Discussion:Planning for new tax business in 2012

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Discussion Forum Index --> Business Growth Community --> Planning for new tax business in 2012


Jsh1177 (talk|edits) said:

20 January 2011
Hello All,

I've been reading through this forum for a few weeks now and have found that it is a gold mine of information! I have a question that I cannot seem to find an answer to here. I plan to open my own tax/bookkeeping/payroll/insurance office in time for the 2012 tax season but am wondering how early I need to open to realistically be able to run full steam by Jan 2012.

CrowJD (talk|edits) said:

20 January 2011
Do some volunteer work of some kind. Maybe preparing taxes. You'd be surprised how many people you can meet doing volunteer work. You're heart has to be in it though.

It can be expensive opening a brick and mortar operation too early (or renting a space). However, you can have some simple cards printed up, mentioning that you will be starting your professional practice in "X" with your phone number and so on. Hand them out.

JackTraffic (talk|edits) said:

20 January 2011
I think you want to rent space... Or at least you do if that's the kind of practice you eventually want.

I.e., if you start off as a home office, out-of-a-briefcase operation, I think it'll impact your pricing... and you'll basically need to replace your early clients with new, higher-fee clients later on to support a bricks-and-mortar operation.

BTax2010 (talk|edits) said:

20 January 2011
There are so many options available right now. I am starting off as a part-time venture for this tax season. I strictly focus on tax prep and will likely not expand much beyond that in the future so the expectations are different than for someone like yourself who is offering a variety of services.


For the tax portion it depends on what types of clients you are going to focus on. Aside from the late filers, individuals will be pretty numb to anything tax come late March to the deadline in April. I think Crow's suggestion is very good because in his example you are actually doing something before you open. Just handing out cards, brochures or whatever and expecting people to hold on to that for a year and then show up is going to be a bit of a stretch.


My approach was to get the initial word out in December. My original plan was to make a quick announcement to all of my friends and associates on December 1st....after Thanksgiving and Black Friday, but before Christmas. My website wasn't ready so I pushed it back to December 15th, and it wasn't ready again until around the 20th. At that point we were too close to the holidays and any message you put out then will get drowned out by the holiday madness.


I waited until around the 27th or 28th and then I sent a quick into email to all of my contacts and my wife's contacts, which due to our facebook accounts was over 500 people. I am also doing some other online advertising, and of course I have spoken to all of my family and friends, and the website traffic is steadily building daily. In addition I am looking into joining one of my local Chambers of Commerce so that I can get out and about and actually talk to people in person (imagine that).


What I have found is that for tax services anyway, it doesn't appear to be the type of thing you can pre-sell...at least when you are first starting out. I have had quite a few inquiries but no commitments at this point (I am referring to new business here, not so much family and friends who are already clients).


I originally expected that people who were interested would at least register at the website and then come back when they were ready, but what I am finding is that people seem to be shopping around. I expect things to heat up a bit at the end of this month when most people will have their W-2's in hand.


You may want to consider a virtual office/executive suite type of setup when you do open, or find a small office you can rent month to month in the beginning. Basically it is a way for you to have an office space without being on the hook if you need to scale down later. That depends of course on your budget. If you have a reserve socked away then you may be okay with renting a proper space as well.

Ernest Money (talk|edits) said:

20 January 2011
Buy software that can do all types of returns. You will get some interesting ones and your customers depend on you to get the best refund for them. They will send you their friends if you get them a big refund. Sometimes you have to use additional forms in order to reduce the tax bill and create a refund. The software can do this for you.

Rgtaxservice (talk|edits) said:

20 January 2011
Oh boy.

Taxaway (talk|edits) said:

20 January 2011
--Register as a DBA if your city/town requires it.

--Register a servicemark if you will operate under a different name.
--Register a domain name even if you don't intend a website.
--Start exploring office locations where it's most convenient for clients to reach you (and convenient to you). Or time-share offices/conference rooms. Home office only if expenses prohibit the other options.
--Try out the free demo software packages to decide what you like best.
--At the start, your business may be mostly referrals, so ask each client. If they're happy with your services, they'll want to refer.
It's wise you weren't trying to accomplish this for this season!! I think 6-12 months is an appropriate amount of time to get ready.

NewYorkEA (talk|edits) said:

January 20, 2011
Save as much money as possible so if you are going to rent office or retail space, wait until November/December. Also, while everyone has high hopes about their new business, be realistic. Do not get yourself into a long term lease, buy extremely expensive software, buy expensive computer equipment/gadgets, hire a lot of staff, etc in the beginning.

Jsh1177 (talk|edits) said:

21 January 2011
I'm trying to be realistic as I can.. I'm planning on a Nov open date for the retail space since then I will have enough to cover expenses until the end May. I just thought that maybe opening 2.5 months before tax season begins was a bit late but I can understand BTax2010's dilemma of being lost in the holidays and pre-selling tax services. I've spoken to a few tax prep owners who state they they start marketing in Jan, just wondering what other's on the board think. Thank you for all the replies, Taxaway I just got the ProSeries evaluation kit today, I've ordered TaxWise and Drake as well, are there any other software that I should be looking into? I currently use Lacerte where I work but it's just too pricy for me in the start and I doubt I'll have many corps returns.

Thanks again all!

Taxaway (talk|edits) said:

21 January 2011
Jsh, here's the 'did not like' list I had 10 years ago when I started. I chose ProSeries Professional, and the next couple years tested a couple others, but have stayed with ProSeries and don't see myself changing. Some I disliked instantly and deleted just as fast (eg DOS based), other were somewhat okay. I know many of these no longer exist, but I see that Drake and Taxwise I tried: TaxAct, TaxRelief, Taxwise, AlphineData, TaxSlayer, TaxSimple, Intellitax(Orrtax), Drake, TaxVision, Dunphy, MAX/ATX, Prosystemfx, UltraTax.

I'm generally happy with ProSeries.

Hgco (talk|edits) said:

25 January 2011
Question for Taxaway:

I have used TaxSimple, Intellitax(Orrtax), Drake, Taxwise, and ATX Max. Orrtax and ATX I have used the longest. I am just curious, why the dislike for (the now defunct) Orrtax product? Yes it was DOS based, but it was quicker functioning, required fewer keystrokes, had much more detailed billing (i.e., per line of a particular form and not simply the form alone), easy to use, faster printing, and relatively inexpensive, just to name a few of the aspects that I liked about it. I used to use Orrtax for my 1040s and ATX (first the full package, and then PRS when it got more expensive) for my other tax work.

I'm using ATX Max now for everything and I do have to say that I am not as happy with the product since they have become part of CCHSFS. I used Taxwise for the past two years and have to say that I just hated it!!!!

I'd like to consider Lacerte for next year but the program is just too expensive. I will probably take a very strong look at ProSeries.

Word to the wise however, I would be very hesitant about TRX (see other posts).

BTax2010 (talk|edits) said:

26 January 2011
"Save as much money as possible so if you are going to rent office or retail space, wait until November/December. Also, while everyone has high hopes about their new business, be realistic. Do not get yourself into a long term lease, buy extremely expensive software, buy expensive computer equipment/gadgets, hire a lot of staff, etc in the beginning."

For tax season 2003 I did exactly what NewYorkEA said not to do....wiped me out....I was way overly optimistic about how much traffic I would get in the first year....there was not a second year....Family and friends kept coming to me over the years, and now I am coming back, but taking NewYorkEA's advice....nothing long-term, no employees (yes, I had the audacity to "hire" employees last time around).

I am working out of my home which I have mixed feelings about. It's hard on the first impression, but financially I am not ready to commit to more at this point. Next year I may look into trying to share a space during tax season maybe with an insurance agent or someone of that nature. I doubt I will be ready to sign a long-term lease even then, but the reality is you will need an office to take that next step when starting a business like this.

In terms of timing, unless your office is going to be highly visible and benefit from people seeing a sign and getting familiar with where you are, I would probably wait until after Thanksgiving to open. You will save a month of rent and not really lose any time whatsoever in terms of getting ready for clients.

Death&Taxes (talk|edits) said:

26 January 2011
Come summer, scout around for insurance agents, realtors and others who might have space you could rent on a short term commitment. I have not lived in PA for 10 years, but I remember doing business in a place that processed Auto Tags. They also had an insurance man in the mix. They rented me a desk where I could be seen pounding away at a ten-key (long time ago) but a number of those people stayed for years after I stopped going to the location.

CrowJD (talk|edits) said:

26 January 2011
If these greenhorns would read some of the posts on this board, they might decide to take up growing orchids or running a charter school instead. Of course, I have to disclose that I failed at the business which I blame on the lack of loyal clients and not on anything I did (which was very little indeed). Loyalty is a thing of the past and I went with it.

Tscales (talk|edits) said:

27 January 2011
I am curious, is it true that first year Franchise tax businesses such as Liberty, Colbert,Jackson Hewlett earn over 200k a year largely due to overcharging EIC clients on RALS? If so, I wonder why IRS is not regulating these companies. Or, find a different way to pay out EIC.

NewYorkEA (talk|edits) said:

January 27, 2011
Not all franchises make that much- and the $200k is probably the revenue number, not the profit. Some of those franchises actually lose money in the first year after you take into account the start-up costs and franchise fees. Yes they do charge a lot for EIC and bank products.

Kevinh5 (talk|edits) said:

27 January 2011
I once owned two Jackson-Hewitt franchises (this was 15 years ago) and I lost over $100,000 the first tax season alone. This was when they were first entering the Georgia market and didn't offer much in the way of support or advertising outside of the Inner Metro Atlanta (read poor EITC) market.

They are jumping all over the fact that they have RALs this year and HRB doesn't. What will they do next year if their source of funding shuts down? They were scrambling last year to replace a source.

Rally180 (talk|edits) said:

27 January 2011
Tscales, are you stating a fact or is it your opinion that the larger franchise companies are overcharging? Do you really want the IRS to start regulating fees? Once it starts, where would it end?

PollyAdler (talk|edits) said:

27 January 2011
Where are the IRS people having their returns done? I was talking to a group of tax preparers last week and some of them were old hands and they said they had never done an IRS employee's return. It's a great mystery to me. Are they all going to Liberty?

I had a fellow come in one time during my short period of operations who had a W-2 from USDA and I must tell you there was something awful fishy about him. It was clear he didn't know anything about farming, but he seemed proud that he went so far as to keep his receipts for chewing gum. Now who would do that? I had to wonder when I was through with him if he might be an IRS man and they got their W-2s from another agency like the CIA people do.

I was preparing returns for a group of postal employees and I happened to read a John Le Carre novel and only then did I realize that all my postal service clients were spies who had been out in the cold. CIA men. I knew some of the biggest spies in the country and I didn't even know it. Well I sort of knew it because they all sat in the waiting room with a newspaper in front of their face and they wore sunglasses even when it rained, and they all arrived together packed into the same postal truck which I thought was strange. I caught one of them trying to tuck one of my coffee mugs into his briefcase and I realize now he didn't want to leave his prints behind.

It will be hard on the spy business if they stop printing newspapers. I guess you could hold your laptop in front of your face, but it would be a pity to have to cut two peepholes in the screen to see out of it.

Tscales (talk|edits) said:

27 January 2011
Rally180,Yes I was stating facts. For example, my new clients normally bring in their prior year returns which in most cases include an itemized fee page. I have seen fees as high as $645 on a simple EIC return that probably only took 15mins to prepare. A lot of the fees were paid directly to the tax service, then the remaining to the ERO and Banks.

I believe that most tax preparers are honest and charge reasonable fees for their services, however,there are still many crooks in this business. Regulations would certainly minimize this sort of activity. It's difficult to run a small reputable business when they advertise gifts, cars and free trip giveaways in their advertisements. It's like these RAL dependent companies are robbing the extremely poor to become wealthy. I think that in 2012 we will see a new industry.

NewYorkEA (talk|edits) said:

January 27, 2011
Regulating preparer fees is not the way to go. If they want to regulate the bank products, that's a different story. But the IRS has no idea how long it might take me to prepare a particular return, what expenses I have to cover, what my credentials are, etc- so they have no business telling me how much I can charge for a return.

Tscales (talk|edits) said:

27 January 2011
The IRS website, utube, google,msnbc etc contain recent articles where lawmakers are aiming to regulate ALL tax offices. This is largely due to unethical tax preparers. Regulation is inevitable. It has already begun-PTIN requirement for all preparers. For those of us that are not RAL revenue dependent, regulation will not severly harm our business. I do a great deal of research every year before determining my fees and a placing a cap on those fees.

I'm not sure, however, I have heard that there is already a $400 cap on RAL fees??

NewYorkEA (talk|edits) said:

January 27, 2011
I would sure hope that the AICPA, NAEA, and all the state CPA societies as well put up a big fight if that ever happens (tax prep fee regulation). Regulation is going on but not for fees at this point.

I don't think there is a cap on bank fees. However, some of the banks/software providers put a cap on the tax prep fee you can charge from the refund. I've heard some are $500, and when Chase was in the business theirs was $1,000. Some banks also have rules stating that you must charge everyone the same fee for an RAL.

Tscales (talk|edits) said:

27 January 2011
The below article is worth the read about RALS and Fraud. Regulations will probably be extended to end RAL Fraud on returns prepared with using EIC credits as a slush fund to charge high fees.

http://www.walletpop.com/2010/02/09/the-pitfalls-of-refund-anticipation-loans/

Trillium (talk|edits) said:

27 January 2011
Hi, Tscales. I had to remove the article content you pasted here as it appears to be under copyright, and thus not in compliance with TaxAlmanac's copyright policies. I put in the link instead.

Also, there have been a lot of prior arguments over RALs on this site; if you're interested in reading them, you can find them with the yellow search box. I'm glad to see you're not getting many takers with your bait. It could be that the argument has finally been played out here, or it could be that those who would otherwise engage in it are busier with clients this time of year. Either way, my take from the prior discussions is that nobody's converting anybody from one side to the other. So these RAL-fight discussions seem kind of a waste of time to me. JMO.

Tscales (talk|edits) said:

28 January 2011
Hello Trillium:

Thanks for adding the link and advising me on where to find more Ral discussions -both good and bad. I am truly interested as I prepare for 2012. Also,I believe that we will hear more about RAL's this tax season than ever before. As I find articles of interest and worth reading, I will post a link. Tscales

Kevinh5 (talk|edits) said:

28 January 2011
I think we'll hear less about RALs than ever before now that more lenders have left the building. H&R Block certainly won't be discussing them in their ads. That takes quite a bit of talk off the table.

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