The Ultimate Guide to Starting A
Freelance Tax Preparation Business
Successfully

How to Start a Freelance Tax Preparation Business

Why Start a Freelance Tax Business

More and more people are choosing to join the freelancing community every day. It’s easier than ever as more of our work goes online and becomes remote. It’s more economical and efficient for businesses to outsource many of the tasks they need to have done.

Everyone has a talent or skill that can be turned into a service or product they can offer, and you can too if you’re ready to learn and do the work.

One of the most lucrative freelance jobs is becoming a Freelance Tax Preparer and if you’re really gutsy, why not start your own tax office by hiring other tax professionals to work with you. But for starters, we’re going to discuss how you can get started as a freelance tax solo preparer.

Benefits to Starting a Freelance Career as a Tax Professional

The Tax Industry is a $11 Billion Dollar Industry
It's a Recession Proof Business (Everyone Must File Taxes)
The desire to take your working life into your own hands and earn for yourself rather than for your boss
The ability to weather economic uncertainty by taking on freelance tax work as a part-time gig, even if you’re still working a 9-5
Your day job doesn’t offer much in the way of fulfillment, enrichment, or growth opportunities (create your own opportunities + growth)
You want to start earning on your own while you build other streams of income. Adding no cap to your income potential.

The Freelance Tax Preparer's Mindset

There’s a specific mindset that freelancers have that enables them to work on their own and grow. If you’re considering going solo yourself, you probably already embody this mindset, but here are its main characteristics:

Self-Motivated

You must be able to motivate yourself. You won’t have your boss breathing down your neck and making sure you get the work done. You’ll have to get started each day and stay on track on your own.

Committed to Providing Value.

You need to have a strong desire to deliver value to your clients. This is the key to success in providing freelance tax services or other freelance services in general. The quality of your work is the reason your clients will choose you instead of someone else. This is the key to repeatable clients and repeatable success.

Organized.

In order to handle multiple tax preparation clients, workflows, and deadlines simultaneously, you'll need to be organized. If you're not an organized person now, this is something you can learn. There are also tools that can help you stay on top of things.

Focused on Constant Improvement.

Since your skills and the quality of your work are your main selling point, you’ll need to constantly learn new things and improve. This is called the “growth mindset.” It’s essential for growing a freelance tax preparation business.

Thinking Like a Businessperson.

Right now, you might be a creative who wants to earn through your creativity, but you also need to think like a businessperson. After all, your freelance tax business is a business and will be your source of income.

What Services Will You Offer?

The absolute first big decision you’ll make when planning to start your own tax business is what type of services you’ll offer. You can handle any type of work that’s done remotely or online for your clients.

Check out some of the most commonly known services provided as a tax professional that will help you increase your bottomline include:

Bank Products

Bank products are settlement solutions offered by banks that are authorized by the IRS to produce “refund transfers”. This will allow you to offer your tax preparation services to your clients with no out-of-pocket expenses to your client at the time of service. The tax preparation fees will then be deducted from the taxpayer (client) refund once the IRS has processed the return and settled the payment with the “Refund Bank” selected.

In many cases offering bank products to your clients will allow you to provide your clients with a portion of their refund right away when they apply for a “Refund Advance Loan” through the bank subject to availability and bank approval of course.

[Add Learn More About Bank Products Link]

Become a Service Bureau

This opportunity is great for those who are skilled in tax preparation and want to add a stream of income to their bottom line. This will allow you to resell tax software that you trust using your own brand/label.

The goal of a tax service bureau is to provide growth, training, and expansion services to tax professionals or those wanting to start their own tax preparation business. How involved with each tax business you gain under your service bureau depends on your business model and experience level.

Adding your own branding to a tax software partner and making it available for purchase for other tax professionals helps you increase your brand awareness and credibility in the industry. All while helping you boost your revenue and creating year-round stability of income. The focus here is sales and expansion.

[Insert Learn More on How to Become a Service Bureau Link Here]

Become An Enrolled Agent

After you have had at least one year of tax preparation experience under your belt and you think you have grasped the concepts and the complexities of Tax Law, you should begin studying for the EA exam.

Becoming an EA is the highest achievement in the tax industry awarded by the IRS. It’s not an easy feat and a lot of professionals do not pass on the first try. That’s why it is best for you to study diligently and give yourself time to learn the material and incorporate your experience into the learning process.

To become an Enrolled Agent, you must meet a set of requirements that includes exams, passing a suitability test/check, and earning continuing education credits to maintain status.

Why would you become an enrolled agent, well, this is the only way you can represent a client in front of the IRS if a tax situation should arise. Think of yourself as a “Tax Lawyer” just without a Law Degree, and this is the only way you can present yourself on behalf of a client in front of an IRS hearing.

It is valuable to Become an Enrolled Agent , but it does take discipline and knowledge of the tax code. Give yourself time, especially if you’re not great with tests. The best way to ensure you’ll pass is to have confidence and that comes with preparation and experience.

BOOKKEEPING

You don’t have to be a CPA to do bookkeeping and as a tax professional your client is already entrusting you with their finances. Why not provide them with full financial support throughout the year (Residual Monthly Income) by providing bookkeeping services such as:

accounts payable and accounts receivables (billing your clients' customers for the goods/services sold)
Recording financial transactions (receipts, invoices sent/received, financial reports, tax transactions)
Don’t confuse bookkeeping with accounting; in order to be a public accountant in many states you must hold a CPA license

SETUP & MANAGE PAYROLL

As you know there’s a tax component to payroll. Every profitable business runs payroll if they have employees. Managing these tasks is oftentimes a hassle for business owners who have more daunting tasks to manage within their business. As a tax professional if you have the skillset, knowledge, or training to manage payroll then adding this service to your product offering should be a no-brainer, but only if you have the time to actually manage client payroll needs.

Managing payroll for your clients will help to ensure they’re staying tax compliant, and it doesn’t hurt that it adds revenue to your bottom line as well.

There is payroll software that can you help you manage payroll for your clients such as

Gusto

ADP

OnPay

Niche: Who will you serve?

Once you’ve identified services you can offer, the next step is to figure out who needs these services. The way you get clients is to find the people who need what you offer and put your offering in front of them.

There are several reasons businesses outsource services such as these. The most obvious is that they can’t do it in-house. For example, a small company might outsource graphic design because no one there knows how to do it.

Riches-R-in-the-Niches: Who Needs Your Services? Who will you serve?

Other times, businesses outsource because the task is simply a drain on their time. An e-commerce store owner might be able to write their own content and do their own social media, but they find that it takes up most of their day. By hiring a freelancer to do it, they free up time for more important things.

Another reason people outsource is that their business is growing and along with this growth, their needs increase. They may be able to scale more easily and efficiently by hiring a virtual assistant or outside accountant than hiring more staff.

The best way to identify your client base is to create a customer profile. In this case, the “customer” is your ideal client. Identify their demographic information as well as psychological factors such as their needs, fears, challenges, values, and career journey.

If you’re just starting, you won’t know exactly who this person is that you envision as your ideal client. As you go about building your business, you’ll learn from your clients and their feedback. But for now, make an educated guess so you can get out there and find them.

Another thing to consider is that you may eventually want to specialize.

Think of it like this.

If you’re a Japanese translator, for example, you’ll find that the market is already saturated with Japanese translators. But if you can specialize in legal translations, insurance content, or copywriting, this makes you more valuable to the client who needs that.

Remember one of the first big decisions you’ll make in planning your business is what type of clients you would like to offer your services to.

Everyone has to file a tax return (individuals and businesses).

Some of the most common niches to provide your services include:

Niches to Consider

Creative Entrepreneurs.

If you thrive around the creative space and understand the pain points of this community. You could have a thriving tax business servicing the creative community.

This Community includes:

Copy Writers. There is a great deal of work available for copywriters, from content writing to website copywriting and proofreading to name a few. Every online business need content written. So, it’s safe to say that you would have tons of copywriters that you can scale your tax business around and market to this niche.
Graphic Design. Graphic designers are very creative and don’t really want to be bogged down with the daunting task of preparing financials or handling tax preparation tasks within their business. They shouldn’t have to let the creative be creative.
Photographers. Let’s be honest photographers do not get into business to handle anything math-related, so they will most likely outsource their accounting needs and tax preparation needs. Photographers talk to other photographers and word-of-mouth is an awesome referral source.
Web Design and Development Companies. While many may be intelligent enough to handle their accounting or tax preparation needs, it’s not on the top of their list. That’s where you come in and can be their hero when it comes to tax time. This niche will take a little more skill and studying but you can handle it, at Tax Office Solutions we believe in you and your abilities.

Tech Industry.

Programmers, Techs, and Software Development Firms. Okay – this industry is prides itself with mathematically intelligent beings but preparing tax returns isn’t one of their lingos. With more businesses creating their own apps and software programs, there is a great deal of work for programmers and software developers. This means there are a lot of freelancers in this area who need their tax returns prepared by a professional. Definitely, a booming industry for you to niche down for your tax preparation business. This niche can be a tough one as well as you must be very confident in your abilities to prepare more complex returns.

Administrative, Marketing, and Back-Office Service Providers.

Virtual Assistants. You can offer your services to “virtual assistants.” Virtual assistants make great referral partners as well since they work with many clients that will need your services.
Accounting Firms. Believe it or not, many CPA/Bookkeepers and other accounting firms outsource their tax preparation client needs rather than do them in-house (this is considered outsourcing). Contrary to popular belief a lot of CPAs don’t prepare tax returns, especially personal 1040 tax return preparation. This is another niche in which you can potentially develop referral partnerships.
Human Resources Management or Staffing Firms. Some staffing or employment agencies outsource their tax preparation, payroll, or accounting needs. If you have good financial management skills and want to do more than just tax preparation, you can offer your services to this niche.
Bilingual Tax Services. If you speak another language, even better because now you can tap into multiple markets.
Ad Management, Social Media Management, and Marketing Agencies. Marketing companies have enough on their plate and are fast-paced businesses. They don’t have time to worry about accounting or tax compliance tasks. If you can keep up with the workload of preparing tax returns for the marketing niche, we say give it a go. This is especially a good choice if you’re an expert in your niche.
Online Business Coaches/Consultants. With the evolution of the online world, there are a lot of contenders in this category. With the online coaching and consulting industry exploding right now, this is a great time to break into this niche to provide tax services. If you are working with coaches who coach other businesses, they already have the clientele to help you achieve your client goals. Because online business coaches are some of the best referral partners; if you find one that will partner with you; this can help you grow your new tax preparation business. This method just takes a little bit of strategy.
Data Entry and Transcriptionists. There are tons of transcription plus billing and coding companies out there that work remotely and hire outside their company for their tax and accounting needs. This is a very specialized niche, but it can be beneficial and could also help you score independent healthcare business clients as well.

Ad Management, Social Media Management, and Marketing Agencies. Marketing companies have enough on their plate and are fast-paced businesses. They don’t have time to worry about accounting or tax compliance tasks. If you can keep up with the workload of preparing tax returns for the marketing niche, we say give it a go. This is especially a good choice if you’re an expert in your niche.

Online Business Coaches/Consultants. With the evolution of the online world, there are a lot of contenders in this category. With the online coaching and consulting industry exploding right now, this is a great time to break into this niche to provide tax services. If you are working with coaches who coach other businesses, they already have the clientele to help you achieve your client goals. Because online business coaches are some of the best referral partners; if you find one that will partner with you; this can help you grow your new tax preparation business. This method just takes a little bit of strategy.
Data Entry and Transcriptionists. There are tons of transcription plus billing and coding companies out there that work remotely and hire outside their company for their tax and accounting needs. This is a very specialized niche but it can be beneficial and could also help you score independent healthcare business clients as well.

Educational Freelancers and Businesses.

Tutoring and Educational Service Providers. If you love the educational world or perhaps have an educational background, then this is the perfect niche for you to provide your tax or accounting services. With so many teachers both traditional and online there’s tons of opportunity for you to make this a valuable niche for your services. However, teachers don’t make large salaries, so you can’t expect to demand high ticket priced clients in this niche, unless you’re going for the big dogs in the educational niche.

Entertainment Freelancers and Businesses.

Actors, Entertainers, Video Production Crews. This is a special niche and while it will take some research and perhaps extra skills and training if you’re interested in working with professionals in the entertainment sector then this is the niche for you. Understanding complex tax code and regulations will make you very valuable for this niche and there are plenty of professional and beginner entertainers out there waiting on a tax advisor to help them with their tax concerns.

To work in this niche, you will have to build authority and become a trusted advisor as professionals in this industry don’t just trust anyone to manage any aspect of their finances.

You can offer your tax preparation services to one of the above niches or create your own niche by researching top niches right now or utilizing your past experiences to create your own lane.

Consider not only the skills you have now but those you’d like to improve or learn in the future. You can offer your freelance tax preparation services to individual 1040 clients right now while you sharpen your Business Tax Preparation skills and learn how to prepare tax returns for corporations, partnerships, and more, with the long-term goal of someday offering tax coaching or tax planning services to business clients.

The options are limitless once you start your career in the Tax industry.

How Much Can You Make as a Freelancer?

There’s no maximum you can make as a freelancer, but there are some ways you need to manage your freelance tax business if you want to grow and earn more.

Many people start freelancing for freedom. But if you don’t charge what you’re worth, you’re leaving money on the table and ultimately not creating the freedom that you dreamt of. You need financial motivation as well so that you have the confidence to charge enough.

When you first get started, it’s a good strategy to offer your services at a low to medium entry price. You’ll get a great deal of work and learn the ropes and you’ll be able to undercut the competition.

But once your business starts to grow and your skills improve, you start gradually charging more. As you learned earlier, you can also charge more if you specialize. Clients will pay more for your specialized knowledge and experience.

A major challenge for many freelancers is to muster the confidence to ask for more money or to overcome your fear of making your offer and having the potential client balk at what they consider a high price. But if you don’t have the confidence to demand what you’re worth, your business won’t grow.

Here are some ways to get comfortable asking for more:

Know Your Value. Your services offer true value to the client. You’re not only doing the work for them but also removing that work from their busy day. They’re buying time with their money.
Know the Competition. Take a look around at the market. Compare with others who offer similar services, and you’ll understand how much you can charge.
Don’t Be Afraid of No. If a client looking for services on a budget says no, this frees you up to find clients that will pay what you’re worth.
Be Reliable. A major selling point for a freelancer offering any services at all is the ability to communicate well and deliver work on time. It’s well worth the price for clients to hire someone who won’t disappear.
Remember That You’re on Your Own. Since you don’t work for an employer, that hourly rate you charge needs to pay your insurance, your retirement, your business expenses such as rent, and absolutely everything else. If you subtract all that from your hourly rate, you’ll see that you’re not charging so much at all.

How to Market Your Tax Business

If you want to make it as a freelancer, you not only have to do the work yourself, but you also have to do your own marketing. Before you get started, make sure you’re willing to learn what you need to learn to get new clients.

Marketing is quite simple. It means understanding your target client and putting your offering in front of them using a message that’s easy to understand.

You identified your ideal client, so you’ve already started. Once you know who they are, you can easily understand why they need your services. Try to identify the main motivation for hiring a freelance tax professional.

You can then create a message that speaks to this need and explains your unique value. If you don’t know what’s unique about your services yet, that’s okay. You can discover this once you start your business. Look for opportunities to ask your clients for feedback.

Once you understand these basics, the next step is to create a marketing strategy. This is your plan for finding your ideal clients and communicating your message to them. You need to find points of contact where they learn about you, and you can build a relationship.

In order to start using this strategy, you’ll identify tactics. There is a whole repertoire of tactics you can use, from posting content on social media to writing press releases; joining online forums to making videos to post on YouTube. Which tactics are right for you depends on the nature of your services, the nature of your target client, and your own unique qualities?

Just like the financial considerations, many new freelancers feel uncomfortable singing their own praises. But all you have to do is approach clients with the attitude that says, “How can I help you?” Focus on providing value and you don’t have to feel like you’re promoting yourself.

The Ultimate Guide to Starting A Freelance Tax Preparation Business Successfully