What does a tax preparer do?

A tax preparer creates and submits taxes for individuals or companies. After studying accounting concepts and the tax code, these accounting professionals frequently optimize tax refunds or decrease tax liabilities. In order to make the best decisions for their clients as well as advise them on tax laws and regulations they must also be able to stay up to date on changes in tax legislation and practice.

This Career path has both entry level and experienced individuals with years of expertises and practical field knowledge, there are specific educational requirements for preparers that they need to fulfill in order to pursue this path. 

Entry-level tax preparers who intend to file taxes for others are required to apply for an IRS Preparer Tax Identification Number (PTIN), which sets them apart from other accounting positions. They can prepare both federal and state tax returns after being accepted.

Do you know that the tax preparer career path is one of the most sought-after career options nowadays. So understanding what one goes through to begin this will help you to examine this career path and as well guide you comprehensively how to become one. 

Education requirement is the one aspect of this, being organized, having good communication skills, and paying attention to detail are all necessary for becoming a successful tax preparer. If you are interested in getting to know more about this interesting career option keep on reading. 

What do you need to become a tax preparer?

Get your PTIN (Preparer Tax Identification Number)

Register with the IRS and get a PTIN. Anyone who documents federal tax returns for compensation, or assists in their preparation, must comply with this regulation.

Complete Tax Preparation Education: 

Although there are no formal educational requirements in Texas for tax preparers, it is imperative that they possess a solid understanding of tax laws, rules, and processes. Take into consideration signing up for tax preparation classes. Tax preparation classes are widely available through online platforms, community institutions, and vocational schools.

Consider Professional Certification: 

Getting certified can improve your marketability and reputation, but it’s not required. You can work toward certifications such as the IRS Enrolled Agent (EA), which is obtained by passing an IRS-administered three-part exam, or other credentials like the Accredited Tax Preparer (ATP) or Certified Public Accountant (CPA).

Stay Updated: 

Tax laws and regulations frequently change. Stay informed about updates and changes in tax laws through continuing education and professional development courses.

Consider Joining Professional Organizations: 

Joining professional organizations related to tax preparation, such as the National Association of Tax Professionals (NATP) or the National Society of Accountants (NSA), can provide networking opportunities, resources, and support.

Register with the Texas State Comptroller: 

In Texas, if you plan to prepare taxes for businesses, you might need to register with the Texas State Comptroller’s Office to obtain a Sales Tax Permit.

Remember, tax preparation involves handling sensitive financial information, so maintaining ethical standards and adhering to all legal requirements is crucial.

Acquire a high school diploma or GED: 

In order to meet the minimal educational criteria for tax preparers, the majority of them complete a high school diploma or GED.

Enroll in accounting, tax preparation, and/or business courses in college:

In order to advance their knowledge and expertise in a particular profession, students occasionally finish bachelor’s degree programs or even college courses. It usually takes two to four years to complete this level, depending on the study program.

Gain work  experience as a tax preparer: 

The majority of tax preparers start out as employees of tax preparation companies, while some may find employment with other companies or accounting firms. Many begin their careers as seasonal workers, only working from January to April, which is tax season. 

Do you need a license to prepare tax returns?

Tax return preparation is not permitted with a PTIN. You have to finish the enrolled agent, CPA, or tax attorney process in order to become a tax representative.

To file tax returns, certain states do require an additional certificate. Prior to beginning work as a tax preparer, it is your responsibility to become familiar with the regulations in your state.

How long does it take to become a tax preparer?

There are two factors that contribute to this that how much one take to apply and get PTIN and EFIN

But perhaps a better question to ask is how long it takes to become a seasoned tax preparer, since earning money and advancing in your job both depend on having a particular level of expertise and talent.

Typically, it takes two seasons to become proficient at tax preparation. The career progression is identical whether you want to start as a lone practitioner or at a firm. Most novice preparers will concentrate on raw data entry during their first year. A little more independence is added in the second year. You have the expertise and knowledge required to function as a full-fledged staff preparer at the end of the third year.

However, how long it takes to become a seasoned tax preparer is perhaps the more correct question to ask, as the ability to make money and build a career is dependent upon a certain amount of experience and skill.

In most cases, it takes about two seasons to learn the basics of tax preparation.  Whether you plan on starting at a firm or becoming a sole practitioner, the career progression looks similar. In the first year, most new preparers will focus on raw data entry. The second year brings a little more autonomy. By the third year, you’re armed with the necessary experience and skills to work as a full-fledged staff preparer.

After the initial period of seasoning, it takes about five years to learn the nuances and niche areas of your clients and your practice. In that time, you gain expertise that differentiates you as a tax preparer and allows you to set yourself apart in the market.

What does a tax preparer need to prepare tax returns?

A tax preparer typically needs the following information and documents to prepare tax returns:

Personal information: 

Names, Social Security numbers, dates of birth, and filing status for all individuals listed on the return.

Income documents: 

W-2 forms for wages, 1099 forms for various types of income, investment and retirement account statements.

Deduction and credit documentation: 

Mortgage interest statements, property tax statements, receipts for medical expenses, charitable contributions, education expenses, and childcare expenses.

Business and self-employment documentation: 

Records of business income and expenses, depreciation schedules, home office expenses documentation, and vehicle mileage logs.

How much does a tax preparer make? And what’s the average salary for the role?

The amount of money one can make as a tax preparer is primarily dependent upon whether the person is working individually or in a company setting like CPA, how many clients one can manage. 

Therefore, while many first-year tax preparers may claim a starting salary of $50,000 or more, year one employees at another firm may make between $30,000 and $40,000 instead. Additionally, you might not receive any compensation if you are an intern. 

Some people begin their careers at firms to get the first two years of experience. And then they break away and start a local firm. This allows you to get high-quality training to boost your skills out of the gate.

Some start working for companies in order to gain the first two years of experience. After that, they split off and launched a local company. This enables you to receive excellent training to improve your abilities right away.