How to Start a Tax Preparation Business in 2027

What do you need before you can prepare returns for pay?

The first requirement is a Preparer Tax Identification Number (PTIN). The IRS states that anyone who prepares or assists in preparing federal tax returns for compensation must have a valid PTIN before preparing returns, and that enrolled agents must have one too. Every paid preparer needs their own PTIN; an office cannot share one.

Most first-time applicants can get a PTIN online in about 15 minutes. The IRS lists the fee as $18.75 for 2026, and the PTIN must be renewed every year because it is valid through December 31. If you apply after October 1, the Form W-12 instructions let you choose whether the PTIN is valid for the current year or the next one, so a new preparer starting this fall can request a PTIN for 2027. Confirm the fee shown at sign-up, because the IRS sets it each year. Paper Form W-12 applications take about 6 weeks to process, so apply online if you can.

A PTIN only lets you prepare returns for pay. It does not let you e-file them. For that, your business needs an EFIN, covered next. For a side-by-side comparison, see EFIN vs PTIN: What New Preparers Need to Know.

How do you get an EFIN for your tax office?

An Electronic Filing Identification Number (EFIN) identifies a firm the IRS has accepted as an Authorized IRS e-file Provider. If you plan to prepare returns and e-file them for clients, you apply as an Electronic Return Originator (ERO). The IRS currently charges no fee for an EFIN, but you must pass a suitability check.

Plan for this step early, because the IRS says it can take up to 45 days from submission to approve an e-file application. The application process works like this:

• Create or sign in to your IRS account and open the e-file application under e-Services, E-file Provider Services. Every Principal and Responsible Official on the application needs their own account before you submit.
• Enter firm information and choose ERO as your provider option.
• List each Principal and Responsible Official. Attorneys, CPAs and enrolled agents can enter their professional credentials instead. Everyone else must be fingerprinted through the IRS-authorized vendor, using the scheduling link on the application summary page.
• Pass the suitability check. The IRS describes it as including a credit check, a tax compliance check, a criminal background check and a check for prior non-compliance with e-file rules.
• Receive your acceptance letter with your EFIN. Keep the application current: the IRS requires updates within 30 days of changes, and each office location where e-file transmissions will occur needs its own application.

Do you need a credential or state registration?

Federally, a PTIN is all you need to prepare returns for pay. Credentials matter for representation rights and client trust. Here are the main paths:

• Annual Filing Season Program (AFSP): This voluntary IRS program requires 18 hours of continuing education. That breaks down to a 6-hour Annual Federal Tax Refresher course with a comprehension test, 10 hours of other federal tax law and 2 hours of ethics. You also renew your PTIN and consent to Circular 230 obligations. Participants get limited representation rights for returns they prepared and signed. The IRS issues the Record of Completion after PTIN renewal season opens in October and all requirements are met.
• Enrolled Agent (EA): You pass all three parts of the Special Enrollment Examination within three years, apply on Form 23 and pass a suitability check. EAs, CPAs and attorneys have unlimited representation rights before the IRS.
• CPA: This is a state-licensed credential with its own education and exam requirements. It is not required to run a tax office.
• State rules: Some states add their own rules on top of the federal ones. Two examples verified for this guide: California requires non-exempt paid preparers to register with the California Tax Education Council. That means completing a 60-hour qualifying education course, buying a $5,000 tax preparer surety bond and holding a PTIN (CTEC). New York requires paid preparers to register every year. Commercial preparers, generally those preparing 10 or more New York returns, pay a $100 registration fee and complete continuing education (NY Department of Taxation and Finance).
• Other states and some cities also have rules. Before you open, check your state tax agency's website for preparer registration, and check your city or county for business licensing.

How should you set up the business side?

Treat the office as a real business from day one. Decide on a structure, such as a sole proprietorship or an LLC, ideally after talking with an attorney or CPA about liability and taxes. Get an Employer Identification Number (EIN) directly from the IRS. The IRS says the EIN is free and is issued right away online when the application is approved. It also warns against websites that charge for one.

Open a dedicated business bank account so client fees, software costs and any bank-product disbursements never mix with personal money. Look into errors and omissions (E&O) insurance, which can help cover claims that a preparation mistake cost a client money. Coverage and pricing vary by insurer and state, so get quotes before the season starts.

What data security rules apply to tax preparers?

Tax preparation firms are covered by the FTC Safeguards Rule. It requires an information security program with a designated Qualified Individual, a written risk assessment, safeguards such as encryption and multi-factor authentication, staff training, oversight of service providers and a written incident response plan. Since May 2024, covered firms must also notify the FTC as soon as possible, and no later than 30 days after discovery, of a security event involving unencrypted information of 500 or more consumers. Some requirements are relaxed for firms that hold information on fewer than 5,000 consumers.

The IRS gives you two free tools. Publication 4557, Safeguarding Taxpayer Data, covers security basics and monitoring your EFIN and PTIN. Publication 5708 includes a sample Written Information Security Plan (WISP) template made for small tax practices. Write your WISP before you take your first client file.

How do you choose software, a service bureau and bank products?

Professional tax software is the core of your office. Compare which federal and state forms it supports, e-signature and remote filing, client document portals, reporting, training and how fast support answers during peak season. You can buy software directly from a vendor, join a franchise or work through a service bureau that bundles software, training and support. Our explainer What Is a Tax Service Bureau and How Does It Work? compares the three.

Many offices offer refund transfers and other bank products, which let a client pay preparation fees out of their refund. The IRS treats these as business contracts between the provider and the taxpayer. Publication 1345 says you should make sure clients understand that their refund goes to the financial institution, tell them about every fee and deduction and the amount they will receive, and get their written consent before sharing tax information with the bank. Bank products are optional for clients, have fees, and depend on approval by the bank partner.

See our Software & features page and How it works for what we offer. Specific software, bank-partner and fee details are confirmed during enrollment.

How do you price services and find your first clients?

Many offices price by return complexity, with a base fee for a simple individual return and add-ons for schedules, state returns and business income. Post your prices clearly and put them in writing before you start work. Start with people who already trust you, such as family, coworkers, church and community groups, and past clients if you have them. Add a simple website, a Google Business Profile and referral incentives. Any earnings you see from a pricing plan are illustrations only. Actual results vary with effort, market and client mix, and are not guaranteed. Our Pricing page explains packages.

Use this timeline to be ready for the 2027 filing season. For more detail, see our Start your tax business guide. When you're ready, you can Apply or browse the FAQ.