How do I start a tax preparation business?
Get a PTIN from the IRS, then apply for an EFIN so you can e-file for clients. Register the business in your state, arrange software and a bank product, and check whether your state licenses preparers separately. The EFIN takes longest — start it first.
The order that matters
| Step | Why here | Typical time |
|---|---|---|
| Apply for a PTIN | Required of every paid preparer. Fast, online, renewed each year. | Same day |
| Apply for an EFIN | Authorises the firm to e-file. Longest lead time of anything on this list. | ~45 days |
| Register the business | Entity, EIN and any local licence. Needed before a bank product. | 1–2 weeks |
| Choose software | Once you know your entity and EFIN status. Not before. | Days |
| Set up a bank product | Only if you intend to offer refund transfers or advances. | 1–3 weeks |
| Check state licensing | A handful of states regulate preparers directly. | Varies |
The sequence matters more than the list. People routinely buy software and sign a lease in November, then discover in January that the EFIN has not cleared — and an office that cannot transmit is not open, however ready everything else is.
What actually decides whether the first season works
Not the software. Volume in year one comes almost entirely from people who already know you, and the offices that survive tend to be the ones that made it easy to be referred: clear pricing, an answer when somebody calls, and a way to hand over documents that does not involve a stranger emailing a photo of their Social Security card.
The second season is where retention shows up, and retention is mostly a function of whether the client can reach you between February and the following January. That is a systems question long before it is a service question.
Where the money goes
The federal credentials are the cheap part. The costs that catch new offices are the ones that recur monthly whether or not a return walks in — several separate software subscriptions, a phone system, storage. Per-return pricing moves that risk: the cost arrives with the revenue instead of ahead of it, which matters most in exactly the year you cannot forecast.
Related questions
- How long does the EFIN application take?
- Plan for 45 days from submitting the application to approval, and longer if the suitability check turns up anything requiring follow-up. It includes fingerprinting for applicants who are not already credentialed. Nothing else on the list gates you the way this does, so file it before you sign a lease or buy software.
- Do I need a PTIN and an EFIN, or just one?
- Both, and they are not alternatives. A PTIN identifies you as the individual paid to prepare a return and every paid preparer needs one. An EFIN authorises the firm to transmit returns electronically to the IRS. You can hold a PTIN and prepare returns without an EFIN, but you would be filing them on paper.
- Does my state require a licence as well?
- Some do. California, Oregon, Maryland, New York and Connecticut regulate paid preparers beyond the federal requirements, with their own registration, education or examination rules. Most states do not. Check your own state board before assuming the federal credentials are enough.
- What does it cost to open in the first season?
- The unavoidable federal costs are small — the PTIN fee and the EFIN application, which is free. The real first-season costs are software, a place to meet clients, insurance, and marketing. Software priced per accepted return keeps that first number low while your volume is still unknown.