Description
Tax preparers are individuals that formulate and file tax returns. They also provide tax advice and guidance for the work performed. Becoming a tax preparer requires adequate knowledge of certain federal tax laws and regulations, as well as adequate state and local laws in which the tax preparer has jurisdiction. Generally a tax preparer will deal with many types of 1040 documents pertaining to individual taxation, but they are not limited to this.
Types: PTIN or EFIN
Qualifications/Skills
On occasion tax preparers are faced with complex tax issues in which the tax preparer must research and properly handle the situation in order to avoid penalties and fines, but more often than not it is a simple tax return. Work conditions for a tax preparer are comparable to any other office job, danger is pretty much nonexistent. Until recent years, tax preparers needed very little to qualify for the job. Things have changed slightly in the past 5 years or so. Although a college degree is still not required, potential tax preparers need to take a test administered by the IRS. On the other hand an individual does not need to be registered with the IRS or take the exam if he/she either does not accept compensation for tax services provided or does not exceed more than 10 tax returns filed in one year.
The PTIN (Preparer Tax Identification Number) is required for preparers that are signing and preparing tax returns for compensation. It also allows the preparer to enter the PTIN instead of his/her social security number when signing off on a completed tax return. If the preparer would like to prepare and electronically file for compensation, an EFIN (Electronic Filing Identification Number) is needed. An EFIN typically takes a good amount of time to get approved for, so it is usually recommended to start the process several months in advance so that the process is complete in time for tax season.
Tax preparers can work from a home office, or choose to open a small office outside of their homes. This is mostly based on the amount of clientele they have. Tax preparers that are new and have a small client list typically choose to lower cost and work from a home office to avoid running up too much debt. However, it does benefit to have a store-front to attract potential clients and to give existing clients the opportunity to walk into a more professional setting.
The ability to speak multiple languages can be essential if you plan on working in an area that is culturally diverse with many different people speaking various languages. Also, just like most clientele based jobs, you can really strive if you have the right soft skills and people skills.
Training
Training to be a tax preparer is all hands on experience and research. Every tax situation is so unique that the best way to learn is to tackle each client’s issues with tax research and guidance from seasoned tax preparers. Tax preparers who specialize in certain tax laws such as corporate law or real estate law typically possess a JD, CPA, or some type of legal designation. Tax is also something that has a huge amount of simplified tax guides for novice tax preparers to learn the basics and even advanced tax rules. It is not required to attend a specialized school to become a tax preparer.
Work Environment
Tax preparers can range from a wide array of people coming from different professional backgrounds. Most commonly known backgrounds are enrolled agents or CPA’s (Certified public Accountants), which both require schooling. But, anyone can become a tax preparer if they are willing to acquire the tax knowledge and pass the one hour test. We will give you the pros and cons of this job title and give a final opinion based on our “No degree” metric system.
Salary
Total Employment: 68,720
Mean Annual Wage: $47,090
Median Annual Wage: $38,730
Top 5 Highest Paying States
| State | Employment |
Annual mean wage |
|---|---|---|
| District of Columbia | 160 | $107,880 |
| Colorado | 1,270 | $73,740 |
| Massachusetts | 1,750 | $62,300 |
| California | 10,710 | $61,970 |
| Oregon | 980 | $57,720 |
Top 5 States with Highest Employment
| State | Employment |
Annual mean wage |
|---|---|---|
| California | 10,710 | $61,970 |
| Texas | 6,730 | $50,120 |
| Illinois | 4,080 | $35,990 |
| Florida | 3,470 | $39,230 |
| New York | 2,840 | $54,470 |
Source: Bureau of Labor Statistics (bls.gov)
Pros: The pros for this job are that most of the money is made during “busy season” ranging from January 1st to April 15th. After that period a tax preparer’s schedule becomes very flexible and “free” as some might say. This job also has nonexistent manual labor for those that may not be able to withstand hard workloads and lots of standing.
ConsThe cons for this job are a little concerning. The ten year job growth chart depicts digression; this is due to more taxpayers doing their taxes on their own, thanks to new easy-to-use tax software. In general most taxpayers have a simple return. Most of the potential market may simply be able to use software that maps everything out for them. This is what hurts future growth for the industry. For some tax preparer’s this is not much of an issue because they focus on more complicated tax returns and supply tax advice year round to keep clients interested.
Scoop
One of the great things about this job is that it can be a compliment to another job since there is a lot of work during the tax season. For those that like to move around and get dirty with some manual labor this might not be the job for you. For those that like to sit, analyze, and apply strategies to different problems and scenarios this would be highly recommended. We give this job a (Enter number) based on our No Degree metric system.
Helpful Links and References
https://www.irs.gov/Tax-Professionals/Overview-of-Tax-Return-Preparer-Requirements
https://www.irs.gov/uac/Registered-Tax-Return-Preparer-Test-Explained
