Software Question / Startup Home Office

Hi,
I'm studying for the enrolled agent exam. I've been contemplating starting a part-time home based tax preparation business. My goal has been to keep overhead extremely low, and pass that savings onto customers. In looking into tax software it seems very expensive for someone like me, a very low volume sole propieter. I am looking for any suggestions on software, or inexpensive processes in which to file. In doing some research I found the fillable forms that are available through the IRS website. As a paid preparer, can I use these? I'm sure in the past all forms where done by hand anyway. I'm sure most of my clients returns would be simpler than mine to fill out, and I'm sure I would learn a lot manually preparing forms. From what I've seen, taxes must be e-filed. I'm trying to understand the e-file registration with the IRS. If I register for that, does it provide a portal for me to file my clients taxes? I'm finding it difficult to find answers to these basic questions. Any insights, thoughts or suggetions are appreciated.

Thank you,
Brandon

I'd suggest you join the Facebook group "Tax 101". Lots of help there for the new practitioner.

I was in the same boat last year. Look at Drake. I did pay per return my first year, I think it was around $400 for the software and $19 per return. I have enough clients now that this year I bought the unlimited version which was only $1100 for the early bird pricing. Some folks here don't like Drake because it is weak on the more complex entities, but for someone starting out I found it to be fine.

Their customer support is excellent and they will step you through all the setup along the lines of the questions you were asking. It's easy but you need to start now to get an EFIN in time for tax season.

If you are going to follow the rules for paid preparers (i.e. you are not going to "cheat" by using TurboTax and not signing the returns...), then your best bet is a Pay per return license for any of the professional tax products out there (I know ProSeries and UltraTax both support that). For $200-$300 upfront, and a per-return price that allows you to pay when you actually have payment from the client (great for cash flow), you should be able to keep your overhead low.

There is no free efile transmitter (which, as the ERO, you need to use to efile your clients' returns). Becoming your own transmitter is most likely prohibitive unless you are an experienced commercial software developer. Sorry to rain on your parade, but your idea to use fillable PDF files for paying clients is really not feasible in today's world. And I strongly advise against your business model of keeping overhead super-low to pass savings on to your clients. What you are selling is primarily your knowledge of tax law and planning issues for your clients, not just putting numbers on forms. You will never be able to beat the DIY products for price to the taxpayer, so why aim primarily for that market?

I agree with the previous posts and would add that you also need a PTIN.

You could look into Intuit Online. It's only a pay per return and you can buy packages to keep the per return price down. No other costs. Last time I looked into it, there wasn't a billing module plus you weren't able to customize letters, but if you are on a strict budget, it may work for you.

I would not practically work for free. As you grow and your get the software with the bells and whistles, pay for your CEs, and other expenses, you will find that these clients will really complain when you raise your fees. I've taken this business over from by husband and he practically did returns for free and he was using Lacerte REP. I had to slowly increase the fees on his clients. He was also doing free pickup and delivery. You are a professional, price your work accordingly.

Look at TaxACT. I've been using it since 2002 and now have about 150 clients. Not as sophisticated as some of the high $ programs (so I'm told), but able to handle every situation I've encountered. You can get started with Fed and all states for about $230 and pay per efile. The user interface is great, looks just like the actual forms. I also agree you should charge a market rate. You should get efile authorization but as long as your business is small and your clients agree to paper file you don't have to wait for the efile approval to get started.

Also, regarding efile. The efile portal is your tax software. The software provider will require your efin approval letter to start efiling.

If you were using hand prepared forms, I suspect you have a low complexity set of returns (however that is becoming more and more rare in my opinion and I predict especially so with the ACA in play now).

Having said that, I would look extensively at Drake - for around $1300 you can do a lot - I used Lacerte previously and had to abandon it after many years due to price and am now with Ultratax,

However I test drove Drake a good bit and it's impressive to me for the price, plus they too have a pay-per-return option - I've heard Drake referred to as the "top-end of the low-end" and I would agree with that from what I've seen.

Even Drake may seem expensive to you if you're just moonlighting, but I would consider a commitment to a software system as an "investment" in the future, even if not needed right now. As your practice grows, you'll want additional capabilities and believe me, the oddball situations that add complexity come early and often. Also this time next year you'll be glad you can proforma over all your 2014 returns and not have to reinvent all the basic data and carryforwards.

My thoughts. Good luck.