Your guide to becoming a tax preparer
Tax preparation is something a lot of companies and individuals in the United States have to deal with every year. In many cases, people or small businesses choose to do this on their own. Still, most employ either a tax firm or a self-employed professional to help them calculate the amount of tax they owe, prepare the appropriate documentation, and then file their tax return papers.
This decision generates a constant demand for people who have the necessary know-how to perform this activity in a professional and accurate manner. They are called tax preparers and becoming one can be an excellent accounting career choice.
What is a tax preparer?
Regardless if we are discussing large corporations, medium-sized businesses, or self-employed individuals, everyone has to pay taxes every year. And to be 100% sure that they are paying the right amount of taxes, taxpayers typically employ a professional in the field called a tax preparer.
Tax preparers help commercial organizations and individuals calculate the amount of tax they owe based on their financial activity in the previous year. Then, tax preparers – as their name implies – fill out the relevant documentation with the requested information about their customer, as required by the tax department. Lastly, they file their customer’s tax return papers to the relevant federal tax authority.
This is a simplistic explanation of the main tasks that tax preparers have to do as part of their daily activity. Getting the exact amount of tax right means that tax preparers must have extensive skills, abilities, competencies, and know-how.
Given the frequent changes that the U.S. Congress has been making to the tax code, tax preparers need to constantly update their knowledge the legal provisions in place to perform accurate calculations of their customers’ due taxes.
Tax preparers must have access to and verify all documents related to their customers’ income to ensure they report the exact total income on which customers owe taxes. That is why tax preparers regularly work with bank statements, invoices, or contracts related to acquisitions or other types of investments.
Last but not least, apart from dealing with taxpayers’ income tax return papers, tax preparers can also advise their clients on ways to file their returns. Planning their upcoming financial activities will help their clients reduce the amount of legal taxes they pay.
How much do tax preparers make
As a tax preparer, you have access to a wide array of accounting career opportunities, ranging from working for a tax preparation firm, joining the IRS, acting as a self-employed individual, or starting your own company, to name a few of your options. Regardless of the career path you choose, being a tax preparer has its benefits and can be a lucrative profession. The median yearly salary in 2020 for tax preparers was $45,850 across the U.S.
What to expect from a tax preparer job
As in virtually every other job on this planet, there are both good and bad things about being a tax preparer. The best part of being a tax preparer is that you get to interact with a significant number of people, talk to them, and slowly get to know who and how they are. It is common for tax preparers to become friends with their clients, given that they can work together for very long periods of time.
That is why, if you are considering becoming a tax preparer, it is important to know if you enjoy working directly with people on a daily basis. It is also essential to have excellent interpersonal and communication skills. Often tax preparers must share news and information with customers that is not easy to communicate. For example, advising customers that they have to pay more tax than they had initially thought, or worse, penalties for not having paid the right amount of tax in the first place. These conversations constitute the most challenging part of the tax preparer’s job. Fortunately, such situations are infrequent, yet represent an important reason why tax preparers should have excellent communication skills.
Is the tax preparer career right for you?
To be a tax preparer, you’ll need an extensive array of skills and abilities to be great at your job. Even if many people say that the most important thing is to be comfortable with numbers, the reality is that it’s much more than that.
Tax preparers deal with people directly, often on a daily basis. So, if you don’t like people and you don’t enjoy interacting with them, you don’t want to do this for a living. On the other hand, you’ll likely do well as a tax preparer if you have excellent interpersonal skills.
Unfortunately, most firms that provide tax preparation services don’t cater to this human side. Customer interactions with these companies can be cold and distant. If you are good at what you do and care about your customers, being a tax preparer can be a rewarding career on all levels.
Excellent verbal and written communication skills are a must-have for professionals who work with people on a daily basis. Tax preparers must be able to communicate specialist information to their customers clearly and concisely, especially as many customer will not have accounting knowledge or background. That is why they need to have excellent written and verbal communication skills as well as the capacity to be concise and get straight to the point.
If you decide to have a career in taxation, having solid mathematic skills should rank very high on your list of skills. Getting the numbers right is crucial in a tax preparer’s duties. Being able to accurately calculate the amount of tax your customers owe is not just proof of having an analytical mind, it can also make or break your entire tax preparer career.
Time and project management
Tax season can be a very busy period, especially as tax preparers tend to work with more than one client at a time. The ability to manage time and projects well is a quality all successful tax preparers have. The capacity to prioritize and organize accordingly will enable you to shift between customers, complete urgent requests, and meet deadlines.
Coping well with stress and pressure
During tax season, between January 15 and April 15, the level of stress that tax preparers generally have to face can be very high. This is the period in the year with the highest volume of work coming through. Hence, desirable qualities in a tax preparer include working well under pressure and handling stress generated from this increased workload.
Attention to detail
As a tax preparer, you must go through all of your customer’s financial documents, and that can mean tens or hundreds of pages filled with numbers. Apart from ensuring that the numbers add up, you must verify that your customers comply with all laws and regulations which calls for close attention to detail. In the end, when it comes to taxes, everything matters.
Technology adds value to the working processes, with software solutions that streamline the tax preparer’s activity and helps eliminate errors. Thus, as a tax preparer, knowing your way with spreadsheets and other accounting-related programs can save a lot of time and help you cope with that large number of customers during tax season.
Strong moral standards and work ethics
Integrity plays an important role in the accounting world and having strong work ethics is indispensable if you want to have a successful career as a tax preparer.
Being a competent and experienced tax preparer can result in the provision of a reliable service that sees your customers pay the right amount of tax year after year. Further, it can be noted in the advice you provide to them on how pay less tax in the future. However, that does not just happen out of thin air, so let’s have a closer look at how to become a tax preparer.
Requirements for a tax preparer career
In most states, there are no official requirements to become a tax preparer, so you can choose a multitude of paths to get there.
Take a specialized course
One way to become a tax preparer is by taking a specialized course organized by one of the big tax companies. These firms provide paid classes where they teach you how to do tax returns. This is a good opportunity to accumulate the essential know-how you need to begin work as a tax preparer. If you do well during the course, chances are that the company organizing the training will offer you a job at the end of the course.
Another way is to go to school and earn an accounting degree issued by a high-education institution. Admission requirements are generally having a high school diploma and demonstrating good numerical abilities. Let’s have a look at your options.
Earn an associate’s degree
Earning an associate’s degree in accounting takes around 2 years and will teach you the accounting principles, helping you start a career in this field. Should you want to continue your education, most universities accept a transfer of the credits earned in an associate’s degree to a bachelor’s in accounting program.
You can choose to enroll in an associate’s of sciences, a program that focuses more on mathematics and science studies. Entry requirements are typically not as high as for bachelor’s degrees, most institutions asking for a high school diploma and a minimum 2.0 GPA score at your GED test. Some ask you to prove your math knowledge and writing skills before the beginning of the program.
Earn a bachelor’s degree
When you choose to earn a bachelor’s of science in accounting, you’ll focus on gaining the necessary skills and knowledge needed to work in accounting, which translates into a deeper understanding of advanced accounting principles. You’ll study business, economy, and taxation principles and develop communication abilities as well as analytical skills.
Earning a bachelor’s usually takes 4 years or 120 credit hours, and admission requirements include holding excellent high school General Public Assessment (GPA) test results, usually of 2.5 or above, and a strong college admission test score.
How to represent clients before the IRS
When you hold a bachelor’s, you can get a job as a tax preparer and start accumulating the experience on the job that is vital in this field of work. Once you have worked as a tax preparer for several years and have acquired the necessary expertise, then you can think about representing people before the IRS.
This is possible after becoming a Certified Public Accountant (CPA). Read our dedicated page to discover what you need to do to earn your CPA credential.
A different approach is to gain sufficient work experience as a tax preparer to become an enrolled agent. Although the name seems to imply that you will be working for the IRS, this is not the case. You take an examination organized by the IRS to become an agent. Once you take the exam, the IRS recognizes you as a qualified agent to prepare taxes to represent your clients.