1. Where did you find clients when you first started?
When I first became self employed, I worked an at-home phone job for TurboTax (open to EAs or CPAs) during tax season. Hardly anyone actually met their experience requirement. I'd encourage you to apply once you become an EA, even if you read the job description and think you won't make it. I swear to God, their recruiters are paid for every warm body they get to pick up the phone. While I had tax experience at a normal accounting firm, that TT phone job was the best education I could have gotten in answering questions clearly, managing customer expectations, and understanding real peoples' issues with taxes.
I also joined a referral based business networking group (BNI), and a large chunk of my business comes from referrals from that group.
Finally, I built a reputation on Elance (now Upwork), by bidding jobs and requesting reviews after successful projects. Only 5 star reviews are worth it. You have to start low before you've built the reputation, but after you have some successful job completions, people will pay more based on your history. Also, some clients will become repeat clients.
2. Did you take over someone else's tax practice /buy someone's book? If so how much did it cost?
No, I started from scratch. I believe the rule of thumb is 1x gross. I wouldn't go there, though. If you do, you'll lose at least 25% of the clients who just don't like being sold or prefer the old accountant. You'll lose more if you lack experience in managing a full time client load on your own. Let it grow organically.
No advertising was ever worth it, except that one of my first clients built me a professional website and it continues to be my #1 source of clients, despite the fact that we basically spend nothing on it. He just happened to be really good at understanding search algorithms. When I tried building my own website, you couldn't even find me.
3. Do you do audit representation? Is it worth offering/ required?
It doesn't come up often. But yes. Current clients will be nervous if you say you won't defend them in an audit. Also, audit rep is easy if documentation is good, so on my own clients, it's no big deal. On clients who are calling just for that - if you don't like it, or aren't confident in it, then don't feel required to accept them. Like I said, it doesn't come up often.
4. How many clients do you have in a year?
I think I did 200 last year.
5. What do you charge for each return and what geographic region do you live in? (I live in the mid atlantic)
Midwest. I'd rather not disclose. I raise my prices every single year and learned to set a minimum tax return price early. I also learned to quote my hourly rate and minimum cost with confidence and don't feel bad when people turn away. Price sensitive clients are some of the worst.
Start with finding out how much H&R Block charges for an Earned Income Tax Credit return, a return with a K-1, and per form Schedule C. You'll feel good about setting a reasonable price then and raise it as you become more popular. Don't feel the need to compete on price for casual W-2 returns. Basically, if people can do their tax return for free or $40 on TurboTax, they're not your target demographic. Accept them if they come along, because they're quick and easy, but don't compete on price.
6. Anything else I should be asking?
I use Drake Software, which is frequently voted the best software for new practioners. I highly recommend it. It has excellent customer service and a great knowledge base. Also the price is fantastic.
I also offer bookkeeping (I guide clients to Quickbooks Online). These days I have an assistant, because I charged a lot less for bookkeeping and now I focus on higher profit work. But when I was starting, monthly bookkeeping was a great source of income and clients.
I use Patriot for payroll as a wholesale accountant provider. They're full service payroll for super cheap. Way better than trying to do it yourself.
Feel free to reach out in PM if you decide to go this route and encounter problems that you're not sure how to resolve. When I started, I said yes to basically everything. Sales tax? Payroll? Audit support? Back taxes? Penalties? New bookkeeping software? Whatever. Fake it until you make it. I pretended I knew about all of that and I figured it all out.
One thing to keep in mind is that you can get form 2848 and pull IRS transcripts for clients from IRS E-services. You can also use 2848 to phone the Practioner Priority Service (less than 5 minute wait if you call in the morning, usually) and get penalties removed over the phone. Familiarize yourself with First Time Penalty relief, because it's easy and makes you a hero. My only regret is that I didn't start a ticker to log how many dollars I've successfully abated for clients - pretty sure I'm in the six figures. The first thing I'd do upon becoming an EA is file form 2848 on my own business to get myself into the IRS system with a CAF number, so that you don't have hiccups with that first client you need it for. Register for IRS E-services on day 1.
California is one of the worst states to deal with. Their Franchise Tax Board is a nightmare. They're the only state I consider rejecting out of state clients for.
