Chapter 1
How to Start a Tax Business
Chapter 2
The Fundamentals for Tax Preparers
Chapter 3
How to Setup Your Office
Chapter 4
Getting Your Office Tools
Chapter 5
Outsourced Suppliers
Chapter 6
Investing In Your Own Office Space
Chapter 7
Acquiring Your Clients
Chapter 8
Chapter 2: The Fundamentals for Tax Preparers
Now that you’ve identified what services you would like to focus on and built an initial client list, the next step is to work on the necessary registration for your practice. Getting this registration done is mandatory for you to start your professional tax preparer career.
- Get your Employer Identification Number (EIN)
Employer Identification Number or EIN is issued to your business for tax administration purposes. An EIN is also known as a Federal Tax Identification Number. Before you can request for other government documents, you would need to process this first. All other government forms will require you to declare your EIN.
TIP: Do not confuse the EIN with your EFIN. These are two separate and different ID numbers. To lessen your confusion, EIN is a 9-digit number while the EFIN is only a 6-digit number.
Steps to applying by mail:
Check if you are eligible to apply for an EIN
You can only apply for an EIN if your business located in the U.S.A. or in U.S. territories. You should be eligible to work in the U.S. That means you would need to provide your taxpayer information such as your Social Security Number (SSN) and Individual Taxpayer Identification Number (ITIN).
Understand the Online Application
Read the application instructions before beginning your online application. The online application does not have a save option. You must complete it in one session. If you take too long, more than 15 minutes, your application will expire and you have to start over.
Submit application
Once you’ve finished the application and all validations are done, you will immediately get your EIN. A notice will pop-up, which you can download, save, or print.
- Get your Business License or Permit
Learn what business licenses and permits you need for your business type and location. Check which types of licenses and permits are mandated in your State. Requirements and fees may also vary.
TIP: Some states issue a license or permit for a limited time only. Read these documents thoroughly so you’ll know when you need to renew them.
- Get your PTIN
Before you can offer services as a tax professional, you have to register as one with the IRS. Basically, this means obtaining a Preparer Tax Identification Number. Getting a PTIN is easy and free. Check out how to get your PTIN here.
- Get your EFIN
Tax filings can be accomplished electronically nowadays. The IRS does require every tax preparation business to have an Electronic Filing Identification Number (EFIN) in doing this. It is a mandatory step in setting up your business.
An EFIN takes about 45 days to process because the IRS conducts a rigorous background check on every applicant. Prioritize getting this ID number before you start setting up your office or looking for clients. If you don’t apply before November, the time you’ll wait to get an EFIN may be longer due to the high volume of applications.
In your business timeline, make sure you receive an EFIN before the start of January. If you apply in January, you might not be able to get an EFIN until March. By that time, you won’t have time to acquire clients.
Not all individual preparers need to apply for an EFIN. Only businesses are required to get an EFIN, not each preparer. Learn more about how to get your EFIN here.
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