You might think the growth of DIY tax platforms would reduce the demand for tax accountants, but regulatory changes like the new $5,000 reporting threshold for Form 1099-K, the $8,046 maximum EITC, or the $2,000 Child Tax Credit, has continued to drive tax returns, making it the second-highest revenue-generating service in 2024.

In 2025, the IRS processed over 138 million tax returns, a staggering number handled by just 131,000 tax preparation businesses. This shows the abundance of opportunities for new and established tax preparation businesses.

All things considered, tax expertise alone will not be enough to sustain your success. You need the right processes, marketing strategy, and capacity management system to meet client deliverables and stay profitable.

This article will take you through the steps to achieve this.

Step 1: Understand the Requirements to Become a Tax Preparer

What Level of Tax Knowledge is Required?

Any accountant who understands how tax laws and regulations apply to businesses can prepare federal taxes for clients. The only requirement is the Preparer Tax Identification Number (PTIN) and in many cases, Electronic Filing Identification Number (EFIN).

Certifications like CPA, EA, Attorney, etc. are important, but you don’t need them, especially if you won’t represent your clients before the IRS.

Understanding the PTIN: The PTIN is necessary for filing individual or business taxes at the federal level. To get your PTIN, create your account and apply for a PTIN at https://rpr.irs.gov/ptin using your personal information (name, mailing address, date of birth), Social Security Number, business information, and your previous year’s tax returns.

Understanding the Electronic Filing Identification Number (EFIN): this number qualifies you to become an e-file provider. If you will e-file more than five (5) tax returns, the IRS requires you to provide your EFIN to submit returns for your clients.

Important Certifications Include:

  • Certified Public Accountant (CPA): These are licensed at the state level to provide accounting, auditing, and financial planning for businesses. Getting the CPA license also qualifies you to represent your tax clients before the IRS.

The CPA license qualifies you to provide public accounting services beyond tax.

  • Enrolled Agent (EA): These are licensed at the federal level to provide specialized tax-related services. This license qualifies you to represent your client before the IRS.

While an EA can do all the tax-related work a CPA like a CPA, they can’t provide broader financial services (such as financial statements) that a CPA can.

State-specific Requirements

Individual states have special requirements to protect their population from financial harm.

Examples are:

  • California: To become a registered tax preparer in California, you need to get a $5000 tax preparer bond from an insurance agent and take a 60-hour course within 18 months of your application, unless you’re a CPA or EA in California.
  • Connecticut: a High School Diploma and a $100 permit to be a professional tax preparer.
  • New York: a High School Diploma (or GED), a $100 fee, and continuing education (using the SLMS) to complete more than 10 tax returns.

Check the IRS List of all State Requirements for Tax Preparers for specific requirements in other states.

Step 2: Create a Tax Preparation Business Plan

Define Your Target Market

Defining your target market helps you channel your limited resources to businesses in specific industries.

For example, if you’re serving only freelance business owners, your strategies for getting and retaining clients might differ from those targeting larger businesses.

The more you know about your target market, the better equipped you’ll be to tailor your services to their financial situations.

Determine Your Pricing Model

Beyond the amount you want to charge for your services, your chosen pricing model will determine how frequently you get paid and the profits you’ll take home.

The most common models are:

  • Flat Fees: Where you charge fixed weekly, monthly, or quarterly fees, depending on the client’s needs. This works best for recurring tax projects.
  • Project-based Pricing: Each tax project commands a separate fee. The client pays once the project is complete, regardless of the hours spent.
  • Hourly: Your client pays you based on the number of hours spent on the project. This is more time-sensitive than others, which is why effective time tracking is most important here.
  • Tiered: allows you to categorize your services for a singular payment. The most common example of tiered services is the Basic, Standard, and Premium bands, where each pricing band commands a higher fee.

Recommended:

Playbook: How to Price Accounting and Bookkeeping Services for Ultimate Profitability

Goals and Revenue Projections

This is where you decide where you want to be in one, three, or ten years. This is also where you state the number of clients you need to serve and the income (and profit) you need to get there.

Your answers to these, and similar growth questions, will form the foundation of your firm’s goals and revenue projections.

Tools and Staffing Needs

When you’re done budgeting and forecasting your revenues, you need to understand the tools and human resources you’ll need to hit those figures.

Your choice of tools will depend on your tax workflows (what you’ll need at what stage to meet your client’s needs). During the onboarding stage for example, you’ll most likely need a tax engagement letter. Internally, you need tools like Financial Cents to manage your projects, clients, and team.

For staffing needs, your service offering, available expertise, and workload will determine the skillset to look for in your next hires.

For example, you’ll need a CPA or an EA for IRS  representation projects. Lower-level tax (or admin) work can be handled by other team members.

Step 3: Set Up Your Business Legally

Register Your Business Name

This is where you go to the Secretary of State’s office (or similar agencies) to register a business name, either as a sole proprietorship, partnership, LLC, Corporation, etc. More on this later.

  • File a “doing business as” (DBA) if you’re doing business under a different name than your legally recognized name.
  • Get a Federal Tax ID with the IRS to get an Employer Identification Number (EIN) to file your taxes.
  • Visit your City Council to understand their requirements for your type of business (such as permits and licenses).

Still deciding on a name? Use our free firm name generator tool to generate name idea.

Your firm’s legal structure determines your tax obligation, personal liability for the business, and available investments.

Here are the most common and how they work:

  • Sole Proprietorship: This structure is low-risk and easy to start. However, you’re required to report the firm’s income on your personal tax returns, making you responsible for the firm’s inability to meet its financial obligations.
  • Limited Liability Company (LLC): This structure gives you the option of paying corporate taxes to protect your personal assets from the company’s liabilities or passing your profits and losses to your personal tax returns.
  • S-Corporation: This structure requires you to pay corporate taxes on the business, but protects your personal assets from the company’s debts and liabilities. This business structure is much harder to start than a sole proprietorship or LLC, making it more ideal for large business owners.
  • Other structures include partnership and C-Corp.

Set Up a Business Bank Account

Setting up a separate business bank account is required of LLCs and S-Corps. It prevents commingling,  simplifies financial audits, and gives you a more professional outlook.

  • Choose a bank that satisfies your service and fees criteria.
  • Provide required information and documents (EIN, personal and business information, and documents).
  • Make the account opening deposit.

Set Up Payment Processing

A secure and efficient payment processing system enables clients to pay you easily, conveniently, and confidently, improving your cash flow and profitability.

As a matter of operational efficiency, use a practice management system with an integrated billing solution. It’ll save you the time and stress of moving data across two platforms each time you need to receive payments.

Choose a Provider:

If you can get a provider with low fees that integrates with the other accounting apps you use daily, you’ve struck gold.

It will reduce your technology expenses and help you manage more processes in one place.

Sign Up:

Complete the merchant application by providing your business and bank account information. You can also schedule a call with the payments team if you need help.

Understand Data Privacy and Compliance Rules

Privacy and compliance rules protect your client’s information from fraudulent access and enhance client confidence in your business.

Here are some of these rules and their requirements:

  • The IRS E-Filing Mandate: Tax firms filing more than five (5) returns must file electronically using IRS-approved tax software.
  • IRS Form 7216: Get the client’s consent before disclosing tax data to third parties.
  • IRS Safeguards Rule: Use security measures like access control and data encryption to protect client data.
  • Gramm-Leach-Bliley Act (GLBA): document your data security plans in writing.
  • FTC Safeguards Rule: regular risk assessment and training of employees on data security.
  • Written Information Security Plan (WISP): a document that outlines how you protect sensitive customer data. It is required by the IRS and the FTC. Grab a free WISP template here.

There are also state laws and professional standards to monitor for maximum compliance.

Step 4: Choose the Right Tools and Software

Tax Filing Software

Tax software reduces human errors by automating calculations, which frees you up to focus on applying tax laws and regulations to increase your clients’ tax credits and deductions.

Here are some top tax filing software solutions and their key features:

  • Intuit ProConnect Tax: Manages the entire tax process from books to returns to advisory.
  • Drake Tax: Extensive tax forms that automate tax returns.
  • Lacerte: Efficient workflows and data integration.
  • ProSeries Tax: Error-checking and integrated tax research features.
  • TaxAct Professional: It is cost-effective and provides pay-per-return options.
  • UltraTax CS: Robust tax software with federal, state, and local tax programs. Built for larger firms.

Practice Management Tool like Financial Cents

Standardizing processes, documenting them, and creating checklists was the most important thing I did as a firm owner. It allowed me to hand off work.

Using Excel to manage your clients and their returns requires a lot of documentation and manual work. If you don’t systematize your processes in a practice management software, there’s no hope of scaling a tax business."

Blake Oliver, CPA, Founder & CEO - Earmark

These tools help to centralize client information, standardize tax workflows, track projects, and manage team capacity in one place.

With Financial Cents, for example, you have every feature you need to manage the entire client process from onboarding through service delivery to payment processing. This enables your team members to deliver satisfactory tax projects consistently.

Secure Client Portals and Document Sharing Tools

Security is even more critical in client collaboration now that you don’t need to meet clients physically to exchange documents and tax forms.

A solid client portal makes client collaboration instant, convenient, and easy to use, increasing clients’ response rate.

With tools like Liscio, your clients do not need special training to collaborate and share information with your team.

E-signature Tools

E-signature tools ensure speed and efficiency at a time (tax season) when speed and efficiency matter the most.

They eliminate the need for clients to print and scan tax forms and returns to add signatures.

Instead, your clients can simply open the document and sign online. This helps tax teams complete projects faster to meet all client deadlines.

Time Tracking and Invoicing Tools

Time tracking and billing tools keep your firm profitable by ensuring you get paid what you deserve.

Time tracking enables your employees to keep accurate time logs. You can also use your time reports to make your rates and optimize your workflow to ensure maximum return on the time you invest in client projects.

With an invoicing solution, you can easily bill your client for one-time or recurring projects. The automated reminders help clients remember to make payments on time, which is good for cash flow.

As an all-in-one practice management software, Financial Cents provides all the features in this list (except for the tax software category) at a single price.

This allows you to access E-Signature, time tracking, client portal, and other features built exclusively for tax and accounting firms in one platform. It saves your team the need to jump between multiple applications when working, especially during tax season.

Step 5: Find Your First Clients

Use Your Existing Network

Before creating any fancy marketing and customer acquisition plan, start with the low-hanging fruit: the people in your network.

This strategy is effective because it builds on the relationship you have already built in your communities. These people likely already know you and can vouch for your expertise, which increases the chances of word-of-mouth referrals.

Meanwhile, if you’re not visible in your network, you need to start sharing your tax knowledge with people who fit your ideal client profiles.

Join Local Business Associations

This strategy brings you into physical contact with the people who will need your services someday. While in these associations, build trust with other members by sharing helpful tax knowledge.

You can also organize events that help DIY tax preparers understand changes in the tax laws and regulations. Doing this makes you a trusted advisor, and when these businesses want to start using professional tax preparation services, you’ll be an easy choice.

Offer Referral Bonuses or Seasonal Promos

Referral bonuses and seasonal promos take advantage of the power of self-interest and the desire to cut costs.

Referral bonuses incentivize your existing clients to reach out to their networks to bring people who trust their recommendations. Seasonal promos create a sense of urgency in prospects to take advantage of your offer before it’s gone.

Both tactics help you to win clients who could have chosen another tax firm down the line.

Partner with Other Service Providers

Partnering with non-competing accounting businesses is another lucrative source of tax clients.

By sending your clients who need bookkeeping services to bookkeeping firms, your bookkeeping partners will also send their clients looking for tax planning and preparation services your way. This also works for other businesses in the accounting industry (AP/AR, payroll, audit, etc.).

Build a Professional Presence Online

Having a digital office for your tax preparation business helps potential clients find you more easily.

You can create a website to advertise your business, social media to engage with prospects, and blogs to answer common tax questions.

These tactics make your business more visible to people looking for your services within and outside your locality.

Learn about other creative and effective ways to find clients for your tax business in this article.

Step 6: Scale and Grow Strategically

Hire Seasonal Staff or Virtual Assistants

As a tax attorney, when I have an interesting project (or workload) to manage, I can just get staff from my friends at the American Bar Association to work on projects with me. This gives me partner-level people fully trained and are good, if not better, than I am."

Eric Green, Founder, Tax Rep Network

Hiring seasonal staff helps you manage capacity to meet client demands at scale. They’ll take some load off your internal team to prevent burnout and maintain work/life balance during the tax season.

Virtual assistants can handle low-impact tasks (like admin work) to allow your core team to focus on the work that moves the needle for your firm.

Automate Repetitive Admin Work

Automation frees your time and makes your firm more efficient, which allows you to focus on tax advisory and consultation.

For example, automating your client data or signature collection gives you more time for other important tasks while helping clients remember to grant your request.

Automation also reduces errors by eliminating human input or manually sending a tax preparer checklist to clients. This helps your clients escape regulatory penalties, which can hurt your brand reputation and ability to get more clients.

Implementing Efficient Workflows and Systems

To scale your firm, you have to document what you're so good at doing to the point that you can duplicate and delegate it. Once you get those processes in place, it doesn't matter who's doing it.

If somebody leaves the company, you still have the process to ensure the work is done for the client. New hires can come in and just follow the steps that you have in place. It ensures consistency and quality of work."

Roger Knecht, President of Universal Accounting Center

One way to implement efficient workflows is the use of tax preparation checklists that help your team members prepare client taxes confidently. This saves time and standardizes tax returns, enabling your team to serve more clients, increase profits, and grow.

Offer Year-Round Services

Diversifying your services makes you relevant to your clients throughout the year. One way to do this is by offering other accounting services like bookkeeping, payroll, etc.

Roger Knecht recommends tax planning. Here’s how he breaks a year’s worth of tax planning engagement:

  • First Quarter: Receive the various reports to file the return. This is where you flag the returns that missed out on opportunities to save money in the previous year.
  • Second Quarter: Meet with the clients who missed out on money-saving opportunities in the previous year.

To scale your firm, you have to document what you're so good at doing to the point that you can duplicate and delegate it. Once you get those processes in place, it doesn't matter who's doing it.

If somebody leaves the company, you still have the process to ensure the work is done for the client. New hires can come in and just follow the steps that you have in place. It ensures consistency and quality of work."

Roger Knecht, President of Universal Accounting Center
  • Third Quarter: Meet with everybody you’re serving to address tax issues based on the current tax law and the codes they ought to consider implementing in their business to save them money.
  • Fourth Quarter: Find out if they did the things you discussed in the third quarter that would save you money before the year’s end.

Use a CRM or Practice Management System

You’ll struggle to consistently deliver accurate tax returns if storing and retrieving client or work information is difficult for your team.

The right CRM or practice management solution will hold your brain, so that your team members can access every relevant information on time to deliver excellent work and improve client relationships.

Financial Cents allows you to store all kinds of client information using standard and custom fields and makes all this data available to every team member online.

Build Recurring Client Relationships

Businesses scale faster when they add new clients without losing existing ones. Recurring client relationships also save you the cost of acquiring new clients to replace old ones.

How do you build recurring client relationships? Deliver excellent client service consistently and make your client feel seen, heard, and valued.

Invest in marketing (Ads, SEO, Email Newsletters)

Effective marketing helps you to land the kind of clients that will pay well for your expertise without questioning your price.

For example, paid advertising (using Google or Meta Ads) allows you to target your ideal clients by location, business type, size, etc.

Similarly, SEO and Newsletters allow you to create content that addresses the pain points of your ideal clients, helping to attract, delight, and convert them.

Providing Excellent Service and Retaining Clients

Streamline the Client Onboarding Process

One benefit of an efficient client onboarding process is the ability to handle client information in a way that inspires confidence.

A streamlined onboarding process enables you to communicate clearly and clarify client expectations. This gives you a reliable foundation to tailor your services to their unique financial situation.

Maintain Clear and Consistent Communication

Tax preparation requires your client to understand the tax process, deadline, and outcomes. Clear and consistent communication helps you achieve that by clarifying your client’s business and their opportunities to increase tax refunds.

Effective communication is hard when you’re using multiple communication channels. That is why practice management software like Financial Cents creates a dedicated client folder that pulls client emails into your CRM solution.

This allows your team to track client communication where they’re getting work done.

Stay Up-to-Date with Tax Laws and Regulations

Regulatory changes happen regularly. We are required to shift our processes to fit the changes.

I learn about regulatory changes either through a client, watching a lot of IRS videos (they have some pretty good videos on their site), or just asking questions of the attorneys I work with. If I notice anything, I would go, 'Hey, have you seen this before? What does this look like?"

Dawn Brolin, Founder of Powerful Accounting

Most clients use tax preparation businesses (instead of DIY tax software) because of the need to stay compliant with evolving changes in tax regulations. But if you’re not up-to-date with these changes, you cannot help them.

Solicit Feedback and Testimonials

Your existing clients are more eager to speak about the quality of your service than you imagine, but you won’t know if you don’t ask for it.

Client testimonials are so effective because they are organic and allow clients to articulate their challenges and the solutions you provided convincingly.

Common Mistakes to Avoid

  • Relying Too Much on Tax Season

Waiting until January to April (or October 15) to make money from tax returns is a losing strategy.

The most successful tax firms generate revenues from year-round tax planning and consultation services.

  • Not Tracking Deadlines and Tasks

Tracking project deadlines is the most reliable way to exit the tax season without burning your team out.

This is where tax deadline management software is most beneficial. They help you track the tasks and subtasks that make up your projects in line with their due dates so that you can plan your team’s workload to hit all deadlines.

  • Failing to Follow Up on Unpaid Invoices

Clients fail to make payments on time for various reasons, but whatever the reason, timely follow-up gives you a better chance of receiving your payment.

With a billing solution like Financial Cents, you wouldn’t need to follow up on outstanding invoices.

You just have to set a reminder frequency, and Financial Cents will auto-remind your clients until they process your payment.

  • Using Insecure Communication Methods

Insecure communication methods expose your client’s financial information (banking information, SSN, etc.) to fraud.

This could result in fraudulent activities that may cost your client a fortune and damage your brand reputation.

One major way to plan for growth is by implementing an efficient staff onboarding process to set clients up in your firm as quickly and efficiently as possible.

When this process is disorganized,  you may leave your clients unimpressed and unsatisfied with your services, which could hurt client retention efforts.

Grow Your Tax Preparation Business Using Financial Cents’ All-in-One Solution

You can easily set up your tax preparation business by:

  • Understanding the requirements to become a tax preparer.
  • Creating a tax preparation business plan.
  • Setting up your business legally.
  • Choosing the right tools and software.
  • Finding your first clients.
  • Providing excellent service and retaining clients.

But growing the business requires you to simplify your tax workflows using software solutions like Financial Cents.

With its all-in-one practice management solution, Financial Cents gives you all the resources you need to scale your business in one, instead of multiple platforms.

Features include:

  • Proposal and engagement letters.
  • Workflow management.
  • Time-tracking and Billing
  • Client management.
  • Client tasks and auto-reminders.
  • Email integration.
  • Capacity Management
  • ReCats
  • Etc.

You need to see how these features work. Our customer support staff is here to walk you through our tax workflow solution. Click here to book a personalized demo.

You can test-run all its features on your own with our 14-day Free trial. Click Here to Start Now.