Tax preparer career guide

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.

Getting the exact amount of tax right means that tax preparers must have extensive skills, abilities, competencies, and know-how.

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.

There has been a steep decline in employment numbers from 2018-2020, which mimics general market performance across the US. However, this is also very state dependent. Using again Tennessee as an example, we see some employment growth there (although 2019 numbers were not reported for some reason), which likely portends greater growth should the pandemic-related downturn reverse.

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.

It is also essential to have excellent interpersonal and communication skills.

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.

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.

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.