How to start a tax preparation business in 2026

No federal license exists to prepare taxes — two IRS numbers do the work, and the states we read add registration in five. The PTIN: "Anyone who prepares or assists in preparing federal tax returns for compensation must have a valid 2027 PTIN before preparing returns"; "Most first-time PTIN applicants can obtain a PTIN online in about 15 minutes. The fee is $18.75. This fee is non-refundable and non-transferable" (IRS, PTIN requirements, 2027 cycle) — not the "$19.75" the AI answer prints. The EFIN: "it can take up to 45 days from the date of submission for the IRS to approve your e-file application", and a preparer without a credential needs "to be fingerprinted using the IRS authorized vendor" (IRS, become an authorized e-file provider); "Currently there is no fee to obtain an EFIN" (IRS, EFIN FAQs). You need it because "any tax return preparer who anticipates preparing and filing 11 or more Forms 1040, 1040A, 1040EZ and 1041 during a calendar year must use IRS e-file" (IRS, most tax return preparers must use e-file). Without a credential, a PTIN holder may prepare returns and nothing more — "Beginning January 1, 2016, this is the only authority they have" (IRS, preparer credentials and qualifications).

The eighteen hours, or the exam. The Annual Filing Season Program takes "18 hours of continuing education, including a six hour federal tax law refresher course with test" a year; participants "are included in a public database" and have "limited representation rights, meaning they can represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees" (IRS, Annual Filing Season Program) — the IRS's directory of preparers with credentials or the filing-season record is where a client checks you (IRS, choosing a tax professional). The package is $79.50 at Sequoia CPE (Sequoia CPE) or $89.95 at Gleim (Gleim). The enrolled agent exam gives unlimited rights: "There is a $317 fee per part paid at the time of appointment scheduling", three parts within three years, then "the $140 enrollment fee at Pay.gov" (IRS, enrolled agent FAQs); "Effective March 1, 2026, the IRS Enrolled Agent Special Enrollment Exam (EA-SEE) is no longer developed and administered by Prometric, LLC. A new vendor, PSI Services" (IRS, become an enrolled agent), and the credential is kept with "72 hours (66 hours of qualifying CE and 6 hours of ethics) every three years" (IRS, maintain your enrolled agent status). Representation before the IRS — audits, collections, appeals — belongs to enrolled agents, CPAs and attorneys under Circular 230 (IRS, Circular 230).

The penalty, and the plan the law already requires. A paid preparer who claims the earned income credit, the child tax credits, the American opportunity credit or head-of-household status completes Form 8867 and keeps the records: "For returns and refunds filed in 2026, the penalty is $650 per failure to be diligent. The penalty can be up to $2,600 on a return" (IRS EITC Central, news for paid preparers, June 2026); for returns filed in 2027 it rises to $665 per failure, and the penalties for not signing, not furnishing a copy or not using the PTIN are $65 each (Revenue Procedure 2025-32). And the security plan: "Federal law requires tax and accounting professionals to create and maintain a Written Information Security Plan to help protect client information from identity thieves and data breaches" (IRS, IR-2026-92, August 18, 2026), on the IRS's own template (IRS Publication 5708) — because the FTC's Safeguards Rule counts a person who "Becomes your client for the purpose of obtaining tax preparation" as a financial institution's customer (16 CFR Part 314).

Five of the states we read register preparers; Texas and Florida do not — and check your own state, because Nevada registers "document preparation services" that prepare "all or substantially all of a federal or state tax return" (Nev. Rev. Stat. §240A.030). California: "Complete a 60‑hour qualifying education course from a CTEC‑approved education provider. Obtain a $5,000 tax preparer surety bond."; "Pay the non‑refundable application fee: $100, plus a $2 processing fee"; a Live Scan background check; "You must register within 18 months of completing your 60‑hour QE course" (CTEC, how to become a tax preparer in California, January 29, 2026), then "the $35 annual registration fee" (CTEC, new application); the bond "starts at only one payment of $45 for a 12 month bond term" at a vendor that opens (Surety Bonds Direct). Oregon: "a minimum of 80 clock hours of basic income tax law education" and the licensed tax preparer exam (Oregon Board of Tax Practitioners, exam requirements), an initial license of $85 and a renewal of $110 (Oregon Board of Tax Practitioners, license renewal). Maryland: "The cost of the examination is $65" (Maryland Board of Individual Tax Preparers, exam), "Registration fee: $100 | Renewal fee: $100" for two years (Maryland Board, fees) and "at least 16 hours" of continuing education per renewal, four of them on Maryland tax (Maryland Board, continuing education). New York: "if you're a New York State tax return preparer or facilitator, you must register annually with the Tax Department", and a commercial preparer — ten or more returns — must "pay the $100 registration fee", with "$50 per return for not paying the registration fee" up to $5,000 a year (New York Tax Department, preparer registration). Connecticut: "The initial permit application fee is $100.00 and is valid for a period of two years" (Connecticut DRS, 2018), and "As of January 1, 2022, a certificate of completion of the annual filing season program administered by the IRS will be required in order to receive a permit" (Connecticut DRS, Special Notice 2019(4)). Texas and Florida register no one — the IRS rules apply; Maryland is not the rule, as the AI answer implies, but one of five exceptions.

Registering the business, and the tax a preparer doesn't collect. Texas: an LLC's certificate of formation is $300 (Tex. Bus. Orgs. Code §4.152), and tax preparation is not on the Comptroller's list of taxable services (Texas Comptroller, publication 96-259). Florida: $100 to file articles of organization (Fla. Stat. §605.0213); the taxable services the Department of Revenue lists do not include it (Florida Department of Revenue). New York: $200 for articles of organization (N.Y. LLC Law §1101); "Sales of services are generally exempt from New York sales tax unless they are specifically taxable" (New York Tax Department, quick reference). California: "Filing Fee - $70.00" (California Secretary of State, Form LLC-1) and "an annual tax of $800" (Franchise Tax Board); "Persons engaged in the business of rendering service are consumers, not retailers" (CDTFA Regulation 1501). Kentucky files an LLC for $40 (Kentucky Secretary of State). A few states tax services generally: Hawaii's general excise tax, "4% for all others" (Hawaii Department of Taxation), New Mexico's gross receipts tax "from 5.125% to 8.6875% depending on the location" (New Mexico Taxation and Revenue), South Dakota, where gross sales "include … services" (South Dakota Department of Revenue), and West Virginia, where "All sales of goods and services are presumed subject to Sales and Use Tax unless an exemption is clearly provided" (West Virginia Tax Division). Ask your state's revenue department, and confirm the details with your accountant.

The software and the insurance, from the makers' own pages. Drake Tax 1040 — one user, unlimited individual returns — is $2,075 through November 30, 2026 ($2,195 list), Drake Tax Pro with business returns $2,695 ($2,845 list), and its pay-per-return $379.99 for the first ten returns, then $49.99 an individual return and $74.99 a business return (Drake Software, pricing, tax year 2026); Intuit's ProConnect Essentials 100 — one user, 100 individual returns, every state, e-signature — is $3,842 a year on promotion, "starting at $5,957" at list (Intuit ProConnect, pricing). Insureon's tax-preparer customers pay a median $34 a month, $411 a year, for errors and omissions at $500,000 per occurrence, $29 a month ($350) for general liability and $53 a month ($636) for cyber (Insureon, June 23, 2025) — $1,397 a year for all three, our arithmetic. Workers' compensation is not universal: "in Texas, private employers can choose to carry workers' compensation insurance coverage, but it is not required in most cases" (Texas Department of Insurance); California — "all California employers must provide workers' compensation benefits to their employees" (California DIR); Florida from four employees outside construction, counting LLC members (Florida CFO); New York — "every employer subject to this chapter shall … secure compensation to his employees" (N.Y. Workers' Compensation Law §10). Square takes 1 percent on an ACH invoice and 3.3% plus 30¢ on a card invoice (Square pricing).

The questions clients bring, answered from the IRS's own pages. Payment apps and marketplaces report on Form 1099-K when payments for goods or services exceed $20,000 in more than 200 transactions — the "$600 rule" never took effect, though a platform may still send a form at a lower amount (IRS, understanding your Form 1099-K). Returns are chosen for audit by "Random selection and computer screening" against norms and by "Related examinations", and "a refund is not necessarily a trigger for an audit" (IRS, audits) — $26.8 billion of additional tax was recommended across the 497,621 audits closed in fiscal 2025. A sole proprietor files when "net earnings from self-employment were $400 or more" (IRS, self-employed individuals tax center), while income tax depends on the standard deduction — $16,100 for a single filer, $24,150 for a head of household and $32,200 for a married couple for tax year 2026 (IRS, tax year 2026 inflation adjustments) — so $10,000 of net profit owes self-employment tax and may owe no income tax.

The money to start. Our free tax preparation business plan itemizes one preparer's start at $5,295–$14,918: the PTIN and the free EFIN, the eighteen hours, state registration where your state has one, the software, the computer and office, the security tools, insurance at Insureon's medians, the portal, the registrations, launch marketing, the website and two months of running costs — the enrolled agent exam and a seasonal office on top. The lean home-office version — the PTIN ($18.75), the eighteen hours ($79.50), Drake's pay-per-return ($379.99), a year of errors and omissions ($411) and a Kentucky LLC ($40) — comes to $929.24, our arithmetic, and $2,624.25 with Drake's unlimited individual returns instead of pay-per-return. The only sourced start under $500 — the PTIN, the eighteen hours and pay-per-return, $478.24 — leaves out the insurance and the entity; "with no money" is false, because the PTIN alone is $18.75 and e-filing needs software. No franchisor's fee page opens, so no franchise number is printed here.

In the UK: no license is needed to call yourself a tax adviser, but two registrations bite — anti-money-laundering supervision, where "you must pay a one-off registration fee of £300 which is non-refundable" and "£400 for each of the premises" a year (GOV.UK, money laundering registration fees), and the agent services account "to register with HMRC as a tax adviser" (GOV.UK, HMRC agent services account); the inversion is coming the other way: "from April 2026, all tax advisers who interact with HMRC on behalf of a client will have to register with HMRC before doing so" (GOV.UK, raising standards in the tax advice market); VAT registration is required at £90,000 of turnover (GOV.UK). In Australia: the full inversion — "If you provide tax agent services for a fee or other reward, you must be registered with the Tax Practitioners Board (TPB)", with penalties "Up to $82,500 for an individual" for practicing unregistered (Tax Practitioners Board), an application fee of $290 for an individual (TPB, tax agent registration), and GST registration at $75,000 of turnover (ATO). Check your own country's rules.