The global pandemic created havoc with our economic system. Now, as we begin to pull out of it, many people are considering switching careers. Are you one of them? And if so, have you considered tax preparation? If so, you may be wondering: do tax preparers make good money?
A tax preparer helps other people organize financial information and fill out tax forms correctly. This usually happens in the peak season, between the second week of January and April 15th every year. However, tax preparers can help with other tax issues, such as self-employment tax and other accounting tasks, throughout the year.
People who thrive as tax preparers are detail-oriented. They’re able to follow complex financial information and organize it in a presentable way. Tax preparers are knowledgeable, analytical, and good at using software programs and other tools available to them.
They’re not just math nerds, though. Because tax preparers spend a lot of time working with the public, they have to be good at interacting with people, too. The best tax preparers could be service-oriented people who want more out of their career than to just make money. They could be genuinely interested in using their unique skillsets to help their clients achieve financial goals and understand the bottom line.
Some organizations suggest that an ISTJ personality (from the Myers-Briggs personality test) are a good fit for accountants and tax preparers. They can stay busy with book-keeping, payroll processing, financial planning, and other money-related tasks, too, and this can open up doors to future job opportunities. Becoming tax preparers might be an ideal job for the right individuals.
Do Tax Preparers Make Good Money?
What's The Median Salary For Tax Preparers?
According to the Bureau of Labor Statistics, the median salary for tax preparers was $23.84 in 2019, or around $54,640 annually. The amount a tax preparer can make can vary from location to location, though.
For example, the annual mean wage for tax preparers in states like California, Texas, New York and New Jersey ranged from $52,420-$65,580. In other areas, such as Wyoming, Kansas, and Arkansas, the annual mean salary ranged from $31,410-$39,920. Alabama had the lowest salary statistic in the nation for tax preparers, with an annual mean income of $35,750.
Tax preparers in Colorado earned an average of $73,740, which was around $5,560 less than accountants and auditors made. In Virginia, accountants and auditors made around $84,740, while tax preparers made around $37,770—a difference of more than $46,000.
This suggests that, depending on the part of the country you live in, upscaling your tax preparation skills to accounting or auditing can be a valuable investment of time and money. This means moving beyond tax preparation training courses, which can be offered by tax preparation services like H&R Block or Jackson Hewitt, to more formal education.
While tax preparers generally need a high school diploma or GED, accountants usually receive a bachelor’s degree in accounting from an accredited school. This requires around 150 credit hours of work. It can include picking a specialty, such as internal auditing or business accounting.
Tax preparers following this path might also need to decide whether to be satisfied with an accounting degree or push further to become a certified public accountant. Certified accounting includes a hefty four-part test which can be taken over days.
Tax preparers who want to make more money might also consider moving to a different area of the country. Whether you’re an accountant, a CPA, or a tax preparer, taking new courses for continuing education could make you more knowledgeable, give you more items to put on your resume, and generally increase your confidence in searching for higher-paying jobs.
How Do Tax Preparers Make Money?
If you’re looking into becoming a tax preparer, you probably want to know exactly what they do every day at work. It’s important to note that most tax preparers work seasonally, which means their tax work is most likely a second job. If they have other jobs that they work year-round, this could mean that their days are long, because tax preparation would essentially be an additional shift at work.
Tax preparation focuses on helping clients get the best tax returns possible. This includes using tax forms and tools to keep taxes that clients may have to pay as low as possible. Tax preparers need to provide enough information to clients that they can get the right financial data to fill out the forms. They need to be able to explain the tax laws and forms to clients, understand the software programs they’re using, and take clients step by step through the tax preparation process.
One other thing that tax preparers need to be able to do is determine the appropriate forms to use while preparing taxes. This means they need to be able to interpret the financial data that clients provide and be aware of changes in tax laws from year to year. They might also need to be able to move between tax preparation for individuals and tax preparation for small businesses, which involves more forms and complex questions.
As they work through the tax preparation process, tax preparers will use the forms and tools to compute taxes owed or possible refunds. They can then help their clients pay their taxes and plan for the future.
Tax preparers often work with tax preparation services such as Liberty Tax or H&R Block in local branches. Some of them start their own home-based businesses.
Most tax preparers talk to clients on the phone at least daily. Teamwork is important, and the job often requires group discussions. There may be overtime opportunities during tax season, and the workload can taper off quickly after April 15th.
Do Tax Preparers Have Good Job Satisfaction?
There are a number of positive aspects of tax preparation jobs. Tax preparers provide a significant service to the local community and at the same time, they increase the amount of money they make. They get to use very specific skill sets, teach others about tax laws, and generally help clients feel satisfied with their clients. For people who enjoy working with others, this can be rewarding on several levels.
However, not all tax preparers are happy with their work situations. They deal with complex information and decision making every day, which sometimes includes placating angry clients. They may also be overtired from working long hours due to the seasonal nature of the job.
There’s deadline pressure, also, because all taxes are due at the same time every year. Tax preparers don’t have control over when clients will come in, so there may be days at the beginning of the season where there isn’t much work to do. It can pile up toward the middle of April, when everyone is in a rush to get their taxes filed on time.
One statistic showed that tax preparers only rank in the 9th percentile for job satisfaction. This could be due to stress, which could come from working with the public, scrambling to meet deadlines, and working long hours. However, a second survey showed that 68% of tax preparers were satisfied with their jobs, and 35% of them felt that their jobs were meaningful.
Like most jobs, there are tradeoffs associated with being a tax preparer. For example, tax preparers have to get an enormous amount of work done in two to three months’ time. However, they can make up to around $100,000 during those three months, which could ease financial stresses for the rest of the year.
Tax Preparer Pros & Cons
- Tax preparers can make a significant amount of money in just a few months’ time.
- Tax preparers can enjoy providing a significant service to their local community.
- Becoming a tax preparer takes less education than becoming an accountant, auditor, or CPA.
- Tax preparers work long hours in sometimes stressful situations.
- It may take about three tax seasons to build up a steady clientele.
- Tax preparers often have to rush to help clients meet the mid-April tax deadline.
What Are The First Steps To Becoming A Tax Preparer?
One nice thing about becoming a tax preparer is that there are many trainings available. Some tax companies, such as H&R Block, provide their own trainings for new tax preparers. These are usually low-cost or free training opportunities, and it could be easier to be hired by a national tax preparation chain if you take the trainings offered through the company.
There are also some independent companies that provide tax preparation training. The National Association of Tax Professionals and The Accreditation Council for Accountancy and Taxation (ACAT) offer training courses, too.
One good option is an online training course provided through a company called Start A Tax Preparation Business. This company offers a free federal income tax course, as well as information on how to start a home-based tax preparation service.
Training isn’t essential, but it can help you gain credibility, get jobs faster, and make more money. If you get started on your training and decide it's just not for you, that's okay, too. There are other jobs that don't require degrees but can still bring in $50,000-$100,000 per year.
Once you’ve got your training, you need to get a Preparer Tax Identification Number from the IRS. This requires you to be at least 18 years old, provide your social security number and address, and explain any felony convictions or money you owe to the IRS.
You’ll also need to get an Electronic Filing Identification Number from the IRS, which allows you to e-file returns for your clients. You may need to get fingerprinted to obtain your EFIN. Although the EFIN itself is free, you may have to pay around $50 for the fingerprinting.
Unlike becoming a CPA, once you’ve finished the steps outlined above, you’re officially a tax preparer in most states. California, Maryland, New York, and Oregon require tax preparers to take one more step and become licensed. If you live in one of these states and want to become a tax preparer, visit your state’s website to find out more information about how to get your license.
Do Tax Preparers Make Good Money?
Tax preparers work hard, completing a lot of detailed work in a short amount of time. The work can be both stressful and rewarding. Salaries can vary across the nation, and it takes about three years to build a solid customer base. However, tax preparation is fairly easy and inexpensive to get into. Many tax preparers make around $50,000-$100,000 per year, and it can provide a nice work-at-home situation for the right individuals.
So yes, tax preparers make good money once they’re established. If they like fast-paced work and contributing to society in a meaningful way, they may get a lot of job satisfaction from this career, as well.