How to Start a Tax Business
The Fundamentals for Tax Preparers
How to Setup Your Office
Getting Your Office Tools
Investing In Your Own Office Space
Acquiring Your Clients
Chapter 6: Investing in Your Own Office Space
Should you get your own office? This is a crucial decision that every new tax preparer must deliberate on when starting their business. You have to carefully weigh the pros and cons before renting (or purchasing!) your own office space.
Starting with a home office is a viable option. One advantage of tax preparation as a business is the ease of doing it from your home office. As long as you have enough space to accommodate your clients for meetings, you can start in the comfort of your home.
Of course, having an office space will lend credibility to your business. Clients will be more likely to trust you and view you as a professional.
What to Consider When Deciding on
Investing in Your Office Space?
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Most tax forms are available to download on the IRS website. The IRS has detailed instructions for each one for easy reference. You can fill up forms using the Adobe Acrobat PDF Editor. Once ready, file the forms via the e-File application.
You may find that not all clients want to file their returns using the IRS e-File system. Clients who opt for paper filing their tax returns include those with concerns about the security of their financial data. Some clients may not be eligible for an e-filing option. In 2018, IRS still received 13,628,000 paper tax returns.
To handle paper filing,order available tax forms from the IRS for a limited quantity. Expect the forms to be mailed after ten business days. If you have regular clients who prefer paper filing, make sure to order forms as soon as you can. Tax forms for the calendar year filing are available for ordering as early as December 1 of the previous year. Paper filing is not as common as it used to be. You’ll want to allot additional time for preparing and mailing paper forms.
If you’ve exceeded the limit for ordering tax forms from the IRS, you may purchase IRS tax forms from Amazon and Staples.
TIP: Order red ink forms from the IRS, instead of printing these on your own. Red ink forms such as Form W-2 or 1099s are specialized. If your self-printed red ink form is rejected by the IRS scanner, you will be penalized.
Printing your own tax forms means that you are applying for substitute forms. The IRS must pre-approve how you print these forms. Printing mistakes could damage the IRS’s scanning machine and could cause delays. To get approval, you must submit an application for review via email.
Steps to applying for substitute forms approval:
Clearly, the first to consider is whether you have the budget for an office space. Consider the capital you are willing to invest in your new business.
When you invest in your office space, you should be ready for a full commitment. You need to ensure you have a budget for at least one year of occupancy. Though in some cities, you can rent for a minimum of six months. That would still be a substantial cost to your start-up business.
According to Deloitte Insights, 23% of commercial space owners expect an increase in their rates in 2020 as they continue to upgrade their properties to ‘smart buildings.’ And even if you are not planning to rent in smart buildings, this surge in rental rates can affect the overall commercial real estate market.
When it comes to the rental price, you also have to factor in where you will do your business. According to Inc.com, the rental rates from big cities like Minneapolis, Milwaukee, Chicago, and Detroit are continuously increasing. The same goes for cities like Seattle, Denver, Austin, and Raleigh.
According to SquareFoot.com, rent per square foot from major US cities, like New York, San Francisco, and Los Angeles, averages at $41.82 per square foot per month. It could also increase depending on the lease type.
In large cities like New York, you can get a 1,035 sq. ft. office for $5,000 a month in the Financial District / Water District / Insurance District. However, if you choose to get an office in Hudson Yard / Far West Side, your $5,000 a month budget will only get you 481 sq. ft. The location of your office affects the cost of your lease.
If you’re looking for lower rental rates, rent could be about $14-$16 per square foot per month. If you’re willing to drive about 5-10 minutes away from the popular buildings that charge more than $20 per square foot, you can find decent offices for as low as $12.
Remember, an office rental rate is also indicative of how much you should charge for your services in your location’s target market. If you choose to get an office in the high-end part of your town, you’ll also need to charge higher rates. If you get an affordable office, you can charge lower.
Location, Location, Location
A big factor in the increase or decrease in rental costs is the district location. Even if you are not setting up your business in a major city, rental rates will vary depending on the neighborhood you choose. Is it in the posh and influential part of town? That’s going to be expensive. How about getting an office downtown?
Aside from rental rates, you also need to find a location that’s suited to your tax business. Consider the reputation of your chosen district. Make sure your office is not close to shops or offices that have a problematic reputation. Also, since you will be discussing financial information with your clients, you’ll want the office space to be in a quiet and secure area. Be sure that your clients will feel comfortable visiting you in that district.
Given that tax preparation is a service type of business, it’s a good idea to have a storefront office in a retail shopping environment. A location that enjoys a lot of foot traffic can help you attract more customers; especially during tax season.
You can choose an office near shops that are convenient for your clients. For example, choose a space near check-cashing, convenience stores, inner-city supermarkets, car dealerships, and loan retail shops.
Another good location to consider is an office park. You could capture the market of employees in an office park. Most often, employees would like to get their taxes done before or after work. Getting a space in an office park helps you bring that convenience to your target market.
A tax preparation business does not need a lot of space, especially when you’re starting out. A minimum of 1500 square feet of office space is plenty.
Plan to have enough room for a reception area, a private meeting room, and your private workspace. Don’t discount the possibility that your business may expand. If possible, allow enough space for an additional workstation or two.
In terms of office layout, see that your meeting rooms are not adjacent areas that see a lot of activity. When you’re meeting with a client, you wouldn’t want them to feel distracted or uncomfortable. Ensure that they enjoy privacy.
Getting Help From Real Estate Brokers
On hunting for an office space, you can enlist the aid of commercial leasing agents. They can help you find suitable options for your office. Some agents provide their services for free and take their profit out of a commission. Others will require a small fee in advance.
There are advantages and disadvantages to getting help from commercial listing agents or real estate brokers. Some of the advantages are:
- Guidance from an expert; especially when it comes to leasing agreements
- Support in conducting negotiations on your lease
- Advance knowledge of spaces or properties that may not be available yet
- Saves you the time and effort of finding spaces on your own
Some of the disadvantages of getting an agent are:
- Showing properties that may not be the best for you in favor of a higher commission
- Not having enough listings to find you a property that fits your office needs
- May favor a specific property owner or landlord
Should you choose to work with a real estate agent, see that you meet with more than one. You can get different insights and additional knowledge from having discussions with different agents.
If you don’t want to use a commercial listing agent, you can communicate and negotiate with property owners on your own. Nowadays, finding office spaces can be a breeze because you can easily find available real estate listings online. You can check out office spaces from WeWork, Regus, LoopNet, Commercial Cafe, and OfficeSpace.com. You can also check out the websites of the local real estate companies in your area.
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