Starting a tax preparation business is hard.
But I don’t think a tax firm that makes you miserable for 6 months out of every year is what you have in mind.
If you’re doing it, you probably want to earn strong profits, work with great clients, have the freedom to work and live how you want, and build something that can run without you.
In this guide, I will show you how you can build a tax preparation firm that lets you do all that.
Let’s begin!
Table of Contents
- Step 1: Plan Your Business Roadmap
- Step 2: Consider Focusing on an Industry
- Step 3: Register Your Business
- Step 4: Create Pricing Packages
- Step 5: Choose Your Tools
- Step 6: Generate Leads With Marketing
- Step 7: Implement a Sales Process
- Step 8: Scale Based on Capacity
Step 1: Plan Your Business Roadmap
During my private coaching sessions, the first questions I ask clients aren’t about their firm — they’re about them.
- How much do you want to work every week?
- What kind of work do you want to be doing and not doing?
- How much money do you want to make?
These questions define the purpose of your business. They’re your personal goals, and they’ll shape every decision you make.
You also need to be clear about your “Why.”
Why do you want to start a tax preparation business?
Here’s the truth: firms that only focus on the technical side eventually burn out.
But when you have a “why,” your firm has a reason to keep going.
Once you’ve nailed down your personal goals and purpose, you can figure out:
- The size of the firm you need to build
- Which industry you will serve
- The types of potential customers you’ll target
- Whether you need to build a team
If you want to hear more about the importance of your “why,” listen to this podcast episode.
Step 2: Consider Focusing on an Industry
Let me preface this by saying you can absolutely succeed as a generalist professional tax preparer — you don’t have to specialize in an industry to build a solid firm.
That said, niching down tends to make life easier. It helps you focus your efforts and makes it easier to obtain new customers because:
- Your services are targeted
- Your messaging is sharper
- You stand out more in your market more easily
Your niche will determine your marketing strategy. It might also influence the name of your firm — you can get inspiration from my article about names for accounting firms.
I strongly recommend against chasing after the “perfect” name, though.
Like I mentioned in a podcast episode, perfection slows you down and prevents you from taking action. The name just needs to be clear, memorable, and meaningful to your potential customers.
CryptoTaxGirl is a good example. It’s not super fancy or corporate, but it’s easy to tell what they do, and the name is super easy to remember.
If you wait for a 100% perfect decision every time, you’ll stay stuck. Choose your industry, move forward, and refine as you grow.
Here are a few industry options to get you started:
- Real estate investors: With all the unique deductions and depreciation rules, real estate clients often need year-round tax help, not just during tax season.
- Freelancers and content creators: From YouTubers to designers, more and more people need help sorting their 1099s and deductible expenses.
- Cryptocurrency investors and traders: Crypto taxes are notoriously confusing, and many tax pros avoid them. This can be a great opportunity if you’re willing to learn the ropes. (Note: Xen Accounting, my previous firm, was one of the first North American accounting firms to accept cryptocurrency as payment.)
- Expatriates and Overseas US Citizens: Americans living overseas must still file U.S. tax returns. Most CPAs also don’t touch this work, which means there is less competition.
- Small businesses: This industry is booming — over 5 million new business applications were filed in the US in 2024.
With all of that said, your decision shouldn’t feel forced. If you choose an industry to focus on, it should come easily, and it should be something you actually want to do.
You can also identify industries you don’t want to work with.
The point of niching down is identifying industries you’re good at and want to work with. If doing so makes you feel stuck instead of showing you a clear path forward, I recommend you step back.
Step 3: Register Your Business
Here’s where you make things official.
First, you’ll need to register your business entity. In the US, most solo tax pros go with a limited liability company (LLC) to keep things simple and protect personal assets. In Canada, it’s usually a sole proprietorship or corporation.
Next, apply for your business tax ID. That’s an EIN (Employer Identification Number) in the US or a BN (Business Number) from the CRA in Canada. This step is needed to legally operate and open a business bank account.
If you plan to prepare federal tax returns in the U.S., the IRS requires you to have a Preparer Tax Identification Number (PTIN), which you can get through your IRS E-Services account on the IRS website. To electronically file client returns, you’ll also need an Electronic Filing Identification Number (EFIN).
In Canada, you’ll want to register for CRA e-file to submit returns on behalf of clients.
Depending on where you live, you may also need additional licenses or certifications. Check your local regulations early to avoid surprises.
Finally, protect yourself and your firm with professional liability insurance, and make sure your federal tax planning obligations are clear from the start.
Step 4: Create Pricing Packages
If you want a profitable firm that doesn’t suck up all your time, pricing is where the magic happens.
Instead of charging an hourly rate (which ties your income directly to your time), I recommend setting up three pricing tiers.
A three-tiered pricing model is typically set up with Bronze, Silver, and Gold plans. This gives clients a choice instead of a yes-or-no decision.
It’s designed so profits are baked into every tier, and it keeps your firm profitable at every level.
Here’s how to set up a three-tiered pricing plan for tax services:
- Bronze: This will include your core tax preparation services and the minimum level of support and strategy calls. I strongly recommend setting $500 as the absolute minimum price for this plan.
- Silver: This will give clients more access to you and your team, a faster turnaround time for their concerns, and more frequent strategy calls.
- Gold: This plan will include all that your firm has to offer. That could mean unlimited support, audit support, a fully personalized tax plan, etc.
Here’s an example of a three-tiered pricing model for tax services:
This approach to pricing also helps you:
- Prevent scope creep through standardization
- Create predictable workflows
- Build workflow templates for each package so you can onboard clients faster
Three-tiered pricing allows you to sell outcomes instead of your time.When you show clients the value you provide instead of the hours you’ll work for them, it becomes easier to charge more — just like one of my Future Firm Accelerate members who signed a client to his $3,951 plan after previously charging $250:
Step 5: Choose Your Tools
You’ll need a tech stack that fits your specializations and clients, not just a random list of apps.
Focus on the results you want to deliver to clients and work backwards from there. Like I shared on LinkedIn, this lets you focus on what you really need instead of falling into shiny object syndrome like many firm owners do.
Think about what tax software, communication tools, and collaboration apps will actually help you serve your niche efficiently.
Practice Management Tools
Practice management tools help you organize client work, track deadlines, and keep your team on the same page.
- Karbon: Karbon’s Triage feature centralizes emails, tasks, and notifications into a single, actionable inbox. This allows your team to manage communications efficiently, assign tasks directly from emails, and easily keep track of client interactions.
- Financial Cents (affiliate link): Financial Cents has automated client task reminders that help you ensure clients provide necessary documents on time. This helps prevent collection issues caused by missing information or slow client responses.
- Canopy (affiliate link): Canopy’s client portal works on both desktop and mobile, which enables secure document sharing and communication across multiple devices. Its workflow automation features streamline repetitive tasks and reduce delays in information gathering.
- TaxDome (affiliate link): TaxDome features an integrated Marketplace offering ready-made templates for workflows, emails, and more. This, combined with its client portal and automated reminders, helps speed up onboarding and improve client communications.
If you want to discover more tools like these, check out my article on accounting practice management software.
Documentation Tools
Documentation tools help your firm organize and securely share files with your team and clients. They make it easy to access the right information at the right time without digging through endless email threads.
- Dropbox: Known for its strong documentation features, including e-signatures and file requests, Dropbox makes it easy to receive and organize important documents.
- Google Workspace: A super versatile platform that’s great for real-time collaboration, combining storage (Google Drive) with tools like Docs, Sheets, and Gmail.
- Microsoft 365: Ideal for firms that prefer the Microsoft ecosystem, offering OneDrive storage plus familiar tools like Word, Excel, and Outlook
Communication Tools
Communication tools centralize conversations between your team and improve collaboration.
- Missive (affiliate link): This is what we use at Future Firm. I like its excellent email integration, which lets your team share and collaborate on email threads without messy CCs or forwards.
- Slack: A popular choice that has great integration support. You can even invite clients as guests, which could be useful if you have unlimited support in your Gold tier.
- Microsoft Teams: Perfect for firms that like the Microsoft ecosystem. It combines chat, video, and file sharing on one platform that ties seamlessly into the rest of your tools.
Collaboration Tools
These tools make it easier for your team to work together, especially when juggling multiple client projects at once. With the right setup, you’ll spend less time chasing updates and more time actually getting things done.
- Teamwork (affiliate link): We use this at Future Firm. It’s packed with helpful features, but the recurring tasks and capacity planning tools are especially great for keeping your team organized and avoiding burnout.
- Asana: A highly visual project management tool with loads of automations. One of my Future Firm Accelerate members even said that if they could only use one app in their firm, this would be it.
- Trello: One of the most popular Kanban-style apps out there. It’s simple and flexible, but you can always expand its functionality with Power-Ups.
Payroll Tools
If you want to run the firm all by yourself, that can be done. But if you want your firm to grow, hiring a team will eventually become part of the picture. When that happens, you’ll need the right tools to pay people smoothly and stay compliant.
- Wise: Ideal for paying overseas team members because of its low transfer fees and competitive exchange rates.
- Gusto: Gusto makes payroll easy with automated tax filings and benefits management. However, it’s only available in the US.
- PayPal: A familiar option for many contractors and freelancers, PayPal is simple to set up and works well for mass payouts.
Step 6: Generate Leads With Marketing
Many firm owners either dread or flat-out avoid marketing.
But by ignoring it, you’re leaving a lot of growth on the table.
The good news? You don’t need to master every marketing strategy under the sun. Pick two, get good at them, and stay consistent — you’ll be finding clients sooner rather than later.
In fact, Future Firm’s marketing strategy involves only newsletters, content marketing, and LinkedIn.
This simple page actually generates the majority of our newsletter subscribers:
Here are some marketing strategies to get you started:
- Social media: Tap into a huge audience of potential clients and connect with other experts in your industry.
- Email marketing: Build an audience that trusts your expertise and is ready to hire when they need help.
- Content marketing: Help potential clients find you online when they’re actively searching for tax help.
- Networking events: Meet potential clients and partners who can send work your way.
That last one is perhaps the most inefficient in the list, but it’s also the most effective (I relied on networking when I first started Future Firm). You can find out more in this podcast episode.
You’ll need long-term consistency to make these work, but they’re worth it.
If you’re looking for a marketing tactic you can implement now, though, you can do this:
Add a P.S. line in your email signature.
It’s one of my favorite marketing tactics. Basically, write a short blurb about your target audience’s pain points and how you can address them in your email signature. Here’s one you can use:
This works so well because you can forget about it after setting it up once. If you’re sending 100 emails every day, you’re basically marketing your firm in every one of those emails. 🙂
If you need more tips, I’ve got plenty more in my marketing for accountants article.
Step 7: Implement a Sales Process
Whether you realize it or not, everything you do in your firm is sales.
Once a lead comes in, your job is to guide them through a structured sales process that builds trust and makes it easy for them to say yes.
Start with a discovery call to capture their pain points. This is where you learn:
- Their current situation
- What’s not working
- Where they need help
The goal of the discovery call is to uncover the client’s struggles so you can offer your solutions to them. These can be done by asking value questions like the following:
- Out of everything that we’ve discussed so far, which part of your taxes is the most painful for you?
- What is preventing you from reaching your ideal situation?
After the discovery call, schedule a second call to walk them through the three-tiered pricing options you’ve created and recommend the package that fits best.
Once they’re ready, send over your engagement agreement.I recommend collecting payment up front to avoid unpaid invoices down the road. This is what I did to make sure my previous firm had zero accounts receivable.
Step 8: Scale Based on Capacity
A lot of firm owners think growth just means taking on more clients.
However, that’s the fastest path to overwork. It also leads to the business owner becoming the bottleneck in their own firm.
Growth happens when revenue increases, but scale happens when you increase revenue without increasing your personal workload. Capacity planning is the key to that.
Capacity planning means understanding how much work your team can realistically handle — whether that’s preparing tax forms, onboarding new clients, or handling advisory work — and making sure you have enough resources in place before you add more clients.
Here’s how it works:
For example, if you know a new client will take 15 to 20 hours per week and your team only has 10 hours of available bandwidth, you need to hire another tax professional before bringing them on.
It’s better to run at 80% team capacity than to constantly work overtime. And as I discussed in this podcast episode, capacity planning allows you to achieve the work-life balance you need.
Build Your Tax Preparation Business With This Guide
There we have it!
An in-depth, 8-step system to start a tax preparation business that helps you bring in great clients, generate strong profits, and protect your time, even during busy season.
Are there any tips you’d recommend based on your experience? Did I miss anything?
Share your thoughts in the comments below!
