Business Overview

As the owner of a tax preparation business, you’ll have the responsibility of cutting through the fog of federal, state, and local tax preparation, filing returns, and often earning tax rebates for individuals and, perhaps, small businesses.

Who is this business right for?

If you are a well-organized, people-oriented person who’s taken professional courses to learn the tax preparation business and are at ease with automation and digital software, you could thrive at this largely seasonal business. You should be able to handle long and probably stressful hours in a contained season of intense activity from January through mid-April. After that, you’ll have plenty of time to recover!

What happens during a typical day at a tax preparation business?

Think of your business as falling into two periods—tax season and pre-season—with very different areas of responsibility for each. During tax season, you’ll primarily see clients and prepare and file their taxes. Your goal is to do almost nothing but handle your clients since the tax-filing season is bound by the deadline dictates of the Internal Revenue Service and other taxing agencies.

Off-season, your responsibilities are more diverse. Your pre-season day will probably include some or all of the following activities.

  • Interviewing and hiring temporary tax-prep employees, if you have a customer base that justifies seasonal help
  • Seeking temporary storefront offices if you plan on working from such a public space rather than from your home
  • Ordering and mastering your tax preparation software since software glitches or usage confusion during filing season can result in customer fee losses in the hundreds or thousands of dollars
  • Conducting marketing and social media strategies to atttract customers

What is the target market?

Who will your typical clients be? You might mostly see lower-income earners filing to receive their earned income tax credit. Or more complicated cases from the self-employed or smaller businesses. Or the middle class, who aim to take advantage of various tax credits. Making this decision will help you determine where you might open a storefront, how and where you might market your business and what specific skills you must master.

How does a tax preparation business make money?

You’ll charge a fee for your services, based on the complexity and time involvement of the filing.

What is the growth potential for a tax preparation business?

The U.S. tax code contains 73,000 pages. Eighty-two million individuals file annually and the complexity of the process discourages most people from preparing their own taxes. While politicians from both parties promise simplification of the tax code, the reality is that the process only grows more complex. That means you can always feel confident of a customer base eager for your help.