by Nayab Naseer

Created on: February 10, 2009   Last Updated: March 03, 2009

Overview:

Most businesses and individuals are obliged to pay taxes. People can file tax returns themselves, and businesses have accountants who can do this job. However, most people find this task too cumbersome, intimidating and time consuming. They would not be aware of all the statutory obligations, would not have the time or resources to update themselves with the changes to the law on a daily basis, or be adept with the many forms that need filling. This is where the scope for a tax preparation business exists.

Most businesses need to pay taxes every quarter, and as such, the tax preparation exercise is a year round activity. The primary role of the tax preparation consultant here is to identify the tax computations from the balance sheet drawn up by the company accountants and compute tax liabilities based on the tax rules.

Individuals need to file taxes only once a year, and the tax season is from January to April. Individuals are less likely to have a separate accountant to do the computations and the tax consultant would have to do the computations based on the cash inflows and outflows of the individual for the relevant year.

Pros of the Business:

The saying goes "There are two things certain in life death and taxes!" Since the law requires people and businesses to pay taxes, the demand for tax preparation professionals is always there.

The tax preperation business can be set up from the comforts of one's home or just about anywhere else, with very little start up costs. The operating costs and overheads are also minimal, and the income is lucrative. With business clients, one can earn up to $100 per hour.

It is possible to market this business on a shoestring. Strategies like word of mouth advertising, tapping into contacts, placing free ads at various sources and other such measures is most likely to generate businesses. With experience, referrals from existing clients would invariably help generate more clients.

What You Need to Get Started

The tax preperation business is suitable for people who are good with numbers, are attentive to details and are able to meet deadlines.

The traditional route to becoming a tax preparer is through a college degree as an accountant or CPA. Another quick route is via short courses offered by many independent schools and tax return preparation companies. Some real time exposure in the form of work experience is useful.

The first step to start the business is to register the name with the local county office. There would also be other specific requirements that vary from state to state.

While waiting for the registration formalties, a business plan that would determine the range of services, the fees and other aspects of the business can be devised.

The next step is to actually set up the home office with all the necessary materials. A PC, an Internet connection and a printer would be the tools of the trade.

Once the office is set up, the next step is to market the business and wait for clients to come in. The best marketing exercise is a delighted client who would bring in referrals. The key to success in the long run is accuracy and dedication

References:

Michael Johnston, CPA, Retrieved February 8, 2009, retrieved from www.about-accounting.com/starting-business/tax-prepa ration-business.aspx
Robbi Erickson, (September 27, 2005), Retrieved February 9, 2009, Retrieved from www.googobits.com/articles/2713-how-to-start-your-ow n-tax-preparation-home-business.html
www.universal-ac counting-center.com/tax-planning-preparation.htm, accessed on 08-02-2009, 14:45 hrs
Ed Paulson (2007), The Starting of Your Own Business, Page 311.

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