Category: Operate A More Efficient Tax Firm

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

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
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Where do you really want your tax practice to be in ONE year?

Most tax professionals that I speak with aren’t really sure where they want there practice to be. They’re doing this thing that they do, week in and week out, but don’t really have a vision for where they want to take it.

Many motivational speakers will talk about having a 5-year plan for your life. They talk in terms of very long-term goals and planning. But I think on a much shorter scale, and there’s no reason not to. Amazing things can be accomplished in twelve months or less, particularly in a professional services business like tax or accounting. There’s absolutely no reason for us to look on a time horizon longer than a year, especially if you focus heavily on tax services, due to the natural annual cycle of most things in tax.

Have you given any thought to where you want to be a year from now? If not, this is the time to think about it. We’re in the lull between tax seasons, and it’s convention and seminar time, so practice management and planning are probably near the top of your mind right now. In fact, if you haven’t yet registered for one of my live workshops, I’d encourage you to do so. See the workshop schedule here.

It’s completely possible to take an accounting practice from one person and $60,000 per year in revenue to 10 people and $2 million in revenue in one year flat: It’s been done. If your ultimate goal for your practice is to grow to this level, then what are you waiting for?

If your goal is to never have employees and remain a solo practitioner, but want to double your revenue and live full time in a foreign country while serving your American clients, that’s been done, too. There’s nothing stopping you from doing it, and it’s very doable within just a few months.

Go for a walk and give serious consideration to what you want your practice to look like a year from now. If it’s growth, then there is a marketing solution. If it’s location independence, there’s a practice management solution. No matter what you want out of your practice, you can have it.

Remember, you created your business to serve you, not for it to be the master of your life.… Continue reading