How to start a tax preparation business

One credential is mandatory for everyone: the Preparer Tax Identification Number, or PTIN. Anyone compensated to prepare federal returns must hold one and renew it each year through the IRS. The application is online, and the current fee and renewal window are published at irs.gov, which is worth checking directly because they change.

The second number is the EFIN, the Electronic Filing Identification Number, which authorizes you to e-file as a provider. It matters more than it sounds: the IRS e-file mandate covers preparers who expect to file more than 10 covered returns in a year, and 10 returns is roughly one week of a functioning practice. The EFIN application runs a suitability check and approval takes weeks, which makes it the long pole in the launch timeline.

Past those two, federal law asks nothing else of an unenrolled preparer: no exam, no degree, no license. Representation rights differ, though. A CPA, enrolled agent, or attorney can represent clients before the IRS broadly; an unenrolled preparer generally cannot go beyond returns they prepared themselves. Several states also regulate preparers on their own terms, California, Oregon, Maryland, and New York among them, so check your state before printing business cards.

Yes, and most solo practices start exactly there. Nothing in the PTIN or EFIN process requires commercial premises, and a home office keeps the first season's overhead near zero. What changes is not legality but logistics: client documents full of Social Security numbers now live in your house, so the Safeguards Rule plan has to cover your actual setup, meaning encrypted storage, a locked file drawer for anything physical, and a network your family's devices do not share.

Client contact works differently too. A secure portal for documents plus video review meetings lets a home practice serve clients it never meets, widening the market past your zip code. Some preparers add a coworking mailbox so their home address stays off engagement letters, and a few municipalities apply home-occupation rules, so a quick check with your city is cheaper than a surprise.

The engagements that pay best in a young practice, Schedule C filers and small businesses, are also the ones that arrive without books. What the client actually hands you is a stack of bank statement PDFs and an apology, and reconstructing a year of income and expenses from them is the real time cost of the return, not the tax form itself.

That reconstruction is what LedgerBox does. Upload the statement PDFs, scans and phone photos included, and each one comes back as spreadsheet rows with the arithmetic verified: debits, credits, and running balances must reconcile before a document is marked clean, and any row the extraction cannot settle is flagged for your review rather than guessed at. The rows export to Excel or CSV and drop into whatever workpaper your engagement uses. For late filers, expect closed accounts in the pile; the statements are still recoverable from the bank, and the closed-account guide linked below covers how.