With tax day fast approaching, many people are already starting to get their accounting in order in preparation for their annual filing.
While a small minority will file their taxes independently, most people will use a third-party tax service to handle the task on their behalf. With all of those taxpayers needing assistance, and with many firms being overloaded during tax season, there is plenty of room in the market for new practices to emerge and accommodate the continual demand.
If you’ve been considering starting your own tax practice from home, it’s important that you take the right approach and cover all bases before getting started in order to prevent a less than ideal outcome. With that said, anyone looking to start their own tax return business from home should definitely heed the following seven tips:
1. Use Professional Formatting and Folders
The key to launching a successful tax practice from home is to display the utmost professionalism when dealing with prospective and existing clients. Thus, aesthetics should always be a top priority, especially when it comes to the tax documents themselves and the folders that they’ll be presented in.
It goes without saying that you should attempt to make your clients’ tax return documents look as good or better than those used by other local tax firms. We recommend using a company like Company Folders to order tax folders and envelopes; the alternative, using standard envelopes and cookie-cutter templates, will usually result in a more amateur appearance for your business overall.
2. Ensure Licensing and Education are Covered
Hopefully, you already have the experience and educational credentials needed to competently manage a tax practice. If not, then this should actually be your starting point. Although there are some people who manage to build up a small local clientele of friends and family that they file taxes for, if you’re looking to solicit clients indiscriminately on an ongoing basis and operate a fully legitimate business, then earning a degree or at least taking a tax preparation course will be necessary.
You’ll need to obtain an Employer Identification Number (EIN) for your business, and you’ll also need to incorporate as an official company. You may also need to fulfill additional licensing and registration requirements depending on local regulation, so it’s a good idea to contact the county clerk to discuss requirements before opening for business.
3. Develop a Solid Business Plan
Starting your tax preparation service without a plan will lead to problems like slower growth, missed opportunities, stagnancy, and the inability to accommodate a full workload. Since maximizing productivity is the key to boosting daily revenue, developing a comprehensive plan and schedule is a beneficial preliminary step that every tax practice should take. In addition to scheduling, your plan should also cover the various promotional methods you’ll be using to facilitate ongoing client solicitation.
While creating your business plan you should thoroughly research nearby regional markets to find out which one has the highest unfulfilled demand. You may also choose to offer your service online to clients all over the country. Whichever route you decide to take, having a predefined plan mapped out is always the best approach.
A detailed and professional plan will also be a useful asset to have when seeking external funding from investors, as a well-written plan will almost always be a plus in that regard. Adversely, operating without a plan is the equivalent of proceeding blindly, as not only will you be struggling to formulate your next move as you go along, you’ll also have no tangible business model to base your decisions on.
4. Estimate and Gather Startup Costs
Although managing the company from home will eliminate many of the expenses associated with running a business, there will still be some unavoidable costs that you’ll have to consider beforehand. As mentioned in the first tip, you’ll have to cover the stationery costs which includes folders, documents, and writing/printing accessories. You may also have to pay for advertising services to build up some initial momentum and brand awareness.
Furthermore, the IRS charges a $50 fee to become a registered Tax Preparer, and a tax filing business course can cost around $500. Purchasing a professional tax filing software will also set you back another $500. Thus, anyone looking to launch an official tax practice from home should expect to spend a minimum startup cost of $1000-$2000, with costs increasing if you opt for an office space and/or an extensive marketing campaign.
If you’re starting from scratch and don’t even have a home office setup (i.e. – powerful desktop computer, desk, ergonomic chair, etc.), then expect to spend closer to $3000+ for all of the expenses involved, which includes promoting the business during the initial stages.
5. Assemble a Team
Operating a tax practice independently can become stressful, especially if you achieve the goal of soliciting a ton of business early on.
The ideal outcome is to have more work than you can handle, and when that happens you’ll inevitably have to find help. Thus, it’s best to go ahead and plan for that moment by having in-house or remote employees no standby.
Virtual assistants are great for these kind of roles, but it’s important that you take your time screening potential candidates before making any hiring decisions, as you don’t want the poor work of one of your employees affecting your brand’s reputation and image.
6. Utilize Proper Time Management
While scheduling was briefly covered in tip #3 above, the practice of time management goes far beyond a basic daily/monthly schedule. Instead, to achieve optimal productivity and assist as many clients as possible, you’ll need to have your days planned out on a per-task basis.
In other words, you need to plan for the average amount of time it takes to complete each small task, in order to calculate a suitable workload that pushes the business to the limits. However, it’s also important to take a sustainable approach, so over burdening yourself and employees is usually a bad move.
7. Don’t Forget Security
Finally, since you’re going to be handling the sensitive financial data of others, it’s absolutely essential that you consider both digital and physical security in your home office.
This would primarily involve installing a robust anti-virus suite on all of the devices that connect to your home/office network, but should also include the installation of a surveillance system that can keep watch of your equipment, printed documents, and other essential assets.
Next Step: Consider Expanding Into a Commercial Office Space
In closing, once you’ve done all of the above and have established a successful business from home, you’ll inevitably consider the advantages of operating from a commercial office space.
On the other hand, it may be wiser to just keep doing what you’ve been doing, without creating an additional expense. Aside from the office rent/mortgage, it’s also worth noting that you’ll be wasting time every morning and afternoon by having to commute to and from your new place of business.
With that said, an office can certainly do a lot to give a company more authority, and it may therefore be a good way to greatly expand your client base.