Are you currently working as a tax preparer for someone? Or Do you already have experience preparing tax returns? Either way, are you interested in starting your own tax business and wondering how to start and if this decision is right for you? With the ever-changing nature of the U.S. tax code, the demand for professional tax preparers will always be there.
Before your tax preparation business can get off of the ground, there are two important numbers you will need. To provide tax preparation services for compensation, – you must acquire a Preparer’s Tax Identification Number (PTIN). To electronically file tax returns, you must become an ERO and obtain an Electronic Filing Identification Number (EFIN).
Did you know you are not required to have any special training to become a professional tax preparer? According to the IRS, Any tax professional with an IRS Preparer Tax Identification Number (PTIN) can prepare federal tax returns.
What is PTIN?
A PTIN is an identification number all paid tax return preparers must use on U.S. federal tax returns submitted to the Internal Revenue Service. As a tax preparer, you can obtain a PTIN online at irs.gov. You must renew your PTIN each year after October 15.
Don’t have a PTIN and need to obtain one?
Most first-time PTIN applicants can obtain a PTIN online in about 15 minutes. The fee is $35.95, paid directly to the IRS, and is non-refundable.
After you obtain your PTIN, the next step is to obtain your EFIN. Please know everyone who prepares tax returns in your office will need PTIN, whereas the business owner is the only person required to get EFIN.
What is an EFIN?
EFIN stands for Electronic Filing Identification Number. The EFIN gives your permission to submit tax returns to the IRS electronically. According to the IRS, Tax preparers who will file 11 or more tax returns must submit them electronically. Therefore, individuals interested in starting a tax business must become Authorized e-file Providers and obtain an Electronic Filing Identification Number (EFIN).
Who is an ERO?
The Electronic Return Originator (ERO) is the Authorized IRS e-file Provider who originates the electronic submission of a return to the IRS. The ERO is usually the first point of contact for most taxpayers filing a return using the IRS e-file system.
How to become an ERO and Apply for EFIN?
Although there is no cost, the EFIN application process will require you to submit your fingerprints and undergo a suitability check (criminal history, tax debt history, etc.).
Three steps process:
- Step 1: Create an IRS e-Services Account
- Step 2: Submit Your Application
- Step 3: Pass a Suitability Check
Note that the IRS says the process can take up to 45 days. Also, some states may require that a tax preparer complete a separate application for state income tax return e-Filings.
How long it takes to get an EFIN?
The IRS says the process can take up to 45 days. Also, some states may require that a tax preparer complete a separate application for state income tax return e-Filings.
Once you obtain PTIN and EFIN, you are ready to start your tax business. The next step is to purchase professional tax software. Which software solution will be ideal for your business? That will depend on the types of tax returns, the volume of returns, and budget constraints—most companies offer several options. Once you purchase the software, you are ready to start training and filing tax returns.
Now that you have a lot of food for thought contact our team at NTO as you take your next steps towards starting a tax preparation business. Our team can save you time and ensure your tax preparation business is successful from the start.