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How to Become a Tax Preparer: A Step-by-Step Guide

If you’re interested in a career in finance and accounting, becoming a tax preparer may be the perfect fit for you. Tax season comes around every year, which means there’s always a demand for professionals who can help individuals and businesses file their taxes accurately and on time.

In the United States alone, more than 155 million individual tax returns were filed in 2020, according to the Internal Revenue Service (IRS). This number doesn’t include the millions of business tax returns that are also filed each year. With such a large volume of tax returns to process, it’s no wonder that tax preparers are in high demand.

But before you can start your career as a tax preparer, there are certain requirements you must meet. In this guide, we’ll walk you through the steps you need to take to become a tax preparer, including education, experience, and certification options. Whether you’re looking to start your own tax preparation business or work for an established firm, this guide will provide you with the information you need to get started.

What is a Tax Preparer?

A tax preparer is a professional who specializes in preparing and filing taxes on behalf of individuals, businesses, and organizations. They are responsible for ensuring that clients comply with tax laws and regulations while minimizing tax liabilities.

Tax preparers can work for accounting firms, tax preparation companies, or as independent contractors. They must possess a thorough understanding of federal and state tax codes, as well as the ability to interpret complex financial documents.

The duties of a tax preparer include gathering information from clients, organizing financial data, completing tax forms, and e-filing tax returns. They may also provide advice on tax planning strategies, such as retirement planning, investment decisions, and deductions.

At the heart of their job, tax preparers serve as key advisors to clients who need guidance on navigating the complex world of tax law. They play a critical role in ensuring that taxpayers meet their legal obligations while optimizing tax savings opportunities.

Overall, tax preparers are essential professionals who help ensure that our economy functions smoothly by facilitating the collection of taxes owed by individuals and organizations alike. If you’re considering a career as a tax preparer, it’s crucial to gain the necessary education and experience to make a meaningful impact in this field.

Steps to Becoming a Tax Preparer

Step 1: Meet the Educational Requirements

To become a tax preparer, you need to meet certain educational requirements set by the IRS. This includes completing tax courses and obtaining a solid foundation in taxation education.

The first step is to gain knowledge of the IRS tax law. The Internal Revenue Service (IRS) lays down the rules and regulations for filing taxes, which means you need to have a thorough understanding of their requirements. Tax courses can help you learn about the various tax forms, deductions, credits, and exemptions available to taxpayers. There are many online and offline tax courses available, and you can choose the one that suits your schedule and budget.

Taxation education is another important aspect of becoming a tax preparer. A degree or diploma in accounting or finance can give you an edge in the job market and help you understand the complexities of tax preparation. Many colleges and universities offer bachelor’s and master’s degrees in accounting and taxation that can prepare you for a career as a tax preparer.

Moreover, some employers may require you to have a certain level of education before they hire you. In this case, having a degree or certification in a related field can make you stand out from other candidates.

In summary, meeting the educational requirements for becoming a tax preparer is essential to ensure that you have the knowledge and skills required to provide competent tax preparation services to your clients. Tax courses and formal education in accounting or finance can be a great way to gain the necessary knowledge and credentials needed to succeed in this career field.

Step 2: Gain Experience

Step 2: Gain Experience

Now that you have met the educational requirements to become a tax preparer, it’s time to gain some experience in the field. This is an essential step in becoming a successful tax professional, as it will help you develop a deeper understanding of the tax preparation process, build your confidence, and perfect your skills.

One way to gain experience is through internships. Many accounting firms and tax preparation companies offer internships for students or recent graduates who are interested in pursuing a career in tax preparation. These programs provide valuable hands-on experience and mentorship from experienced professionals in the field.

Another option is volunteer work. Non-profit organizations, such as the Volunteer Income Tax Assistance (VITA) program, offer free tax preparation services to low-income individuals and families. Volunteering with these programs can give you exposure to various tax scenarios and help you hone your skills while giving back to the community.

Additionally, you can consider working part-time or seasonally for a tax preparation firm. This can give you practical experience in tax preparation, while also providing an opportunity to network with other professionals in the industry.

Overall, gaining experience in tax preparation is vital to your success as a tax professional. It not only helps you improve your skills but also gives you a better understanding of the needs of your clients. Whether through internships, volunteer work, or part-time employment, make sure to take advantage of any opportunities available to gain experience in the field.

Step 3: Obtain Tax Preparer Certification

Enrolled Agent Certification

Enrolled Agent Certification

Enrolled Agent (EA) is a prestigious certification awarded by the Internal Revenue Service (IRS) to tax professionals who demonstrate their competence in federal taxation. To become an enrolled agent, individuals must pass the Special Enrollment Examination (SEE), which covers various aspects of federal taxation, including individual and business tax returns, representation, and ethics.

The SEE consists of three parts, each comprising 100 multiple-choice questions. The exam is designed to test the candidate’s knowledge of tax law and regulations, as well as their ability to apply that knowledge in real-world scenarios. The SEE is computer-based and can be taken at authorized testing centers throughout the United States.

Once candidates pass the SEE, they must also meet other requirements set by the IRS, such as undergoing a background check and obtaining a Preparer Tax Identification Number (PTIN). They must also pay a fee to become enrolled agents.

Becoming an enrolled agent comes with several benefits. EAs are authorized to represent clients before the IRS, including during audits, collections, and appeals. They have unlimited practice rights, meaning they can represent any taxpayer in any state, regardless of where they are located. Additionally, EAs have access to valuable resources provided by the IRS, such as tax updates, continuing education programs, and professional networking opportunities.

In summary, if you aspire to become a tax professional specializing in federal taxation, obtaining the EA certification can boost your career prospects and credibility. Passing the SEE requires a significant amount of preparation and dedication, but the rewards are well worth it, both professionally and personally.

Registered Tax Return Preparer Certification

Becoming a registered tax return preparer (RTRP) requires passing the IRS competency exam, which tests your knowledge of federal tax regulations. The RTRP certification was created in 2011 as part of the IRS’s efforts to regulate the tax preparation industry and protect taxpayers from fraudulent practices.

The competency exam consists of 120 multiple-choice questions that cover tax law and procedures related to individual income tax returns. You must score at least 70% to pass the exam and obtain your RTRP certification.

While the RTRP program was discontinued in 2013, those who obtained their certification before the program ended are still recognized by the IRS as registered tax return preparers. However, the IRS has since introduced other certification options for tax preparers, such as the Annual Filing Season Program (AFSP).

The RTRP certification is beneficial for tax preparers who specialize in preparing individual tax returns, as it demonstrates their knowledge and expertise in this area. It also sets them apart from unlicensed tax preparers who may not have the necessary qualifications or training to provide accurate and reliable tax services.

Overall, obtaining your RTRP certification is a great way to enhance your credibility as a tax preparer and advance your career in the tax industry.

Annual Filing Season Program

The Annual Filing Season Program (AFSP) is a voluntary certification program offered by the Internal Revenue Service (IRS) for tax preparers who are not enrolled agents or attorneys. The AFSP aims to enhance the knowledge and expertise of non-credentialed tax preparers, ensuring they have the necessary skills and education to provide quality tax services.

To obtain the AFSP certification, tax preparers must fulfill certain requirements. They must complete 18 hours of continuing education each year, consisting of 10 hours of federal tax law topics, three hours of federal tax law updates, two hours of ethics, and three hours of other federal tax law topics. It’s worth noting that the AFSP certification differs from other credentials, such as the Enrolled Agent (EA) certification, which requires passing an exam and meeting additional requirements.

One of the benefits of participating in the AFSP is the opportunity to stay up-to-date with the latest tax laws and regulations. The program requires tax preparers to complete three hours of federal tax law updates each year, ensuring they are aware of any changes or updates to the tax code. This ensures that they can provide accurate and reliable tax preparation services to their clients.

Another advantage of the AFSP certification is its focus on continuing education. Tax laws and regulations can change rapidly, and it’s crucial for tax preparers to stay informed and educated. By participating in the AFSP, tax preparers can continue to develop their knowledge and expertise, enhancing the quality of their services and improving the customer experience.

In summary, the AFSP certification is a valuable option for non-credentialed tax preparers looking to improve their skills and expertise. Through continuing education and regular updates on tax law changes, participants can stay informed and provide high-quality tax preparation services to their clients.

Step 4: Maintain Your Certification

Step 4: Maintain Your Certification

Once you’ve become a certified tax preparer, it’s important to maintain your credentials to stay up-to-date with the latest tax laws and regulations. Here are some key aspects of maintaining your certification:

CE Requirements

Continuing education (CE) is a crucial part of maintaining your certification as a tax preparer. The IRS requires all certified tax preparers to complete a certain number of CE hours each year to keep their certification active. These CE courses cover topics related to tax law updates, new regulations, ethics, and other pertinent subjects. The number of required CE hours varies depending on the type of certification you hold and the state you’re in.

Renewal Process

Renewing your tax preparer certification is a straightforward process that involves submitting your renewal application and paying the associated fees. However, it’s essential to renew your certification before the expiration date to avoid any lapse in your credentials. The renewal process typically involves providing proof of the required CE hours and ensuring that your personal information is up-to-date.

Ethical Standards

As a certified tax preparer, you’re held to high ethical standards. Maintaining these standards is crucial for building trust with your clients and staying in good standing with the IRS. Some common ethical standards include avoiding conflicts of interest, maintaining confidentiality, and providing accurate and honest tax advice.

Overall, maintaining your certification as a tax preparer requires dedication and ongoing education. By keeping up with your CE requirements, renewing your certification on time, and upholding ethical standards, you can build a successful career in tax preparation.

Benefits of Becoming a Tax Preparer

Becoming a tax preparer can be a great career choice for individuals who want to enjoy the benefits of a flexible work schedule, diverse job opportunities, and potential earnings. Here are some of the key benefits of becoming a tax preparer:

Job Opportunities

Tax preparation is an essential service that’s required by both individuals and businesses, making it a recession-proof industry with plenty of job opportunities. Tax preparers can work for accounting firms, financial institutions, government agencies, or even start their own business. With increased demand for tax services, there is always a need for skilled and knowledgeable tax professionals.

Flexibility

One of the biggest advantages of becoming a tax preparer is the flexibility it offers. Tax preparers can choose to work full-time, part-time, or as seasonal employees during the tax season. This flexibility means they can balance other commitments such as family, education, or other hobbies while still earning a living. Additionally, tax preparers can choose to work from home or remotely, which eliminates the need for commuting and allows for more work-life balance.

Potential Earnings

Another significant benefit of becoming a tax preparer is the potential earnings. The average salary of a tax preparer varies depending on several factors such as experience, location, and level of certification, but it’s generally a lucrative field. For example, according to the U.S Bureau of Labor Statistics, the median annual wage for tax preparers in May 2020 was $47,520. However, certified tax preparers or enrolled agents who have completed additional education and passed rigorous exams may earn a higher income.

In conclusion, becoming a tax preparer can offer many benefits, including job opportunities, flexibility, and potential earnings. If you’re interested in pursuing a career in tax preparation, now might be the perfect time to take the first step towards achieving your professional goals.

Conclusion

Conclusion

In summary, becoming a tax preparer requires meeting certain educational requirements, gaining experience in tax preparation, obtaining certification, and maintaining that certification through continuing education. It is a career path that offers job opportunities, flexibility, and potential earnings.

However, it is important to note that tax preparers are subject to IRS regulations and must adhere to ethical standards. This includes properly disclosing fees and accurately completing tax returns.

With the increasing complexity of tax laws and regulations, the demand for skilled tax professionals continues to grow. As a tax preparer, you can play an important role in helping individuals and businesses navigate the tax system and fulfill their obligations while maximizing their deductions and minimizing their tax liability.

If you are considering a career as a tax preparer, take the time to research the educational requirements and certification options available in your area. Consider gaining experience through internships or volunteer work, and stay up-to-date on changes in tax laws and regulations through continuing education.

Becoming a tax preparer can be a rewarding career choice for those with a passion for finance, attention to detail, and strong analytical skills. By following the steps outlined in this guide and staying committed to your education and professional development, you can build a successful career in the tax preparation industry.
Becoming a tax preparer is an achievable goal for anyone interested in pursuing a career in the field. By following the steps outlined in this guide, you can gain the education, experience and certification required to become a successful tax professional. Beyond the personal satisfaction of helping individuals and businesses with their taxes, a career in tax preparation offers flexibility, potential earnings and job opportunities. Whether you’re just starting out or looking to advance your career, becoming a tax preparer could be the right move for you. So why not take the first step today towards a rewarding career in tax preparation?

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