your advisor has extra fees beyond the flat rate.

4. They charge a value-based fee—a price based on feeling.

Some tax advisors will say, “Your taxes feel like they’ll cost $350.” You can see how value-based fees can easily lead to disputes. Then again, advisors do this day in and day out, and they’re used to quoting rates that match the elbow grease they’ll need to put into the job.

5. They charge an hourly rate.

If your tax advisor charges by the hour, make sure you find out how much they charge and how much time they expect to spend on your taxes. Hourly fees are usually $100–200 per hour, depending on what kind of tax forms you need to file.

Think of the cost of tax prep like the cost of getting your car washed. You can get a quick, basic car wash (minus the wax and all the other add-ons) pretty cheap. Sure, your car might not sparkle like new, but for $5, it gets the job done. And don’t be surprised if, on closer inspection, you see they missed a few spots.

Now, if you want to get your car detailed—we are talking a deep clean where they get all the cookie crumbs out of your cupholders and shine the rims—you have to pay more.

The same goes for tax advisors. If you pay around $220, you’ll probably get an average tax preparer who may or may not help you get all the deductions you deserve. But for a little bit more, you can get a trustworthy tax advisor who cares about your situation, helps you understand tax changes, and ensures your tax bill is as low as possible.

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