Jassen Bowman EA
Jassen Bowman EA

Why You Should Become An Enrolled Agent

Note: If you’re already an EA, CPA, or attorney, then this post will be of zero interest to you. If you’re an unenrolled preparer, however, keep reading…

It’s becoming increasingly common for me to receive emails like this one from a return preparer in Sacramento, CA:

I would like to pursue this opportunity. I am currently not an EA. What ways have others moved ahead until they became an EA? Can I hire one? What do you suggest?

Here was my verbatim reply to this particular email:

By “this opportunity”, I presume you’re referring to collections representation services?

While hiring an EA, CPA, or attorney is definitely an option, I would still encourage you to obtain your Enrolled Agent license yourself. Honestly, the test isn’t that difficult for an experienced tax preparer that puts in a couple weeks of study. The Gleim test prep books are the ones I used, and they were pretty good.

The reason I would encourage you to get your license yourself, even if you hire a licensed person to do the work, is because by IRS regulation, you must be licensed in order to solicit representation services. In other words, it’s a violation for an unlicensed person, even an experienced preparer, to sell licensed representation services.

A couple weeks of study and a few hundred dollars for the tests is a tiny price to pay to be able to sell something as lucrative as tax resolution, in my biased opinion. 🙂

Since this comes up frequently, I figured it was finally worth it’s own blog post, so here we go.

Let’s start with the one thing that I feel I’ve become a broken record about over the past few years:

In order to sell tax resolution services, you MUST be licensed. This is non-negotiable.

I’m starting with this, instead of “why you should be licensed”, because I feel like it’s the most salient point for anybody reading this blog. Most folks end up here because of the information I provide on marketing and selling tax resolution services.

In case you’re not familiar with Revenue Procedure 81-38, this was the original Revenue Procedure covering limited practice without enrollment. Section 8 of this Revenue Procedure explicitly bars individuals that are NOT an EA, CPA, or attorney from soliciting representation services (which is what “tax resolution”) is.

Many folks erroneously believe that every provision of 81-38 was replaced by Revenue Procedure 2014-42… Continue reading

Tax Resolution Marketing: How To Save Yourself $15,000…

In other posts on this blog, I’ve covered the topic of client acquisition cost fairly extensively.

I’ve also written extensively about the lucrative nature of this particular service. To give you the short version, there are 12.4 million active IRS collections cases right now, and the average 1040 client pays about $2,500 for full service representation. Business clients are even more lucrative, paying average fees of $3,500 for straight forward 941 cases, and thousands more on top of that for a variety of unique situations, lien work, 6672 representation, etc.

Combining these two factors, something readily apparent should emerge: You need to determine how much you’re willing to spend to acquire a client.

Without a sales staff to pay commissions to (which skyrockets your client acquisition cost, plus introduces a host of other problems, of course), my cost of client acquisition has average around $400 for tax resolution work. That’s a rough average across all my lead generation efforts, both paid and free, as well as my lead follow up costs to convert leads into prospects over time (there’s a HUGE marketing lesson in that sentence, by the way).

I’m more than happy…no, I’m ecstatic to pay $400 to make $3,500. That math works for me. $400 in…$3,500 out. Sure, there are ups and downs. Some cringe-worthy marketing tests sometimes. But all in all, that’s the formula.

How much are you willing to spend to acquire a customer? Seriously, think it over. It’s one of the single most important questions you can ask yourself if your goal is to GROW your tax practice.

My answer to that question is actually much more than my $400 average. In fact, it’s three times as much. Yes, I’m willing to spend up to $1200 to acquire a single client. In fact, given some challenges with conducting tax resolution marketing campaigns in my new home town, that number is probably going to increase. By the end of summer, I expect to be willing to spend $1600 to acquire a high-fee tax resolution client. Mind you, that won’t be my average, just my maximum.

If those kinds of numbers induce a panic attack, I’ve got some good news for you.

Two years ago, while visiting the beautiful city of Tallinn, Estonia for a full month, I conducted an experiment. It was a wildly successful experiment, and over the following 18 months I repeated it twice.… Continue reading

Making money *after* tax season

It’s been a hard push the past few months.

There’s one day left to go in a jam packed tax season. You’ve made plenty of cash to last for a while. You’re exhausted, and you’re just ready for it to all be over.

Sure, you’ll have some extensions to work on. But it’ll be the life of leisure after this week, right?

For most tax professionals, that statement couldn’t be further from the truth.

Now, if you’ve configured your life in such a manner that you can live on your tax season revenue for the remainder of the year, then I applaud you.

For most tax pros, however, it couldn’t be farther from the truth. The stark reality for most of our colleagues is that tax season is the time when you have enough money to finally catch up on bills, pay your own taxes, pay off the Christmas credit cards, catch up on the mortgage they were two months behind on, pay the kid’s next tuition bill, and on, and on.

Even though we make good money during tax season, it’s not that hard for it to suddenly all vanish, and then we’re struggling again for the rest of the year.

Here’s how you break out of that boom and bust cycle: Have multiple revenue sources within your practice to even out the peaks and valleys of seasonal business. Specifically, I suggest having three solid revenue sources within any practice, and my favorite happens to be IRS collections representation.

There are a number of issues impacting all professional service providers, including CPAs, attorneys, and EAs alike. Consider the following info from the legal world, while bearing in mind that similar trends exist in the accounting space:

  1. Smaller Pie – As the New York Times recently pointed out, “Legal forms are now available online and require training well below a lawyer’s to fill them out.” In other words, the Internet is decreasing the public’s reliance on attorneys for simple matters. The same phenomenon has been see for CPAs and EAs with the rise of QuickBooks, consumer tax software, and IRS Free File.
  2. More Mouths to Feed – The number of attorneys continues to grow: We saw 6,694 new attorneys passing the bar last year in California alone. Worse, a lot of the larger firms are laying off, and when those layed off attorneys can’t find work, they start their own practices, creating more competition. Business
… Continue reading