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Launching Your Own Tax Preparation Business: From Certification to Your First Client

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Launching Your Own Tax Preparation Business: From Certification to Your First Client

The journey of starting a tax preparation business in Canada is an exhilarating entrepreneurial endeavor that mixes the expertise of being a professional with the added benefit of flexibility from running your own practice. Whether you are using the skills you gained in the ProFuture Academy’s formal training programs or building from your prior financial knowledge, your journey from professional certification to securing your first client requires you to take the necessary steps to prepare yourself to serve future clients.

The Canadian Tax Preparation Market

The tax preparation industry is an integral sector within Canada’s economy and represents a bona fide business opportunity. Thousands of individuals and businesses require professional assistance each year during the tax season, and there is always a high demand for skilled and qualified preparers. Ultimately, the success of your practice is dependent upon how you develop your client’s trust in you to be that credible and knowledgeable professional with Canadian tax law who provides effective service and value.

Step 1: Finalize your certification and CRA registration

First things first, before you start your practice, make sure you have the right credentials and registrations.

Your Education

The certification you earn from programs like you received at ProFuture Academy gives you great foundational knowledge on how to prepare individuals’ taxes (T1), corporations’ taxes (T2), accounting basics and payroll. This training gives you a solid foundation to perform taxes with services like TaxCycle Software and QuickBooks Online specifically designed for your anticipated practice to serve your clients.

CRA Registration Process

You cannot prepare and file tax returns for your clients until you register with Canada Revenue Agency. You need to do several important steps:

Business number (BN): You will need a business number identifier for your business so you can identify yourself should CRA need to verify your tax preparation business. You can obtain this BN by registering through Business Registration Online, by phone, by mail or by fax at 1-800-959-5525.

Representative Identifier (RepID): You need to apply for a RepID identifier to represent clients for CRA communications. You’ll be able to access clients tax information to see what they filed, support your clients on CRA communications they have and you will be able to assist your clients in communications with CRA.

EFILE registration: Apply for your Electronic Filing Identification Number (EFIN). Once you receive EFIN, you will be able to electronically file tax returns. CRA approval can takes up to 30 business days after the E-file application is received by CRA. Once you are registered as E-file you will be required to adhere to compliance standards if you decide to keep your E-file status.

Step 2: Set Up Your Business

Structure Choose a Business Structure Most solo part tax preparers in Canada choose a sole proprietorship or become a corporation. Decide on a structure based on some considerations:

  • How much liability protection do you want?
  • Tax implications of the structure.
  • Administrative burden of the structure.

Set Up Business Banking

Open a separate bank account for the business; this ensures a clear separation of business and personal money. Having a separate account sets a professional tone and makes it easier for you to track your income and expenses and keep accurate records for your own tax purposes.

Get Professional Insurance

Make sure to have professional liability insurance coverage for your practice. Professional liability insurance is an important aspect of working in the tax preparer sector, as one mistake can cost your clients a lot of money.

Step 3: Develop your service offers and pricing structure

Define your service offer Based on your training and your expertise define the services you will offer:

  • Corporate tax returns (T2 returns)
  • Personal tax preparation (T1 returns)
  • Bookkeeping and payroll
  • Tax planning and advisory
  • CRA audit support

Implement Strategic Pricing

Consider a three-tiered pricing structure that offers choices for clients of different needs and maximizes your earning potential:

Basic Package: The simplest tax prep available for uncomplicated returns

Standard Package: Complex returns with multiple income streams, deductions, and credits

Premium Package: Total service including tax planning, year-round advice, and prioritized service

Check local publication to ensure your prices are unique enough to earn business while also being competitive in your space and reflective of your value to the service.

Step 4: Build Your Client Acquisition Plan

Start with your networks

Your first clients will most likely come from your personal and professional networks. Reach out to family, friends, former colleagues, and connections who may be looking for tax prep services, as those clients are valuable in terms of referrals and testimonials.

Develop a Professional Online Presence

When those clients find you, they’ll need to have a professional appearance of your services, your competencies, and your differentiation from other firms. Get a professional website that clearly shows.

  • Your credentials and qualifications
  • Descriptions of your services and prices
  • Client testimonials
  • Clear contact information and websites call to actions

Ensure that your website is developed as a local search engine optimizer, so potential clients can find you when they search for an available tax preparer, in your area.

Utilize Local Networking

Participate in all local chamber of commerce/networking events to build relationships with entrepreneurs and private service providers such as financial advisors, lawyers, and bookkeepers that can partner with your business direction.

Leverage Social Media Marketing

Create a presence with places such as LinkedIn, Facebook, etc. Share valuable tax tips, reminders of upcoming deadlines, and industry news as a way to show your expertise and remain top of mind with your potential clients!

Step 5: Get to Know the Client Onboarding Process

Carry Out Detailed Client Interviews

Your initial consultation with a client prepares the groundwork for the entire client experience, so make sure you ask all the right questions and gather all the necessary information about their financial situation, prior tax history, and what they are looking for:

  • Their current employment, job income, and other income sources
  • Investment income, rental property income, etc.
  • Ownership of a business and/or income from self-employment
  • Overall tax situation from the previous year with any outstanding issues
  • Means of communication and expectations for communication

Make Expectations Clear

Make sure that you have made clear expectations around things like:

  • Deliverables from your service delivery and timelines to complete deliverables
  • Things like communication protocols
  • Your fee structure and payment arrangements
  • What documentation the clients should provide to you
  • Their responsibilities vs your responsibilities

Create Orderly Collection of Documentation

Set up a standardized process for the collection of documentation for clients and the organization of documentation. Only use secure means of sharing documentation. In addition, ensure you have well-organized files (physical or electronic) setup for each client.

Step 6: Focus on Building Client Relationships

Provide Amazing Service

By providing a timely and accurate service, being proactive in identifying opportunities to save them on taxes, helping them understand complicated tax issues, be responsive to any questions or concerns that come up, and following up after you have completed the service, will create loyal clients who will come back to you again and again.

Ask for Reviews and Testimonials

A satisfied client is your best advertising. Ask your satisfied clients to leave you a Google review or a LinkedIn recommendation. If you can get a few written testimonials, then you can easily add those testimonials to your website and marketing material.

Set Up a Referral Program

Establish incentives to have your existing clients refer you new business. A great referral program can be as simple as paying a referral fee of $20-50 in exchange for having a firm refer you a new client. These small investments can pay of dividends in new business.

Step 7: Plan for when the business grows and sustainability

Track key business metrics

Track the business metrics that are important to you, such as the:

  • Number of active clients
  • Average fee per return
  • Client retention ratios
  • Referral sources and conversion ratios
  • Seasonal cash flow trends

Consider expanding your services

When your practice grows, consider expanding your range of services to include things such as:

  • Year round bookkeeping
  • Payroll
  • Business advisory
  • Financial planning

A larger services portfolio can result in a more balanced workload, and consistent year-round revenue.

Be aware of changes to tax law

As tax laws change, keep your knowledge current by:

  • Attending CRA updates and training
  • Joining a professional association
  • Receiving tax newsletters and magazines
  • Transcribing your knowledge through continuing professional education

Managing the seasonal nature of the business

Tax preparation is inherently seasonal, with the busiest season running from January through until the end of April. Develop a plan to manage the seasonal nature of the practice, such as:

  • Building a cash reserve when you are busiest
  • Considering a part-time job or other services when not as busy
  • Using the off-season for marketing, training and business development
  • Keeping in touch with clients all year round through short touching points.

Tools and Technology for Success

Use quality software and other technology, which will improve your capability and professionalism, for example:

  • Professional tax preparation software (like TaxCycle, which you are now trained on)
  • Client relationship management (CRM) systems
  • Trusted document sharing platforms
  • Professional communications tools
  • Accounting software for your own business accounting

The First Steps to Success

A successful tax preparation business takes time and hard work, a commitment to constantly bettering yourself through learning, and a commitment to customer service excellence to meet your client expectations. If you put in the work to become properly certified, register with CRA, create a plan, and identify an appropriate way to acquire clients, it is possible to develop a successful practice that gives you professional satisfaction and financial success.

Understand that the training you receive at ProFuture Academy, combined with your application of TaxCycle and QuickBooks Online, have you set up for success in this rewarding field. Keep in mind that every successful tax professional started the same way – with their first client. Focusing on delivering value, trust, and reputation, you’ll leave a good impression on any potential first client of your own.

Your experience with Canadian tax law, your application of basic business principles, and sourcing your client’s success and profit will be the building blocks that help you create and lead a practice that can grow and prosper for many years.

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