Last Updated on September 26, 2022
Running your own business is a dream for many, but you need to do your homework before you jump in. This article details what you’ll need to become a tax preparer in Texas!
How To Become A Tax Preparer In Texas. Lots of people feel afraid when they hear the word, taxes. The truth is, tax season can be very intimidating for anyone, but with the proper education and training, you can become a successful tax return preparer, and realize your dream of owning your own business.
The Tax Preparer program will prepare you for a rewarding career in public service as a tax preparer with the IRS, or for gainful employment in the private sector. It is designed to assist those who have neither the time nor the resources to complete the prerequisite college courses necessary to apply for admission to a 4-year college.
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This carefully designed online guide details exactly what you need to do to become a tax preparer in Texas.
How to Be a Tax Preparer in Texas
To become a tax preparer in Texas, a potential tax preparer must meet requirements set forth by the Texas Department of Public Safety. Each time you renew your registration with the state, you’ll have to pay a renewal fee. Whether you are looking to get your license to prepare taxes or looking to renew your expired license, visit this page for helpful information on the requirements and how to apply.
Tax preparation is a career that is on the rise and brings a necessary and welcome service to the community. But how do you become a tax preparer? What sort of qualifications are needed? What tools are available to make you more productive? And what does a tax preparer do on a day-to-day basis?
Preparing Taxes in Texas
If you live in Texas and you’re good with numbers, working as a tax return preparer is a good way to earn money. No degree is required, and you can train for this career in a short period of time. Many working parents also appreciate the scheduling flexibility that tax preparation work can offer.
According to the United States Bureau of Labor Statistics, tax preparers complete annual income tax return forms, working for both small businesses and individuals. This job typically involves reviewing financial documents provided to you by your clients and then entering this information into state and federal tax forms, such as the 1040. As a tax preparer, you’ll be expected to identify possible deductions and tax credits, seeking to minimize a client’s tax liability while maximizing his refund.
No license is required for tax preparers in Texas, which is consistent with the laws in most U.S. states. Still, many tax preparers opt to receive some kind of training so that they can provide the best service to their clients. Many national tax preparation companies offer free or low-cost training to those interested in becoming a tax preparer. In fact, the training program offered by one major tax preparation company requires only 60 hours of instruction in most states. Some vocational schools also offer training, but you may want to compare the cost of these programs to those provided free by tax-preparation companies.
Tax preparation companies provide free training, so they can recruit new preparers each tax season. Completing a training program is not an offer or guarantee of employment: If you decide you want to work for the company, you’ll still need to complete an application and undergo an interview process.
Before you can begin preparing tax returns, you’ll need to obtain a preparer tax identification number (PTIN) from the IRS. You can do this online, and no fee is involved. In addition, the IRS provides training courses and continuing education programs for tax preparers. In fact, if you would like to get some real-world practice in tax preparation before going professional, you can contact social service agencies in your area to learn about becoming a volunteer tax preparer for people in your community.
According to the BLS, the national median annual wage for tax preparers, as of 2016, was $36,550.This means that 50 percent of tax preparers made more than $36,550 and 50 percent made less.
As a tax preparer, you will usually work in an office setting. If you work for a tax preparation company, you may work in one of their offices or even a “pop-up” tax center set up in a grocery or department store. If you’re self-employed, you have the option of working from home or a standard office. It’s important to keep in mind that tax preparation is a seasonal business one that primarily runs from January until the middle of April. Things may pick up again in October, which is when those who have received a six-month extension are required to submit the returns. Expect to be extremely busy around deadline periods: You may need to ask for cooperation from your family during this time.
Years of Experience
According to a survey by PayScale.com, tax preparers can expect to earn more money as they gain job experience. Survey results showing the correlation between years on the job and income are below:
- 0–5 years: $25,000
- 5–10 years: $31,000
- 10–20 years: $36,000
- 20+ years: $41,000
Job Growth Trend
The BLS does not track employment growth for tax preparers specifically. Instead, this occupation is grouped with others in the classification of “Professional, Scientific and Technical Services.” Employment in this segment is expected to grow between 10 and 14 percent between 2016 and 2026. However, note that this covers a wide variety of professional service jobs, and it’s not specific to tax preparers.
- BLS.gov: Tax Preparers
- PewTrusts.org: Most States Have No Rules for Independent Tax Preparers
- IRS.gov: IRS Tax Volunteers
- IRS.gov: IRS-Sponsored Continuing Education Programs
- IRS.gov: Link & Learn Taxes
- O*Net Online: Tax Preparers
- PayScale.com: Tax Preparer Salary
- HRBlock.com: How to Become a Tax Preparer
- IRS.gov: PTIN Requirements for Tax Return Preparers
Ways to Become a Tax Preparer
Preparing tax returns can be a lucrative full-time or part-time business. And it can be easier than you think to become a income tax preparer.
What types of people prepare tax returns
There are over one 1.2 million tax preparers in the United States. They come in all shapes and sizes. They range from licensed professionals to people without formal training who prepare tax returns part-time.
Let’s look at the different types of people who prepare tax returns for clients.
1. Certified Public Accountants (CPA)
CPAs represent the high end of the tax pro spectrum. CPAs not only prepare tax returns, they routinely represent clients before the IRS. They also perform sophisticated accounting and tax work. CPAs generally work in large national firms or small local outfits.
Each states licenses and regulates certified public accountants (CPAs) located in the state. Most CPAs major in accounting in college. You must have a minimum of 150 hours of college accounting courses to be a CPA. You must then pass a comprehensive CPA exam.
2. Enrolled Agents
Enrolled agents (EAs) are tax advisers and preparers who are licensed by the IRS. You must pass a difficult IRS test to become an enrolled agent. But you don’t have to have any particular educational background.
Anyone who can pass the test can become an EA. Like CPAs, EAs can represent taxpayers before the IRS and in administrative proceedings, circuit court, and, possibly, tax court.
3. Non-Credentialed Income Tax Preparers
Non-Credentialed tax preparers are people who prepare tax returns but are not CPAs or EAs. There are about 600,000 to 700,000 people who work as non-credentialed tax preparers. They often work part-time or only during the tax season. Many tax preparers practice with national tax preparation services like H & R Block, Liberty Tax Service, or Jackson Hewitt Tax Services. However, there is nothing to prevent you from setting up your own tax preparation business.
Non-Credentialed income tax preparers typically handle individual tax returns, which are less complicated than those for businesses. They generally get paid less than CPAs and EAs. But that doesn’t mean you can’t make good money.
tax preparer license
The IRS does little to regulate non-credentialed income tax preparers. It does not require them to have licenses. But non-credentialed tax preparers can’t represent clients before the IRS.
Regulating tax preparers is left to the states. In the vast majority of states, anyone can prepare tax returns for others without having to take a competency exam, get a license, or comply with any other government regulation.
A few states do license preparers. These are California, Connecticut, Illinois, Maryland, Nevada, New York, and Oregon. Also, 20 states have special regulations you must comply with if you offer tax refund anticipation loans to your clients.
how do i become a certified iRS tax preparer
Here are the steps you should take to become a non-credentialed tax preparer.
Step 1: Get the training
You don’t need to be a genius to prepare tax returns. And don’t need a college degree. However, you should have a high school diploma or GED.
Moreover, you don’t necessarily need an extensive background in accounting. Most non-credentialed tax preparers handle returns for individuals, which are usually routine. Nevertheless, you still need training so you can competently prepare tax returns for others.
The less background you have in tax and accounting, the more training you’ll need. If you intend to specialize in taxes for individuals, you’ll need less schooling than if you deal with business taxes.
There are many tax training resources:
- Your local community college may offer courses.
- National tax preparation firms like H & R Block, Liberty Tax Service, and Jackson Hewitt Tax Services all provide training courses, often at low cost.
- Some tax preparation companies offer on-the-job training.
- Many private training companies and technical colleges offer courses.
- The Accreditation Council for Accountancy and Taxation (ACAT) and National Association of Tax Professionals both present training courses. The ACAT offers an Accredited Tax Preparer credential to those who complete its courses and pass an exam. Credentials are not required to be tax preparer but can help you get hired or paid more.
You can access a comprehensive list of tax training resources from the IRS website.
Interested in taking the H & R Block income tax course?
Anyone 18 or older is eligible to take the H & R Income Tax course—although some states require a high school diploma or equivalent. The course is offered to the public so they may learn how to prepare taxes and possibly work for the company as an uncertified tax preparer.
The chances of getting an interview for a job at H & R Block is reliant upon the following:
- Attending the classes and not missing more than eight hours of instructor-led sessions
- Finish all tests and self-study sessions
- Pass the final test with a score of 70 percent or better
Sign-ups usually occur in August of each year, and the classes traditionally run September to November.
Enrollment into the course is free but prepare to purchase course materials in either digital or printed format. Students also receive a “Study Guide” book, which includes key points and reference material.
Step 2: Get your PTIN from the IRS
Anyone who prepares federal tax returns for money must have a valid Preparer Tax Identification Number (PTIN). You obtain it from the IRS. Getting a PTIN registers you as an “unenrolled preparer,” granting you the minimum level of clearance to prepare federal taxes. You use the PTIN to identify yourself as a paid preparer in the returns you draw up for your clients.
You can obtain your PTIN online, and it’s free. To get a PTIN, you must
- Be at least 18 years old
- Provide your address
- Provide your Social Security number
- Explain any felony convictions, and
- Explain if you owe money to the IRS
There are no other requirements. But, if you have felony convictions or owe money to the IRS, it might hold up your PTIN.
Step 3: Get your EFIN from the IRS
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If you intend to work as a tax preparer on your own, you need to obtain an Electronic Filing Identification Number (EFIN) from the IRS. You’ll need this number to e-file returns for your clients. Any tax preparer who prepares 11 or more tax returns a year, must e-file the returns.
To obtain an EFIN, you must:
- Create an IRS e-services Account
- Submit an IRS online e-file application, and
- Pass a Suitability Check
Obtaining an EFIN is free. But you may have to get fingerprinted, which can cost about $50.
The IRS doesn’t want to give criminals EFINs. So it may check your credit history and criminal record. It will also check to see if you owe the IRS money.
For more information, refer to IRS Publication 3112, IRS e-file Application and Participation.
Step 4: Comply with state licensing requirements for non-credentialed tax preparers
The following states require non-credentialed tax preparers to obtain a state-issued license or registration. Many impose education and competency examination requirements as well.
These license requirements do not apply to CPAs, enrolled agents, or attorneys. Some of these states have other exemptions. So study your state’s requirements carefully.
tax preparer requirements by state
California tax preparer requirements
Tax preparers must register online with California Tax Education Council to work in California. To do so, you must:
- Take a 60-hour qualifying education course from a CTEC approved provider within the past 18 months
- Purchase a $5,000 tax preparer bond from an insurance/surety agent
- Obtain a Preparer Tax Identification Number (PTIN) from the IRS, and
- Pay a $33 registration fee
You must also complete 20 hours of continuing tax professional education each year.
Connecticut Tax Preparer Requirements
Tax preparers in Connecticut must obtain a permit from the Connecticut Department of Revenue Services every two years. The permit costs $100. To acquire a permit, you must:
- Be eighteen years of age, or older
- Have a high school diploma
- Possess a PTIN from the IRS, and
- Present evidence that you have the experience, education, or training in tax preparation services
You apply for the permit online. Connecticut tax preparers must adhere to specified standards of conduct or face a civil penalty of $500 for each violation. You can also have your permit revoked. For more details, see Permit Requirements for Tax Preparers and Facilitators.
Maryland Tax Preparer Requirements
Maryland tax preparers must obtain a license from the Maryland Department of Labor, Licensing, & Regulation. To attain a license, you must:
- Have a high school diploma or GED
- Obtain a PTIN from the IRS
- Complete 80 hours of tax law training courses, and
- Pass a state competency exam
You need to renew your license every two years. To do so, you must complete 16 hours of continuing tax education and retake the exam.
Nevada Tax Preparer Requirements
You must register with the Nevada Secretary of State to be a tax preparer in Nevada.
- You register as a document preparation service
- To register, you must pay a $50 fee and obtain a $50,000 surety bond or cash bond
- You must file these with the Secretary of State
- Next, you must renew your license every year
Registration takes place online.
New York Tax Preparer Requirements
You must register with the New York Department of Taxation and Finance every year to work as a tax preparer in New York state. To do so, you must:
- Be 18 years of age or older
- Have a high school diploma or GED
- Certify you have met all child support obligations, and
- Pay a $100 fee if you prepare 10 or more returns each year
You register online. You must also complete four hours of continuing education each year.
For more details, see Publication 58, Information for Income Tax Return Preparers.
Oregon Tax Preparer Requirements
To work as a tax preparer in Oregon, you must obtain a license from the Oregon Board of Tax Practitioners. To do so, you must:
- Have a high school diploma or GED
- Obtain a PTIN from the IRS
- Complete 80 hours of tax training courses with at least a 75% passing grade, and
- Pass a competency examination
You apply online.
Should you enter the IRS filing season program?
The IRS does not license tax return preparers or impose any educational or other requirements on them. Why? Because it’s not legally authorized to do so. But the IRS does have a voluntary registration program: the Annual Filing Season Program.
To join this program, you must have a PTIN and complete 18 hours of tax continuing education. This program includes a six-hour federal tax law refresher course with the test.
After completing these requirements, you’ll receive an Annual Filing Season Program Record of Completion certificate from the IRS.
You’ll also get listed in an IRS online database of tax preparers. This record is officially called the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. Being listed in the directory can help you get business.
In addition, Annual Filing Season Program participants have a limited right to represent their clients before the IRS. They may do so before revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service.