Anyone consider becoming a registered tax preparer?

[headwinds]

Seems like it could be a pretty good side gig. You could learn as much as possible about the tax code, use it to help other people get the most out of their tax returns, and apply the knowledge to your own situation as well, and get paid for it! Low overhead aside from the initial $5000 bond.

[SeattleCPA]

It's pretty hard to make a good living doing basic taxes. TurboTax and TaxCut provide a low-cost DIY option  that's really very satisfactory for lots of people.

My belief is that the typical solo CPA doing taxes makes about $75K in profit, which sounds good.. but that's not wages. The equivalent wages value is probably $65K? And note that CPAs, in terms of tax preparation are top of the food chain. The Enrolled Agents, at least what I've been able to see, make a percentage of what CPAs make... and then the unenrolled preparers, which is what you're talking about, make a percentage of what the EAs make.

BTW, all of these preparers can struggle to maintain work-life balance during tax season. The workload can be a terrible grind.

Can I, though, leave you with a suggestion in case you are really interested in tax work? I would get a CPA (Even if it means getting a bit of college under your belt.) And then I'd focus on providing complex tax accounting services like corporate returns, partnerships, t...rusts, etc. You'd want to first work with someone else to learn the ropes.

But there's a huge shortage of tax CPAs. And people can't DIY the complex work so there either the pay goes up or the work-life balance gets better.

[Cpa Cat]

Can I, though, leave you with a suggestion in case you are really interested in tax work? I would get a CPA (Even if it means getting a bit of college under your belt.) And then I'd focus on providing complex tax accounting services like corporate returns, partnerships, t...rusts, etc. You'd want to first work with someone else to learn the ropes.

If someone doesn't already meet the education requirements to sit for the CPA exam, I think shooting for an EA is a better idea. I think an EA is a good idea for someone who is undertaking just a side gig, even. To go for the CPA from scratch, you're looking at a multi-year education commitment to get the correct credit hours in most states, plus an experience requirement. Study materials and exam fees can also be expensive if you don't have a firm covering it.

Doing the EA on the other hand has no pre-education requirements, cheaper exam fees, cheaper study materials, no extraneous non-tax sections, no experience requirement. Yes, the back end value is lower than a CPA, but so is the time commitment and monetary commitment. Combine the EA with QBO Pro Advisor training (which is free), and the person could throw bookkeeping into their bag of tricks for year-round work. QB makes payroll an easy service to offer, too.

Seems like it could be a pretty good side gig. You could learn as much as possible about the tax code, use it to help other people get the most out of their tax returns, and apply the knowledge to your own situation as well, and get paid for it! Low overhead aside from the initial $5000 bond.

For some people, it's low overhead. But would it be for you? The problem with being uncredentialed is that it's hard to attract clients. You kind of need a store front. A lot of people in your shoes find empty office space in dodgy strip malls and convince the landlord to rent it to them for 4 months. Then they survive off walk ins and do the tax returns while the person waits.

But if you're going to run that type of business, you're looking at getting super duper familiar with EITC due diligence requirement and probably offering bank products (tax refund loans, direct-to-Walmart-gift-card, etc).

Or maybe you're just thinking... "No, no, I just want to offer this service online for cheap and do it in the evenings."  It's hard to predict. A savvy website and a cheap price might get you somewhere. Most professional tax software have a pay-per-return option where you pay some small base fee for the software and then $15 per return or something (my software, for example, on a PPR basis, costs $300, which includes the first 15 returns, then $20/return thereafter).

And sure, people do it as a side gig. Usually it's CPAs with full time jobs elsewhere who are doing it in the evenings and weekends with 20 or so clients. And it's money. But is it real money? I don't know. As an uncredentialed part-time preparer, you might be able to squeeze out $15-$20/hr after software and other costs, if you ignore any unbillable time (networking, talking to potential clients, website setup, software setup, buying supplies, education, research, etc).

[headwinds]

Thank you for the feedback guys, it helps to get some opinions from those truly in the know. I will research more based on what you have told me. I really appreciate it.

[seattlecyclone]

This thread from last year got me thinking about the benefits of having a little bit of earned income during the FIRE years. I was thinking that taxes might be a good option because I'm pretty familiar with the tax code, I actually like thinking about this stuff, and tax season happens to correspond to the dark and rainy season here in Seattle so it would be an ideal time for some seasonal work.

However I'm really not interested in doing the work of recruiting clients, finding an office, etc. Filling out 1040-EZs all day at H&R Block wouldn't be very interesting either. The more ideal situation would be to find a CPA who has more work than she knows what to do with, and process some of her clients' returns for an hourly wage. To the CPAs on the thread: is something like this a common arrangement? What might be a typical hourly wage for a seasonal employee who has passed the EA test?

[taxedatty]

Interesting to see people's thoughts.  I am a tax atty in a specialty group at B4 that has wondered about this as a side gig (although where would I find the time?).   Here in the city, Liberty Tax and others spring up on every corner at this time, so the market seems somewhat saturated if you ask me, depending on what type of returns you are trying to do.

Another entrepreneurial co-worker and I have tossed around ideas on this every tax season.  We have come to the conclusion that the small amount of money on the table is not worth it unless you are not already working.  That is to say, the way we figured, the easiest tax returns are for those folks that make so little they probably qualify for free services through VITA or other programs.  Other straight w-2 returns are easy, but not that lucrative unless you can handle volume (because for a w-2 return, who won't just use turbo tax for $30?).  Anything of high complexity won't be able to be managed by someone without a credential, and those clients are not going to use a no-name joe schmoe anyway.

I think the route suggested before about finding a CPA with too much work is exactly what needs to be done.  Provides steady hourly income without hassle of marketing yourself or finding clients.  And I would agree about the time commitment.  To make any real money you're gonna have to work a lot of hours since all of this type of work is basically taking place over 2 months.

[Cpa Cat]

The more ideal situation would be to find a CPA who has more work than she knows what to do with, and process some of her clients' returns for an hourly wage. To the CPAs on the thread: is something like this a common arrangement? What might be a typical hourly wage for a seasonal employee who has passed the EA test?

I would expect that you'd be on par with the usual tax-season interns. If you return season after season and the office can rely on you as a competent tax preparer, then you'd probably see the wages go up. In my region, $25/hr is the typical wage. BUT - it's highly regionally based. Wages in New York are different from wages in Kansas.

Early on, I worked fairly regularly through Upwork/Elance and it was common to see overflow-type jobs posted. In that instance, it's all virtual and work-from-home. And the person who hires normally provides you with tax software. But sometimes they search specifically for people who already own the software they're using.

The other thing you can do with an EA is do remote support  for TurboTax (also CPA and JD). There's a set compensation rate plus a bonus, so depending on your bonus, it ends up being variable ($25-$35/hr). That's easy work - no legwork is involved - you just log in and work for your shift. Paid overtime if you're on a full time schedule. As far as picking up part time or full time seasonal work for a credentialed person (EA, CPA, JD), it pretty much requires the least effort. I did that when I first started, but was too busy with my own clients to continue. And frankly, I'd think that actual self-employment work for any of those credentialed individuals is going to beat the hourly wage from TT.

[seattlecyclone]

The more ideal situation would be to find a CPA who has more work than she knows what to do with, and process some of her clients' returns for an hourly wage. To the CPAs on the thread: is something like this a common arrangement? What might be a typical hourly wage for a seasonal employee who has passed the EA test?

I would expect that you'd be on par with the usual tax-season interns. If you return season after season and the office can rely on you as a competent tax preparer, then you'd probably see the wages go up. In my region, $25/hr is the typical wage. BUT - it's highly regionally based. Wages in New York are different from wages in Kansas.

Early on, I worked fairly regularly through Upwork/Elance and it was common to see overflow-type jobs posted. In that instance, it's all virtual and work-from-home. And the person who hires normally provides you with tax software. But sometimes they search specifically for people who already own the software they're using.

The other thing you can do with an EA is do remote support  for TurboTax (also CPA and JD). There's a set compensation rate plus a bonus, so depending on your bonus, it ends up being variable ($25-$35/hr). That's easy work - no legwork is involved - you just log in and work for your shift. Paid overtime if you're on a full time schedule. As far as picking up part time or full time seasonal work for a credentialed person (EA, CPA, JD), it pretty much requires the least effort. I did that when I first started, but was too busy with my own clients to continue. And frankly, I'd think that actual self-employment work for any of those credentialed individuals is going to beat the hourly wage from TT.

Thanks for the response. You said working for a CPA might bring in $25/hr in your area, TurboTax would bring in $25-35/hr, but "self-employment work for a credentialed individual" would bring in even more. How does this type of work differ from the first $25/hr option?

[Cpa Cat]

Thanks for the response. You said working for a CPA might bring in $25/hr in your area, TurboTax would bring in $25-35/hr, but "self-employment work for a credentialed individual" would bring in even more. How does this type of work differ from the first $25/hr option?

$25/hr - on par with an intern. This is office work in someone's office where you actually prepare tax returns from files they hand to you. But you likely don't sign the returns (the CPA/owner would review and sign normally). You may or may not be guaranteed hours or have set shifts. It might be full time, part time, on demand.

Turbo tax: $25-$35/hr - This is phone support. I think they do video chat support now. But it's work-from-home. Set shifts.You are scheduled for certain dates/shifts and are guaranteed hours and overtime. But there's no tax prep here. It's all tax advice/software support over the phone or video chat. Intuit has all sorts of tools to help you in this job, but it's you + the customer - LIVE on the phone. Sometimes they cry or curse at you. Sometimes they're lonely. It's a totally different job than preparing tax returns alone in a cubicle.

Self-employment: Self employment is like a mix of the two. Sometimes you prepare tax returns. Sometimes your clients are lonely and cry. Your success is based off your effort, personality and competence, not just showing up. Thus, the rewards are much higher.

[SeattleCPA]

... I'm pretty familiar with the tax code...

I agree. :-)

... To the CPAs on the thread: is something like this a common arrangement? What might be a typical hourly wage for a seasonal employee who has passed the EA test?...

I think rates probably run $15 to $25 an hour. Maybe $30 an hour once you're proficient with the software.

BTW, I think it'll take you about three or four weeks to study for the three EA exams. You'll take the test up in Mountlake Terrance at the prometric testing center. And then 3 or 4 months later you'll be an EA.

The trick in all this is that you really want to do entity returns rather than 1040s. At least that's my opinion.

P.S. Let me get through tax season but you should come over to Redmond in a few weeks and I'll buy you lunch.

[SeattleCPA]

BTW, I'm talking Seattle rates and working some regular rational schedule (like a dependable 8 hours 5 days a week).

Also the lower range is national chains type rates. (Unenrolled preparers there make, I think, about $12 an hour.)

Finally, I think the going rate in Seattle for seasonal tax CPAs is $40 maybe $50 an hour.

P .S. Last year a CPA friend and I sat through a Liberty Tax Franchise intro seminar. It was pretty interesting. Here's my blog post on the subject. Doing the whole franchise thing would be another option...

http://evergreensmallbusiness.com/lessons-from-liberty-tax-service-part-1/

[Drifterrider]

I worked in public accounting for one year.  It was like working in a morgue.

After I retire I might consider doing seasonal tax work but with more and more people doing their own now (free software, etc) I don't know how strong the market would be.

I have always prepared my own tax return.  Last year I borrowed someone's CD (turbo tax I think) to check MY work.  They were not giving me full credit on depreciation (if the IRS gives me five or six places to the right of the decimal, I'm using it).

Then I printed and mailed in my form.  I make too much to be allowed to "free" file electronically (Isn't that a first world problem to have)?

[SeattleCPA]

I don't know how strong the market would be.

I agree with CPA Cat's comments about the ease of getting an EA designation versus the work of getting a CPA credential.

But Driftrider here references the problem I see with preparing simple tax returns. TurboTax and TaxCut have shrunk the market for easy 1040 returns.

[headwinds]

Thanks for all the info you guys. Unfortunately, from all that you are telling me I think I will be better off sticking with what I am actually already credentialed to do. But I really appreciate you all taking the time to share your knowledge on this thread.

[SeattleCPA]

Thanks for all the info you guys. Unfortunately, from all that you are telling me I think I will be better off sticking with what I am actually already credentialed to do. But I really appreciate you all taking the time to share your knowledge on this thread.

Sometimes deciding not to take some action really is the best action...

[headwinds]

Yup. I was looking for ways to become self employed so I could start a solo-401k in addition to my 457 through work. But I am realizing that at my wage level, its just better to work in my profession and eat the taxes than do side hustles at 50% less income just for the tax shelter. Doesn't really make any sense since I'm not in the 50% tax bracket.