Tips for Starting a Home Based Tax Business

Tips for Starting a Home Based Tax Business

By Tim Frye

The art of starting a home based tax business has been puzzle for many tax preparers.  And as the tentacles of the IRS grow more invasive and pervasive than ever, this task is not getting any easier.  Now, when you are preparing taxes out of a home office, and are expecting to do more than a few tax returns a year from home, you are going to be held to higher level of standards then your local Avon wife who is slanging make up next door.  The IRS doesn’t play man, so in this article we will give a few tips for starting a home based tax business without getting on the government’s’bad side.


Is My Tax Business IRS Compliant?

So let’s say you just got your tax license and your PTIN number and are looking to get started doing taxes ASAP.  The number one thing you should be focused on is being compliant with all the IRS provisions and guidelines that go with running a tax business from your home.  If you don’t found your business upon the following of IRS rules, you may as well not even start in the first place.  Any tax preparer who prepares more than ten returns a year is required to EFile all of those returns.  In order to efile, you need to obtain an EFIN from the IRS. 

If you are preparing taxes in California, you need to be registered with the California Tax Education Council, or CTEC.  You also need to obtain a business bond to go with that registration if you are working in the state of California.

The first step to preparing taxes is compliance with the IRS. Everything is secondary compared to this, requirement due to the harsh penalties the IRS places on illegal and dishonest tax preparer activity. 

What is Best and Cheapest Tax Program?

The second tip we have for you when you are starting a home based tax business is to pick your tax software carefully.  You want to look for a program that is not too expensive, but is still adequately equipped and comprehensive enough to allow you flexibility when dealing with different client situations. 

You may not want to purchase a pricey program like lacerated if you are just operating from home and are not planning on doing thousands of returns just yet.  You can keep you operating costs low by finding a program that fits your needs for the moment, and later be free to change any time you want any year you want. 

Pronto Education offers a discount on tax software for all of our 60 hour tax preparation students, and information can be found at

Am I Eligible for the Home Office Deduction?

One of the biggest benefits of having a home office is being able to write off a portion of your costs of living in the home that are in direct relation to the office and to the business.  There are strict restrictions placed on a taxpayer’s eligibility to claim this deduction.  The home office must be exclusively used for business purposes only, must be compartmentalized from other parts and rooms of the home, and cannot be used for other purposes such as entertainment, unless the entertainment is business related.  The office must be regularly and exclusively used for business purposes only.