Tax preparation is one of the few industries where you can build a viable independent practice with a defined, publicly documented set of federal requirements, and without a four-year degree as a prerequisite. The barrier to entry is real and intentional, but it is navigable.
What catches most people off guard is not the complexity of the requirements. It is the sequencing. You need certain things before you can apply for others. Your federal authorization needs to be in place before you can make meaningful decisions about software. And the software question is one you need to settle before your first client sits down across the table from you.
This guide walks through every step in the right order: from the minimum federal requirements to business setup, software selection, and continuing education. Whether you are six weeks from filing your first return or still weighing whether this is the right path, the checklist below reflects what a working, compliant tax preparation practice actually requires. If you already have your PTIN and want the deeper procedural detail, see the full EFIN application guide.
What Does a Professional Tax Preparer Do
A professional tax preparer prepares federal and state income tax returns on behalf of paying clients. That definition is simple. What it covers is not.
Depending on your credentials, client mix, and business structure, a tax preparer may handle individual 1040 returns, small-business Schedule C filings, partnership and corporate returns (Forms 1065, 1120, 1120-S), estate and trust returns, and various amended or specialized filings. Independent preparers typically focus on the individual and small-business market, where demand is consistent and clients often return year after year.
Tax preparers who hold certain credentials (enrolled agent, CPA, or attorney) can also represent clients before the IRS in audits and collection matters. Non-credentialed preparers with an IRS Annual Filing Season Program record of completion have limited representation rights on returns they prepared and signed. Understanding where your credential level sets your practice boundaries is part of starting a compliant business.
Do You Need a License or Degree to Prepare Taxes
No federal law requires a specific degree to prepare taxes for compensation. The IRS requires a Preparer Tax Identification Number (PTIN) for anyone who prepares or assists in preparing federal tax returns for pay. Beyond the PTIN, requirements vary by state. California, Maryland, Oregon, and New York impose additional registration or testing requirements. A degree is not required, but ongoing education is.
The PTIN: The Minimum Federal Requirement
The Preparer Tax Identification Number is the IRS's baseline requirement for paid tax preparers. It is not a license. It is a registration that identifies you as the preparer of record on any return you sign. Every paid preparer who signs a return must have a PTIN, regardless of credential level, regardless of how many returns they file per year.
The PTIN is renewed annually. If your PTIN lapses, you cannot legally sign a return until it is renewed.
State Licensing Requirements
Most states have no additional requirements beyond the federal PTIN. Four states impose their own registration, testing, or education requirements for non-exempt preparers.
California requires non-exempt preparers to register with the California Tax Education Council (CTEC), complete a 60-hour qualifying tax education course, purchase a surety bond, and complete 20 hours of continuing education annually. See the full California CTEC guide for details.
Maryland requires non-exempt preparers to register with the state Comptroller's office and complete continuing education requirements.
Oregon requires registration with the Oregon Board of Tax Practitioners and passage of a licensing exam for non-exempt preparers.
New York requires non-exempt preparers to register annually with the New York Department of Taxation and Finance and complete a competency examination.
In all cases, "exempt" refers to preparers who hold an active CPA, enrolled agent, or attorney credential. These credentialed preparers are typically exempt from state-specific registration requirements because their credential carries its own regulatory framework.
Requirements vary by state and change over time. Verify current requirements with your state's licensing authority before beginning practice.
Optional Credentials That Set You Apart
Nothing prevents a non-credentialed preparer from building a successful practice. But three credentials are worth understanding.
Enrolled Agent (EA): The highest credential issued directly by the IRS. EAs pass a three-part Special Enrollment Examination covering individual tax, business tax, and IRS representation. An EA can represent clients before the IRS in audits, appeals, and collection matters, anywhere, on any return. This is the credential that most directly expands what a tax practice can offer.
Certified Public Accountant (CPA): A state-issued credential requiring a degree, passage of the Uniform CPA Examination, and experience requirements that vary by state. CPAs have broad accounting and representation authority. Not all CPAs specialize in tax, but those who do can command premium fees for complex returns.
IRS Annual Filing Season Program (AFSP): A voluntary IRS program that grants non-credentialed preparers a record of completion and limited representation rights on returns they prepared and signed. AFSP is not equivalent to an EA, CPA, or attorney credential, and it does not confer the same representation scope. It is a meaningful step for a preparer building professional standing, but it should not be described as a license or certification. See the full AFSP guide for details. For a side-by-side comparison of all credential paths, see the tax preparer certification overview.
The 6 Steps to Launch Your Tax Preparation Practice
Obtain Your PTIN
Every paid preparer starts here. There is no exception. Anyone who prepares or substantially assists in preparing a federal tax return for compensation must have a PTIN. This applies to preparers at every level: non-credentialed, credentialed, sole practitioner, or employee of a firm.
The PTIN application is completed through the IRS Tax Professional PTIN System, available at IRS.gov. You will need:
- Your Social Security Number
- Your personal tax information from your most recently filed return
- Your business and personal contact information
- If applicable, professional credential information (EA, CPA, attorney)
Online applications are typically processed immediately. You receive your PTIN on screen at the end of the application. The IRS charges a fee to apply for and renew a PTIN; verify the current fee at IRS.gov before applying, as the amount is subject to change.
PTIN renewal is required by December 31 each year for the following filing season. If you let your PTIN lapse past December 31, you cannot legally prepare paid returns until you renew. Set a calendar reminder in October; the IRS typically opens the renewal window in mid-October for the following year. For a complete walkthrough, see the full PTIN guide.
Apply for Your EFIN
Once you have your PTIN and you know you will be filing electronically for clients (which is the overwhelming norm in professional practice today), the next requirement is an Electronic Filing Identification Number.
An EFIN is the six-digit number the IRS issues to firms and individuals it has approved as electronic return originators (EROs). You cannot transmit a client's return electronically to the IRS without one. The IRS requires that any preparer who files 10 or more returns in a calendar year must file those returns electronically. In practical terms, this means any professional practice of any scale needs an EFIN before the first filing season starts.
Your PTIN and EFIN are separate numbers, issued through different IRS systems, serving different purposes. The PTIN identifies you as the preparer. The EFIN identifies you as the entity authorized to transmit returns. The EFIN application is submitted online through the IRS e-Services portal. The process includes:
- Creating or logging into your IRS e-Services account (verified through ID.me)
- Completing the e-File Application with firm type, responsible official, and filing type information
- Submitting to the IRS suitability check, which reviews your federal tax compliance and background
The IRS conducts a suitability check on every applicant. Approval is not guaranteed. Preparers with federal tax compliance issues or relevant criminal history may be denied. Non-credentialed preparers are required to submit fingerprints through an IRS-approved channeler as part of the check. The IRS is the sole issuing authority for EFINs.
Allow up to 45 days from the date you submit your application. Most applicants receive a decision in 2 to 4 weeks, but processing times vary. Submit your EFIN application at least 6 to 8 weeks before you plan to begin e-filing for clients. For the complete walkthrough, see the full EFIN guide.
Meet Your State Requirements
With your federal credentials in hand, verify whether your state has additional requirements. As noted in the licensing section above, California, Maryland, Oregon, and New York impose requirements on non-exempt preparers beyond the federal PTIN. If you practice in any of these states, your PTIN alone is not sufficient.
If you practice in a state with no additional requirements, your PTIN and EFIN are your complete federal authorization. Requirements vary by state. Check with your state's licensing authority for current requirements before beginning practice.
California's California Tax Education Council (CTEC) registration requirement applies to non-exempt preparers who prepare California state tax returns for compensation. The initial registration requires a 60-hour qualifying tax education course, a $5,000 surety bond, a PTIN from the IRS, a background check, and an application fee. Verify current fees at CTEC.org, as they are subject to change. For the complete guide, see the California CTEC guide.
Choose Your Tax Preparation Software
This is the decision that will define your day-to-day practice more than any other. Bad software slows you down in February when clients are waiting and every hour is money. Good software handles the forms correctly, integrates directly with e-file, and gives you a path to bank products if you plan to offer refund advances.
You are looking for professional tax software, not consumer software. Consumer software does not support multi-client management, does not have the preparer-side tools you need, and does not satisfy IRS requirements for professional e-file in the way authorized ERO software does. For a first-year independent preparer, the key evaluation criteria are:
- E-file integration. Your software must transmit directly to the IRS through your EFIN. Verify that any software you consider is on the IRS list of authorized e-file providers and supports the return types you plan to prepare.
- Forms coverage. If you will prepare state returns, partnership returns (1065), or S-corporation returns (1120-S), confirm your software includes those forms before you commit.
- Interview mode vs. forms entry. Some software walks you through a client interview format; other software uses direct forms-based entry. Match the mode to where you are in your practice.
- Bank products access. If you plan to offer refund transfers or advances to clients, confirm the software supports this before signing up.
- Pricing structure. Professional software typically prices by season or by return. First-year preparers with uncertain volume may prefer a per-return model.
Desktop software runs on your office computer and stores client data locally, and it works without an internet connection once installed. Online or cloud-based software runs through a browser, stores data on the vendor's servers, and requires a reliable internet connection for every session. For independent preparers operating out of a single office, either model works.
TaxWise, available through America's Tax Professionals, is professional tax software built for independent preparers and small tax offices. It supports individual (1040) and business returns, integrates directly with e-file transmission through ATP's IRS-authorized network, and includes access to bank products. ATP has been an IRS-authorized e-file provider since 2001. Independent preparers working with TaxWise through ATP are not buying software from a provider that also competes with them for clients. Get TaxWise through America's Tax Professionals.
Keep in mind that tax preparation software handles the return itself. The client-facing side of your practice, including appointment scheduling, document collection, engagement letters, invoicing, and workflow tracking, requires a separate category of tools. Once your filing software is in place, see the tax practice management software guide for a comparison of the leading options for independent preparers.
Set Up Your Business Operations
Credentials and software are the core requirements. These operational decisions determine whether your practice runs smoothly once clients start coming in.
Most new independent preparers start as sole proprietors. It is the simplest structure: you operate under your own name (or a registered trade name), there is no separate entity formation required, and your business income flows through to your personal tax return on Schedule C. A single-member LLC offers liability separation without significant additional complexity in most states. A partnership or professional corporation makes sense if you are starting with a co-owner from day one. Discuss your specific situation with a business attorney or CPA before deciding. If you work from a dedicated home office, you may be able to deduct part of your housing costs against that Schedule C income, so review the home office deduction guide for tax preparers for the exclusive use test, Form 8829, and the simplified versus actual method choice.
Tax preparation pricing varies significantly by geography, return complexity, and credential level. Pricing strategy is one of the most consequential decisions you make in the startup phase: the rate you set in year one shapes client expectations, your revenue model, and the type of practice you attract. Industry associations publish annual fee surveys that give you regional benchmarks. A common approach for new practices: price individual 1040 returns at or slightly below the local midpoint, with explicit add-on fees for schedules (Schedule D, Schedule E, Schedule C) and state returns. Clients will ask what you charge before they sit down. Have a clear answer. Vague pricing loses clients to preparers who are direct about what each service costs. For a full walkthrough of how to set a defensible fee schedule -- including per-form benchmarks, pricing models, regional adjustment, and how to raise rates without losing clients -- see the tax preparer pricing guide.
In the first year, most of your clients will come from your existing network: family, friends, former colleagues, members of professional and community organizations you belong to. A tax practice is a trust-based business, and trust takes time to establish with strangers. Beyond your immediate network:
- A Google Business Profile listing with your business name, address, phone number, and hours is free and increases local search visibility.
- Your jurisdiction likely has local business directories, neighborhood apps, and community boards where professional services are listed.
- In some markets, direct mail to a defined zip code is still a cost-effective first-year acquisition channel.
Paid advertising in your first year is generally premature until you know your pricing, your capacity, and which client types you serve best.
Once your business is running, see the tax business marketing guide for client acquisition strategies.
For a step-by-step plan covering startup costs, software selection, and financial projections, see the tax preparation business plan guide.
A 2026 market note: The IRS discontinued its Direct File program for the 2026 filing season. Direct File served approximately 296,000 filers across 25 states in 2025. Those filers now need to use paid software or a professional preparer. Preparers opening practices in states that previously offered Direct File (including California, Texas, Florida, New York, and others) may find a small but real pool of first-time preparer clients who previously filed on their own and are now looking for alternatives. This is not a large volume driver, but it is a real and immediate opportunity for new practices in the right markets.
Complete Continuing Education
Even if your state has no mandatory CE requirement and you are not pursuing AFSP, staying current in tax law is not optional. The Tax Cuts and Jobs Act, annual inflation adjustments, and periodic IRS guidance changes mean that what you knew last year needs to be updated every year.
The IRS Annual Filing Season Program is a voluntary continuing education program for non-credentialed preparers. Completing it earns you an IRS record of completion, a listing in the IRS Tax Pro Directory, and limited representation rights before the IRS on returns you prepared and signed. AFSP requires 18 CE hours annually for most non-exempt preparers: 10 hours of federal tax law topics, 2 hours of ethics, and 6 hours of federal tax law updates (including the Annual Federal Tax Refresher course). AFSP does not confer an EA, CPA, or attorney credential and does not grant the same scope of representation rights as those credentials. For the full guide, see the AFSP guide.
California, Maryland, Oregon, and New York each have annual CE requirements for registered non-exempt preparers. California's CTEC renewal requires 20 CE hours annually, broken down by federal tax law, California tax law, and ethics. Verify your state's current CE requirements through your state licensing authority.
Golden State Tax Training Institute, Inc. (GSTTI) is an IRS-approved continuing education provider (IRS Provider P619F) and CTEC-approved provider (Provider #2040). GSTTI offers courses designed for working tax preparers, including AFSP-qualifying hours and California CTEC-qualifying hours. View current GSTTI course offerings.
Building the practice is the start of the lifecycle, not the end of it. When you are ready to plan an exit, the guide on how to sell or close your tax preparation practice covers valuation, succession planning, and the client transition steps.
Frequently Asked Questions About Starting a Tax Preparation Business
How long does it take to become a tax preparer?
The minimum federal requirement, the PTIN, can be obtained in one online session, often the same day. The EFIN application takes up to 45 days. A non-credentialed preparer who completes the PTIN and EFIN process sequentially can be legally ready to e-file within 6 to 10 weeks. State-specific requirements (such as California's 60-hour qualifying education requirement for CTEC registration) add time to that baseline. Verify current timelines at IRS.gov and with your state licensing authority.
How much do tax preparers earn?
According to the U.S. Bureau of Labor Statistics, tax preparers earned a median annual wage of $60,930 as of May 2025, with employment projected to grow approximately 4.5% from 2024 to 2034, faster than the national average. See the full data at the BLS Occupational Outlook for tax preparers. Income for independent preparers varies substantially based on geographic market, client volume, credential level, and the complexity of returns handled. The BLS figure is a useful benchmark; your actual results will depend on your practice.
Can you prepare taxes from home?
Yes. Many independent preparers operate from a dedicated home office. The practical considerations are a reliable internet connection for e-file transmission, a secure physical workspace where client files can be stored and managed without unauthorized access, and compliance with any local zoning or business licensing rules for home-based professional services. Check your local jurisdiction's rules before opening a home office to clients. For preparers running a home-based or fully remote practice, see the virtual tax office setup guide covering EFIN address requirements, WISP remote compliance, and software for virtual operations.
What is Circular 230 and does it apply to me?
Circular 230 is a set of Treasury Department regulations governing the conduct of practitioners before the IRS. It applies to all paid tax preparers, including non-credentialed preparers who hold a PTIN. Circular 230 governs how you communicate with clients about their tax obligations, how you handle potential conflicts of interest, and what standards your work product must meet. It is not a license; holding a PTIN does not make you a "Circular 230 practitioner" in the credentialed sense, but the conduct standards apply to your practice. The IRS publishes the current version at IRS.gov.
Do you need an accounting degree to prepare taxes?
No federal law requires a degree to become a paid tax preparer. Some states have education requirements (California requires a 60-hour qualifying course for CTEC registration), but those are specific courses, not degree programs. The EA exam, the most relevant advanced credential for tax professionals, has no degree prerequisite; it requires passing a three-part examination and a background check.