If you're looking to become a tax preparer, you're the rarest of the rare: someone who doesn't get stressed out by tax season.
If that describes you, though, you may just find yourself a career with lucrative potential in an industry that always needs people. According to the U.S. Bureau of Labor Statistics (BLS), the highest annual mean wage among accountants and auditors in 2018 was in the industry of accounting, tax preparation, bookkeeping and payroll services: $83,710.
Of course, that's if you become a Certified Public Accountant (CPA). The mean annual wage for tax preparers overall was $46,740. That's because tax preparers can have many different job titles and certifications. There are CPAs, enrollment agents (EAs), tax attorneys and those who are non-credentialed but still qualified.
How to Become a Tax Preparer: 5 Steps
Preparing tax returns is a varied career, meaning the actual path can take many different turns. But if you want to know the beginning steps, here is how to start your path to becoming a tax preparer.
1. Complete Minimum Education Requirements
Clearly, you're going to need some particularly strong math skills if you want to spend your career preparing tax returns for individuals or small businesses.
Despite that, though, you may be surprised to find that a bachelor's degree is not required to become a tax preparer. The minimum education requirements for this line of work are a high school degree or GED.
So if you're not someone who was able to attend college, this is absolutely still a valid career path. If you're currently in high school and interested in becoming a tax preparer, use this education as an opportunity to become very familiar with the skills required of a tax preparer, namely math and computer skills.
You should also be taking some time on your own to familiarize yourself with how taxes work, and what goes into preparing the returns. The more knowledge you have, the better advantage you'll likely have for job opportunities and certifications.
All of this is not to say, however, that college should be out of the question. If you can attend college and wish to, getting a relevant bachelor's degree will still give you a massive advantage. While not required for the general job of tax preparer, you'll need one if you want to become a CPA, EA or tax attorney (in addition to the law degree obviously required for a tax attorney).
If you believe you're able to take on whatever student loans come with your degree, it gives you the potential for a much higher salary.
2. Take Tax Preparation Courses
Though you can learn plenty in your high school and college education about math and taxes, there are still a lot of specifics that go into tax return preparation that they don't cover. For this, you'll need tax preparation courses to fill you in on vital information.
Look into nearby universities and community colleges, as many have a tax preparation course that ends with a certification. These courses break down many of the specifics that come with preparing a tax return. You'll be familiarized with major forms like the 1040, and learn about the various tax credits like the Earned Income Tax Credit and the Child Tax Credit.
You'll likely learn about tax deductions, how to file taxes for different people and businesses and the many laws that have to be followed. Effectively, you can take the initial knowledge you've gotten from your high school and/or college education, from math to law, and apply them to information more directly relevant to tax preparation.
In addition to courses at colleges, you may want to look into some of the larger tax preparation businesses near you; many of the nationwide ones offer courses of their own, and if you're able to get a job quicker than expected after your education, many of them offer training on the job too.
3. Get a Preparer Tax Identification Number (PTIN) from the IRS
You can't get that tax preparer job, however, without having a Preparer Tax Identification Number (PTIN) through the IRS.
Applying for your PTIN is easy enough, though depending on your situation you may have to explain certain things on your application. To fill out your PTIN application you will need the following:
- Mailing address
- Date of birth
- Phone number
- Social Security number
- Explanation of felony convictions, if applicable
- Explanation of any discrepancies in your taxes, if applicable
Those last two, should they apply to you, don't automatically disqualify you from a PTIN. But they may stall the process of getting your PTIN.
Once you have your PTIN, you are registered by the IRS as an "unenrolled preparer," which is the minimum level of clearance the IRS grants individuals that allows them to file federal taxes.
If you plan on starting your own tax preparation firm, you will also need to get an Electronic Filing Identification Number (EFIN) from the IRS. This gives your firm the ability to e-file tax returns, which is generally required of a firm that files 11 or more income tax returns.
To do this, you will need an IRS e-services account, where you submit an application to become an authorized e-File provider by the IRS. You'll also have to pass a "sustainability check," which can include a credit check and a criminal background check.
4. Become Licensed in Your State
Depending on where you live, if you are a non-credentialed tax preparer (as in you have your PTIN but are not a CPA, EA or attorney) you may have to get licensed or registered to practice tax preparation. These states are:
- New York
Though many of these states have the same general requirements with variations on the details, certain requirements can be totally unique. For example, New York requires that prospective tax preparers submit proof that they either do not have child support obligations or, if they do, that they are up to date (they cannot be four or more months overdue).
The amount of required training may also vary by state. California requires a 60-hour educational course (one with approval by the California Tax Education Council) for tax preparers, but Oregon requires at least 80 hours of training education on taxes.
These are, again, requirements for non-credentialed preparers. More credentialed ones will of course require more. Enrolled agents and CPAs have their own exams to pass before they can have that title.
5. Gain Tax Preparation Experience
You've got your education finished, you have your PIN and you've done the work to become authorized to prepare tax returns in your state. Now it's time to actually put that to use.
The tax preparation firms that offer training and education can also be, at minimum, a great place to start your career as a tax preparer. Firms like H&R Block (HRB) - Get Report and Liberty Tax Service (TAXA) are nationwide, and practicing tax preparations at a place like this is perfect for a non-credentialed tax preparer with their PTIN ready.
Those with more credentials can gain experience in places that, thanks to their job titles, are fairly self-explanatory. Did you pass your CPA exam to become a certified public accountant? Look for work in your local accounting firms. Same with tax attorneys and law firms.
You can gain a lot of experience in a short amount of time, and depending on your job title or office you may find yourself becoming a specialized tax preparer, especially if you are doing tax returns for businesses. All of this has the potential, if you have the ambition, to be the prelude to eventually opening your own tax preparation business.
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