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Setting up a small tax practice.

WATax
Level 3

I'm working on starting a small tax practice (a one man show).

I'd be interested to hear what some of you have done with things like, marketing, getting a business email, setting up a website and methods to receive payments.

Thanks

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26 Comments 26
qbteachmt
Level 15

Well, you're not getting much input.

I can give some input.

Have you decided what you want to do: local only, remote only, support other preparers until you're better up to speed, find only a handful of people/businesses that will keep you plenty busy, only focus on Enterprise Funds and Not For Profits?

Have you joined, for example, Chamber of Commerce or other local business groups? Are you listed for your State's "whatever" listing that apply? For example, a new person in my town wants to work independently, so I pointed out how the State's vendor system works, and she can apply for bid and no-bid contracts, just like I was a vendor to the State for teaching and rehab, for job shadowing (veteran hires, for example) as well as I had a couple dozen of the towns and villages and special purpose districts as my clients (typically to get their accounting on track, prep for year end, prep for audits and grant administration). You know, the usual "need multiple jobs to survive" strategies.

I don't know if you consider this the type of business where people just cruise the web, and SEO may not really apply. Knowing what you want to focus on, or at the least, where you want this to end up, will help you avoid spending unnecessary time and expense. I had a client who paid a fortune to set up a website, etc, and then called me, she was lying on the couch still in her pajamas, crying, because it had been a couple of weeks and no one was calling. I got her out there, they're not going to accidentally find you. Get networking. She had two kids and wanted the flexibility but some steady contracts, for baseline income year round. She's a QB ProAdvisor and an EA and focused on retail.

You know you want an EIN to avoid giving out your SSN, and the same concept applies to business email. You want to cut it loose when you stop working, and don't mix personal with business. You don't need something fancy or even your own domain, unless your plan is to grow this company. For instance, I worked with some architects for 10 years, we went from 2.5 people to 22 people in 3 locations, and you bet we had our own domain (and custom email accounts), because it served as a point of contact and a portfolio. But another advantage of finding a domain and parking at the least on intro page, would be to accept secure/encrypted FTP for your clients, so as you research GoDaddy or whoever, consider what else they provide and support.

Payment methods are tricky. I would ask some small business people in your area (non-retail) who they use, and try to find someone doing about the same number of transactions as you anticipate. It might be as simply as Square and ACH. Which means an isolated business checking account solely for this, and treat it like a sweep account. That reduces your exposure to fraud.

And you'll want a risk prevention review for fraud, identity theft, systems security, etc.

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Greta
Level 9

1) Is anyone in your area who would like to sell his/her business? You might call the elderly tax preparers and ask. Perhaps they wish to scale back and will refer clients to you (generally those they want to get rid of).

2) Expect to have three low-income years, so have other sources of income. People have to know you will be sticking around for a while, and that you are good at what you do. The word often spreads by mouth. Relatives and friends come out of the woodwork. Our avalanche began in the 4th year.

3) In this small town, I'm still old-school and do not accept credit cards. It adds to the expense.

4) Advertise now for a free consultation, before tax season begins.

WATax
Level 3

@qbteachmt  Thanks for your input! A lot of good points to consider.

I'm thinking I'd start locally targeting 1040 and schedules filers. I like the thought of supporting other preparers, I've wondered about that.

I do need to network.

Good stuff to ponder! Really appreciate the input. Onboarding today as an intuit tax associate, that will get into daily exposure to the tax world.

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IRonMaN
Level 15

Kind of late to the party if you are working on starting your own practice now.  E-filing is just a little over a month away and you are going to be pretty much dead in the water unless you have already obtained an EFIN.  No EFIN, no efiling.  The process can take up to a couple of months so if you don't have an EFIN, you might want to drop everything you are doing and start the process now.

You don't say what kind of experience you have.  If you have been working for another tax practice for years, that will help in your marketing attempts.  But if you have been a toll booth operator for the past 10 years and were working as a forklift driver before that, marketing is going to be a little more difficult.  

Greta doesn't accept credit cards.  I do, but that is due to the changing environment where younger clients don't carry cash and have no idea what a checkbook is.  I started accepting cards a few years back.  But for those that want to use plastic just to build up their reward points, I'm not taking a discount just so you can be rewarded.  I charge a convenience fee for me having to get nicked by third parties for processing that plastic.

Good luck.  


Slava Ukraini!
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BobKamman
Level 15

@Greta 

1) Is anyone in your area who would like to sell his/her business? You might call the elderly tax preparers and ask. Perhaps they wish to scale back and will refer clients to you (generally those they want to get rid of).

Or check the obituaries.  Although most practitioners keel over closer to April 15.

2) Expect to have three low-income years, so have other sources of income. People have to know you will be sticking around for a while, and that you are good at what you do. The word often spreads by mouth. Relatives and friends come out of the woodwork. Our avalanche began in the 4th year.

I bought a small practice from an EA and did as many returns as I could while attending law school.  After the first year I was turning down new clients because of referrals from the ones I had "bought."  Then I sent out a humorous "disorganizer" letter every year, and some clients posted it on bulletin boards of their (major) employers, because no one had heard of a preparer with a sense of humor.  I had some contacts in the media and pointed out quirks in state tax law that no one (including the people who worked for the state) didn't know about, and getting my name in the paper helped.  By the time I got my law degree, I was turning away new clients except for family of current ones.  

3) In this small town, I'm still old-school and do not accept credit cards. It adds to the expense.

I don't either, but half my clients are past 70.  I have one assistant, full time during tax season and part time the rest of the year, and we talk about whether we need to start taking plastic.  We haven't yet.  

4) Advertise now for a free consultation, before tax season begins.

My first year I did a mailing to about 50 new home owners in nearby ZIP Codes; I think it brought in about 5 clients.  If I were going to advertise, I would offer a free review of prior returns and discounted fees (maybe even free) for amended returns.  You get the people who aren't happy with the last preparer. 

@IRonMaN  --- I think he said in an earlier thread that he had the EFIN.  

IRonMaN
Level 15

Bob - yeah, I see that now that you mentioned it.


Slava Ukraini!
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WATax
Level 3

@Greta Thanks for the great tips! I'll have to get familiar with the tax prep firms in the area.

This is a retirement project so not dependent on the income. Looking at it as an education in tax and keeping the head working.

Much appreciated!

WATax
Level 3

@IRonMaN Thanks for the input!

I do have the PTIN EFIN.

I retired from governmental accounting a few years ago. Early in my accounting career I spent a couple tax season in a small CPA firm. So that's pretty old experience. I had been in the building trades as a painter, came down with stomach cancer when I was 35, went back to school for a BS in accounting. I've been doing the intuit academy, tax level 1 & 2. I've also done the AFSR course. So still pretty green, plan to start pretty basic and work upward. Planning to start with ProConnect.

I appreciate all the advice!

WATax
Level 3

@BobKamman Great to hear your experiences! I'm okay not getting too many clients the first couple years, just want to get it right for those willing to give me a shot!

This has been a great thread for me, Thanks!

Greta
Level 9

It sounds like you have a broad background that will surely connect with clients. They appreciate knowing you as a person, and you too will find the year-by-year interactions rewarding. Some clients came to me because of our welcoming atmosphere. It got to be their social hour, and at some point that became too time-consuming--Covid put an end to that. I too started small with a narrow knowledge base, but over time clients came with issues I needed to research. By now I feel self-confident; if not - I turn to this excellent online community for answers.

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Greta
Level 9

I totally agree. I too retired from college teaching, and find this business an excellent way to keep the brain working; also to arrange my own affairs to take advantage of the tax code. The tax code is like a board game that you get to know how best to move the pieces, it's kinda fun.

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WATax
Level 3

@Greta Great to hear! that's encouraging.

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BobKamman
Level 15

@WATax  Classes are great but the best refresher course is to read Pub 17 before the start of every tax season.  Not that I take my own advice on that anymore, but I probably should.  I'm not taking new clients and the old ones are generally dull and boring, that's why I hang out here looking for new questions.  Do they still publish a print version, or do you have to download the pdf and use your own paper and ink?  And I notice the publication date for the last edition was in March 2024. 

 

qbteachmt
Level 15

"I'm not taking a discount just so you can be rewarded. I charge a convenience fee for me having to get nicked by third parties for processing that plastic."

You need to do it specifically to your State.

"Credit card surcharging is legal in most states, but there are some restrictions: 

  • Prohibited
    Surcharging is illegal in Connecticut, Maine, Massachusetts, and Puerto Rico.
     
  • Limited
    Some states limit the amount of the surcharge or require that the total price be disclosed before the sale: 
     
    Colorado: Caps the surcharge at 2% 
    California, Florida, Kansas, Maine, New York, Oklahoma, Texas, and Utah: Have laws that limit surcharging
     
     
  • Allowed with contingencies
    Some states allow surcharging with certain conditions, such as in Illinois, Nevada, New Jersey, Minnesota, and Montana
Businesses should be aware of their state's laws and card brand rules, which can change. In states that allow surcharging, regulations often require that the surcharge be disclosed clearly and upfront to customers."
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BobKamman
Level 15

@qbteachmt  That's straight from a Google search experimental AI overview, which of course is unreliable.  I found this from another source, that is probably not trustworthy either:

*According to federal law, there’s a 4% maximum allowable surcharge on credit card transactions. Debit card surcharging is illegal in all 50 states.

*Minnesota ( @IRonMaN 's home) currently allows credit card surcharging (with some contingencies), but a new law is banning certain surcharges effective January 1, 2025.

qbteachmt
Level 15

And CA law flipflopped in July 2024. That's the point of my posting: it varies, and you need to know how it is to be done in your State. For example, unless it changed (again), MT allows you to offer a discount for cash, but not add the upcharge for debit/credit card use. Then again, a legislature meets next month, so...

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IRonMaN
Level 15

"but a new law is banning certain surcharges effective January 1, 2025"

Kinda, but it all depends on your presentation or methodology.  The law was created to protect folks from getting screwed by hidden fees. Either way it's not a big deal to me for the dozen or so folks that are using plastic to pay my fees.


Slava Ukraini!
WATax
Level 3

@BobKamman Thanks again Bob!

I looked up Pub 17, l found 2023 version, will watch for 2024. Good to hear you hang out here! Maybe you can help help this newbie out now and then or now and now! I promise to do my own research first.

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WATax
Level 3

@qbteachmt Thanks for the info! Another thing to get up to speed on.

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WATax
Level 3

@qbteachmt That's sounds fair to me! After all, it's the client's convenience.

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WATax
Level 3

@BobKamman Good to know on Minnesota.

My state also.

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WATax
Level 3

@IRonMaN You retiring anytime soon with a book of business forsale? 🙂

Your probably younger than me!

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IRonMaN
Level 15

@WATax - I will be 68 in March and haven't given retirement a serious thought yet.  Whenever the word retirement comes up I always go back to a Garrison Keillor line that it is a proven fact that all retired people die.  I want to keep living so I am going to keep on working 😁


Slava Ukraini!
WATax
Level 3

@IRonMaN I'm 68 and starting a new gig so I guess I'm not quite ready for the rocking chair yet!

BobKamman
Level 15

@IRonMaN That's a good quote, I might use it in my annual disorganizer, but I can't find anything online that says the source is Garrison Keillor.  Did you hear him say it?

IRonMaN
Level 15

He came to town a number of years ago and said it during his performance 


Slava Ukraini!
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