So you want to be a tax preparer?

A reader writes in:

I have a question for you that is a little outside what you normally answer (I think). I “retired” ([laid off]). However I am only in my late 50s, feel 30 and feel like I can work for 20 or more years. I have a Masters degree (…) but there are NO jobs. My question to you is, do you think it is wise for me to go and take classes (H&R Block or some other training) to do become a tax preparer? I am reasonably bright, excellent on computers and have good people skills. I like the idea of having very busy times and then slow times (I like to travel so I could take advantage of the slow times). On doing research, it appears I can probably make $30 to $40 thousand a year (I live in Northern CA) at a minimum, which while not being a lot would keep me from touching my 401k. Any suggestions/warnings/ideas would be appreciated (especially if you have an idea on which places training is the best).
-Gary

Thanks for your question, Gary. I can definitely relate to this one, as a significant factor in my decision to become a tax preparer was the lack of jobs in my field at the time. The seasonal nature of the work was also appealing, and I continue to enjoy having more flexibility in the summer for travel and other interests.

So here are some thoughts informed by my own personal experiences. I did start out in one of the well-known chains. It’s not a bad way to go, but in retrospect I might have gone a different route.  Here’s the pro/con from what I experienced:

Pro:

  • You’ll get to complete tax returns start to finish in your first season.
  • The chain I started with, and I think this is true of all of them, have a wealth of on-line resources available to employees for continuing education purposes. This was the key to my success in the field…I took advantage of as many course offerings as I could and within 2-3 years had more tax knowledge than many of the far more experienced veterans I worked with.

Con:

  • The chain stores tend to train you to follow a computer program. (The resources are available to learn the tax knowledge, but the initial training is more focused on following computer prompts.) They also tend to get clients with very simple returns. You could do a lot of work for a chain store without gaining a lot of experience that increases what you know.
  • I was never very comfortable with the way chain stores tend to push expensive financial products on typically low-income people who could least afford the fees. My one “weakness” in my performance reviews was a relatively low take rate on some of these items. Of course, other employees felt that if people willingly signed up for these products that was their free choice. Fair enough. Just something to be aware of and make your own decision about.
  • The starting pay is quite low. The chains typically start you at little more than minimum wage. There are incentive bonus plans that make it possible to make more (much more in some cases), but at the beginning, when you’re the last preparer to get new clients that walk in, and you have no return clients, you probably won’t get much of a bonus. You might get lucky and be in a busy office that keeps you busy, but I wouldn’t count on a large bonus the first season.
So basically, my experience with large chains is that they’re a good way to get your foot in the door,  so to speak. I’ve known of a few (very few) people who’ve stayed with the chains for a long time and now make something in the $30k-40k range you refer to (and more in some cases) just working tax season, or more if they work at year-round offices and have other duties like training new preparers. But I’d consider them the exception more than the rule. They invariably will have a large base of return clients (part of compensation is based on return clients), so your people skills are considerably more important than tax knowledge if you stay in that environment. While I don’t deny people skills and service are a critical part of any tax practice, or any business for that matter, I personally wanted something a little more intellectually challenging.
[As an aside, when I have prospective clients who are considering going to a tax chain, I usually point out that preparers just starting out there make about the same amount of money and have little more time in training than many fast-food workers. Your most significant financial transaction of the year probably shouldn’t be left in the hands of a fry cook ;-) ]
The alternative to the chains is working for a CPA or Enrolled Agent firm. I moved into working for a CPA firm after the chain. And now I have my own firm as an Enrolled Agent. (And just to round things out, I also have done software testing for a tax software company. So I’ve seen the field from every angle :-) ) If I had to start over again, I would probably start by taking the mandatory training classes at a community college. Many community colleges offer the necessary course at very reasonable prices. These courses will focus on the nuts and bolts of the tax forms, not simply following a computer program. With a solid grade in one of these courses, you should be able to find seasonal work for a CPA or Enrolled Agent in your area. Just about every firm I know needs to hire additional people during tax season. You’ll be preparing the more basic returns (though still probably as complex or more complex than what you’d generally see in a chain), and your employer will probably review and sign off on your work. This is good because you get immediate feedback if you’re doing something wrong.
The potential downside is a small firm likely won’t have the training resources of a big chain. But many education providers are now offering “buffet” options for firms, allowing employees of firms to take as many online offerings as they want and pay only a small fee for the courses they want to “count” as part of the ongoing Continuing Professional Education requirement. That’s definitely something to inquire about.
Realistically, either way you go it will probably be quite some time before you make $30k-40k per year working just during the 3-4 month tax season. I don’t know of anybody who has achieved that in less than 5-10 years, and it’s far from guaranteed even then. You may be able to find an accounting firm that will have year round work for you doing various administrative tasks, which would make the $30k-40k starting figure entirely reasonable. Or they may need you during tax season, and then for short periods like when quarterly payments or due or the extended filing deadline is approaching. This would also allow you to reach $30-40k sooner. (I think I’ve seen some of those same sites you refer to indicating starting salaries of $30k-40k. The only thing I can figure is they’re taking the starting hourly rate from tax season and projecting it out over an entire year of full-time work.)
Hope that helps provide some useful information about the field. If you decide to take the training class, check back in about November when I’ll probably be hiring ;-)
Advertisements

One Response to So you want to be a tax preparer?

  1. Gary says:

    Thank you for your excellent answer! I will contact you in November and see if you need me. (Hopefully you are somewhere in the Bay Area of SF).

%d bloggers like this: