Accounting & Finance

How to Start a Virtual Tax Preparation Business: Step-by-Step Guide

Read Time: 6 min

Individuals and businesses alike dread the thought of tax preparation. In many cases, these are the consumers who convince themselves they can handle all the accounting, only to find out that they are struggling with numbers and forms. This is when both business owners and individuals turn to tax preparation services for their expertise.

Tax preparation services require a certain set of skills. Accounting for tax prep is defined as accountants and tax professionals who prepare individual and/or business tax returns for submission to the IRS. According to Statista, the revenue of the accounting, tax preparation, and payroll services industry in the United States generated about $156 billion last year and will only be growing.

Starting an accounting and tax preparation business can certainly bring in profits. Whether you handle businesses or individual tax preparation, there are always customers looking for help.

8 Steps to Starting a Tax Prep Business

Starting a tax preparation business will take a bit of planning. In order to be successful, there are a few main points that you should be sure to think about. 

1. Obtain Proper Licensing

tax preparation forms

If you are planning on providing official CPA or EA services, you will need to take the certification test associated with the state that you will be practicing in. In order to function under a trusted title, this will be necessary. But if you are going to be working non-credentialed, there is no need for this test. Check with your state’s licensing requirements for any additional steps that you need to take to proceed without a license. Different credentials and certifications will be required depending on your tax preparation status.

2. Secure Your PTIN and EFIN

This step is only required for those without a CPA or EA license. In order to prepare federal taxes, you will need to have a valid Preparer Tax Identification Number (PTIN). This can be obtained from the IRS for no charge. While an Electronic Filing Identification Number (EFIN) is used if you will be submitting more than a handful of tax returns each year. Securing your EFIN is free but may require fingerprinting.

3. Consider Business Insurance

Whether you work at home or on the road, getting tax preparation services insurance can be a big relief when unfortunate things pop up. Professional liability insurance can be tailored to the wants and needs of your business as it grows. With an increasing amount of audits and changing tax laws, having a plan on hand will give you peace of mind.

4. Know Your Lawful Standing

Stay current on new financial laws both nationally and locally. Knowing these laws and operating accordingly will help you stay compliant and out of trouble.

5. Hash Out a Business Plan

  1. Target Audience: Who do you want to provide your tax preparation services to? Perform a target market analysis to identify your ideal consumer. Small businesses offer ongoing work, but there are also individuals who require the services of an accountant. 
  2. B2B or B2C: Learn your target market’s financial needs. Working with small businesses will require you to have in-depth knowledge of taxes and payroll, employment law, and more.
  3. Services Offered: Decide on the type and extent of services you will be offering and list them. Once the list is complete, you will need to decide on pricing. Prices will vary depending on the clientele and the time it takes to provide each service. If you find that you are undecided about the prices you want to set, researching your competitors may be helpful.
  4. Marketing Plan: Construct a marketing plan that is targeted towards your audience. The use of brochures and business cards may be one route, but online tactics may be better. Because of the seasonal aspects of your services, be ready for the influx of customers all at once.

6. Acquire Supplies and Software

Get all the equipment that you will need to begin starting your tax preparation business. Reliable internet access, supplies, and tax software are all necessary parts of your tax preparation business. This is just scratching the surface of what you may need as you grow, but at least this will allow you to get started.

7. Open a Business Checking Account

Once you’ve legally filed with the state and obtained your EIN, your next step is to open a business checking account for your deposits. This will serve as your primary operating account for your new tax preparation business.

8. Build a website

Consult other tax preparation business sites for the creation and hosting details, or have a professional build one for your business. Having a website will help your customers find you and will also be a way for you to publish the services that you offer. SEO strategy and outreach opportunities will be easy ways to increase your customer base moving forward.

9. Open a Merchant Account

In order to accept card payments for your services, you will need to receive a tax preparation merchant account. Whether you plan to utilize a MOTO-type account or you will be face-to-face with your customers, this is a very important step. Without this capability, you will be limiting the options that you provide for your customers and preventing a large portion of them from being able to use your company at all. With a proper tax preparation solution, you can capture payments online through a secure virtual terminal, send and receive invoices, track your business transactions, and much more.

Get a Tax Preparation Merchant Account

payment processing mobile

A merchant account will allow you to be able to process customer credit card payments through a safe online payment gateway. For those who will be opening a merchant account for the very first time, it is important to research your payment processor options. All too many times, a new business owner will open a merchant account on PayPal or Stripe and run into issues. The problem is that because of their auto-approval techniques, they do not notice that tax preparation is not a business that they can support. Their terms of service in place do not allow for hard-to-place industries, such as tax preparation.

The same holds true for other traditional banks and payment processors. Accounting and tax preparation fall under the hard-to-place, high-risk category and many business owners in this space get turned away or shut down every day.

Tax Prep Businesses are High Risk

Here are a few reasons why your business is considered high-risk:

  • You may be a new business with no prior processing. Banks do not like taking chances on every new business and so will not support one with no history to go off of.
  • There is are high amount of fraud in tax preparation businesses. Scams and fraud are everywhere in the financial world and more so in industries that handle personal customer information. Oftentimes, online companies are more at risk because they handle all of their services over the Internet rather than face-to-face. 
  • Chargebacks are a real issue. This happens when a customer is not happy with your services and contacts their bank for a refund. Too many chargebacks and your merchant account may be closed without warning. Take into account that there are ways to defend against chargeback disputes.

The best and safest way to open a merchant account is to contact a high-risk provider. These are the experts who work with financial institutions that understand the risks of the business and plan accordingly. They do underwriting before they approve accounts so that they can get to know you and your company. In doing this, they realize the risks involved and partner you with appropriate banking relationships. This way, you will not shut down due to your industry type.

When choosing your high-risk merchant account specialist, make sure to do your research. You need to be able to trust this company and have the confidence that they have your business’s best interest in mind. Make sure that they can handle tax preparation businesses and have the tools to help mitigate fraud and provide chargeback protection.

close icon
low risk bullseye icon

Simplified Invoicing & Recurring Billing


By submitting this form, you consent to our terms

VeriSign Secured

Your information will not be distributed

close icon


By submitting this form, you consent to our terms

VeriSign Secured

Your information will not be distributed