Table of Content

    Do you want to start tax preparation business plan?

    Do you really want to start a business with a little or no tension of managing your employees with literally no startup investment and no restriction of working hours? Well, you might be wondering whether such sort of business exists.

    If you really have some knowledge of accountancy or if you have done some tax-related course, then starting a tax prep business will surely meet all the requirements of your dream business. You can start this business only by preparing taxes yourself or by renting a small office, hiring some staff for you.

    Whether you are starting on a small scale or a large scale to get high paying clients, the first step will always be to prepare an effective business plan. To help you in making a professional business plan covering all the details, we are providing here sample business plan of a tax preparation startup named, ‘ConsulTax.

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    Executive Summary

    2.1 The Business

    ConsulTax will be a registered and licensed tax preparation service, owned by George Brad. The office building will be located in Madison, Wisconsin, USA. Business will be based upon preparing taxes such as federal and state tax, income tax, self-employment or any other tax for households as well as business owners.

    2.2 Management

    Before you start a tax preparation business, you must decide on which scale are you going to extend your startup. If you are starting on a large scale, you will need a strong management system with a detailed management plan else you can go through with a simple one.

    As of George, although he is starting on a small scale, yet he has prepared a complete management plan for his business for the sake of completeness.

    2.3 Customers

    When you are doing so many efforts to start a tax business successfully, then why ignore the important fact of exploring about your customers. You must remember you will be working with multiple customers of different temperaments at the same time, so try to understand the demands they can have with a tax preparer.

    Our customers will mostly be the owners of small businesses, head of small institutes, property owners, earning members of a household etc.

    2.4 Business Target

    Our target is to balance the initial cost of the startup with earned profits within a year of the launch. We aim at earning a net profit margin of $10k per month by the end of the first year.

    Tax Preparation Business Plan Sample - 3 Years Profit Forecast

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    Company Summary

    3.1 Company Owner

    ConsulTax will be owned by George Brad, a business graduate from the University of Illinois. To be a professional tax preparer, George has taken the training from Accreditation Council for Accountancy and Taxation (ACAT), has got himself registered with Internal Revenue Service (IRS) after clearing their course, and finally obtained his Preparer Tax Identification Number to enter the field with a proper professional background.

    3.2 Why the Business is being started

    Millions of people have to pay a tax every year as the per policy of their country which is being changed by higher office holders continuously. Large companies and notable landlords usually afford a full-time accountant whereas, small business holders and mediocre seek the services of tax preparers to do all the confusing stuff for them. Considering this demand, freedom with respect to time and his marketing skills, George is starting a tax preparation business in his city.

    3.3 How the Business will be started

    ConsulTax will be a small tax preparation business, operating from a small office. George has decided to hire just two tax professionals, and other staff to help him starting a tax business.

    The startup summary is as follows:

    Tax Preparation Business Plan Sample - Startup Cost

    The detailed startup requirements are given below:

    Start-up Expenses  
    Legal $55,300
    Consultants $0
    Insurance $32,750
    Rent $32,500
    Research and Development $32,750
    Expensed Equipment $32,750
    Signs $1,250
    Start-up Assets $0
    Cash Required $332,500
    Start-up Inventory $32,625
    Other Current Assets $232,500
    Long-term Assets $235,000
    TOTAL ASSETS $121,875
    Total Requirements $245,000
    START-UP FUNDING $273,125
    Start-up Expenses to Fund $11,875
    Start-up Assets to Fund $15,000
    Assets $23,125
    Non-cash Assets from Start-up $18,750
    Cash Requirements from Start-up $0
    Additional Cash Raised $18,750
    Cash Balance on Starting Date $21,875
    Liabilities and Capital $0
    Liabilities $0
    Current Borrowing $0
    Long-term Liabilities $0
    Accounts Payable (Outstanding Bills) $0
    Other Current Liabilities (interest-free) $0
    Capital $0
    Planned Investment $0
    Investor 1 $332,500
    Investor 2 $0
    Other $0
    Additional Investment Requirement $0
    Loss at Start-up (Start-up Expenses) $313,125
    TOTAL CAPITAL $251,875
    Total Funding $255,000
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    Services for customers

    Before thinking about how to start a tax preparation business, you must decide what you will offer your customers. This preplanning and knowledge about what you have to do and what level of client’s satisfaction you will have to meet will make you more observant about your business and targets.

    While creating your tax preparation business plan, you must include the detail about how you will be able to provide the optimal and efficient services to meet all the client’s satisfaction and needs. If you want to have an idea which services are provided by others in the market, you can take help from this sample business plan for the tax preparation startup, ConsulTax.

    The services offered by ConsulTax are:

    • Income Tax Preparation
    • Income Tax Return Preparation
    • Standard Tax Preparation
    • Capital Gains Tax Preparation
    • Other financial consulting and advisory services

    The services will be increased after we have established ourselves as a successful business. We want to become the number one choice for our fellow citizens, that’s why we are preparing for our services before time to ensure and guarantee the quality of our services.

    Marketing Analysis of Tax Preparation Business

    After you have decided the services you will provide to your customers, the next step is to make marketing plan for tax preparation business. Marketing analysis is extremely important because it gives you an idea of your position in the market.


    The marketing plan includes exploring what is going on in the market, who will be your customers and competitors. While preparing your tax services business plan, tax preparation marketing should be considered seriously, especially if you are working alone.

    You will need a strong marketing plan to market your services and get introduced to as many people as possible. Otherwise, you can sort out other advertisement techniques by reading tax preparation advertising samples available on the web. Another way of getting more and more ideas about business plan preparation service is to observe what others with the same or nearly same business are doing to market them.

    We are also providing the sample business plan for tax preparation service of ConsulTax for your help.

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    5.1 Market Trends

    There are several small businesses running in the United States which cannot afford a full-time tax consultant or accountant but need the assistance of a professional tax preparer almost every time they need to pay their taxes. Millions of people have to pay a tax every year as the per policy of their country which is being changed by higher office holders continuously. A person who is indulged in the day to day tasks always needs assistance with doing that tedious task, so the demand of this business is really high.

    According to a report by U.S. Bureau of Labor Statistics, there were more than 90 thousand jobs for the tax preparers in the country in 2014. The value has increased by a significant amount in 2018. According to IBISWorld, there are about 118,890 registered and licensed Tax Preparation firms running in the United States of America alone. More than 292 thousand have got their employment through this business, generating a revenue of $10 billion annually. Moreover, the business is forecasted to increase by the rate of 4.5% annually. These stats show that you will not be at loss, provided that you plan your business successfully.

    5.2 Marketing Segmentation

    It is very important to analyze the market segmentation of the future customers of your services before developing your business plan. Our experts have identified the following type of target audience which can become our future consumers:

    Tax Preparation Business Plan Sample - Marketing Segmentation

    The detailed marketing segmentation of our target audience is as follows:

    5.2.1 Corporate Sector: The biggest consumer of our services will be the corporate sector in Madison, who needs a lot of documentation and following of policies while preparing for their different types of taxes. During the initial stages of our business, we will mainly focus on the small companies to get us introduced to big dealers with much experience.

    5.2.2 Earning Members: Our second target group comprises of the workers servicing in Madison, we will do the work of tax preparations for them to save them from the trouble of doing things by themselves about which they know nothing.

    5.2.3 Property Owners: Our third target group consists of small and large property owners in Madison. We will advertise our services to get work offers from property owners for tax preparation.

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    The detailed market analysis of our potential customers is given in the following table:

    Market Analysis
    Potential Customers Growth Year 1 Year 2 Year 3 Year 4 Year 5 CAGR
    Property Owners 32% 11,433 13,344 16,553 18,745 20,545 13.43%
    Corporate Sector 48% 22,334 32,344 43,665 52,544 66,432 10.00%
    Earning Members 20% 12,867 14,433 15,999 17,565 19,131 15.32%
    Total 100% 46,634 60,121 76,217 88,854 106,108 9.54%

    Business Target

    Our target is to balance the startup cost of our business with the earned profits within a year of the launch and; to earn the profit margin of $10k per month by the end of the first year.

    5.4 Product Pricing

    At the very initial stage of your business, product pricing must be decided by analyzing both the market demands and the position of your competitors. After great research and interpretation, George has decided to keep the prices of his services initially low as to get introduced to a wider scale of customers and building long-lasting relations with them.

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    Sales strategy must be developed and properly written in your tax preparer business plan as it is the stepwise guide for you to enhance and extend your business to approach your business target. It consists of an effective advertisement plan and a competitive approach which you can better understand from this sample tax preparation business plan.

    6.1 Competitive Analysis

    There are a lot of tax preparation businesses running all around here. However, we are passionate that with our unparalleled and exceptionally good service, we will soon be able to make our place in the market. To get introduced to our customers and to interact with more and more people we have decided to keep our prices low at the initial stages of the startup.

    6.2 Sales Strategy

    To introduce ourselves to the target market, we have come up with the following ideas of advertisement,

    • We will distribute our brochures to our neighboring facilities and expected customers
    • We will put our ads in newspapers and magazines
    • We will start our campaign through social media sites
    • We will be giving a 20 % discount on the second offering by the same client

    6.3 Sales Monthly

    Tax Preparation Business Plan Sample - Sales Monthly

    6.4 Sales Yearly

    Tax Preparation Business Plan Sample - Sales Yearly

    6.5 Sales Forecast

    Tax Preparation Business Plan Sample - Unit Sales

    Sales Forecast      
    Unit Sales Year 1 Year 2 Year 3
    Income/ Standard Tax Preparation 1,887,030 2,680,320 2,588,240
    Income Tax Return Preparation 802,370 815,430 823,540
    Capital Gains Tax Preparation 539,320 770230 1,002,310
    Consulting/ Advisory Services 265,450 322,390 393,320
    TOTAL UNIT SALES 3,494,170 4,588,370 4,807,410
    Unit Prices Year 1 Year 2 Year 3
    Income/ Standard Tax Preparation $140.00 $150.00 $160.00
    Income Tax Return Preparation $600.00 $800.00 $1,000.00
    Capital Gains Tax Preparation $700.00 $800.00 $900.00
    Consulting/ Advisory Services $650.00 $750.00 $850.00
    Income/ Standard Tax Preparation $2,149,800 $2,784,000 $3,383,200
    Income Tax Return Preparation $120,050 $194,500 $268,500
    Capital Gains Tax Preparation $50,110 $71,600 $93,000
    Consulting/ Advisory Services $139,350 $194,600 $249,850
    Direct Unit Costs Year 1 Year 2 Year 3
    Income/ Standard Tax Preparation $0.70 $0.80 $0.90
    Income Tax Return Preparation $0.40 $0.45 $0.50
    Capital Gains Tax Preparation $0.30 $0.35 $0.40
    Consulting/ Advisory Services $3.00 $3.50 $4.00
    Direct Cost of Sales
    Income/ Standard Tax Preparation $989,300 $1,839,000 $2,679,700
    Income Tax Return Preparation $66,600 $119,900 $173,200
    Capital Gains Tax Preparation $17,900 $35,000 $52,100
    Consulting/ Advisory Services $19,400 $67,600 $115,800
    Subtotal Direct Cost of Sales $1,294,100 $1,699,400 $2,104,700


    Any questions? Get in Touch!

    Personnel plan

    Here comes the most influencing and effective step from one of the steps to starting a tax business and that is your required staff.

    George has developed the following personnel plan for his company.

    7.1 Company Staff

    George himself will handle the management tasks and will initially hire the following people:

    • 1 Accountant to maintain records
    • 2 Tax Preparers to help him in tax related services
    • 1 Assistant to assist in day to day work
    • 1 Front Desk Officer to receive calls, and attend customers
    • 2 Drivers for quick transport when needed while preparing taxes

    7.2 Average Salary of Employees

     Personnel Plan      
    Year 1 Year 2 Year 3
    Accountant $85,000 $95,000 $105,000
    Tax Preparers $145,000 $152,000 $159,000
    Assistant $45,000 $48,000 $51,000
    Front Desk Officer $42,000 $45,000 $48,000
    Drivers $45,000 $48,000 $51,000
    Total Salaries $317,000 $340,000 $363,000

    Financial Plan

    If you are going to start tax preparer business, you might be wondering that what do i need to start a tax preparation business? It is luckily the business with the lowest startup costs and can be run successfully by a small team. But it doesn’t matter whether you are starting your business on a large scale, hiring too many people, investing too much on the advertisement, or on a small scale, you will need to prepare a financial plan. A financial plan maps the company’s expenses with the earnings and answers the questions like how the startup costs will be balanced, how the company will be able to meet its financial targets.

    If you too are wondering how to start a tax service business, just be systematic and organized to cover all the steps successful people usually take. First prepare your business plan, like the one of ConsulTax that we have shown you here. Focus on your advertising strategy for business plan as well as a detailed financial plan to help you through the startup phase.

    Now, we are providing the financial plan of ConsulTax which was made by George himself, we are showing just a rough estimation but still, you can have a lot from it.

    8.1 Important Assumptions

     General Assumptions      
    Year 1 Year 2 Year 3
    Plan Month 1 2 3
    Current Interest Rate 10.00% 11.00% 12.00%
    Long-term Interest Rate 10.00% 10.00% 10.00%
    Tax Rate 26.42% 27.76% 28.12%
    Other 0 0 0

     8.2 Brake-even Analysis

    Tax Preparation Business Plan Sample - Brake-even Analysis

     Brake-Even Analysis  
    Monthly Units Break-even 5530
    Monthly Revenue Break-even $159,740
    Average Per-Unit Revenue $260.87
    Average Per-Unit Variable Cost $0.89
    Estimated Monthly Fixed Cost $196,410

     8.3 Projected Profit and Loss

     Pro Forma Profit And Loss      
    Year 1 Year 2 Year 3
    Sales $309,069 $385,934 $462,799
    Direct Cost of Sales $15,100 $19,153 $23,206
    Other $0 $0 $0
    TOTAL COST OF SALES $15,100 $19,153 $23,206
    Gross Margin $293,969 $366,781 $439,593
    Gross Margin % 94.98% 94.72% 94.46%
    Payroll $138,036 $162,898 $187,760
    Sales and Marketing and Other Expenses $1,850 $2,000 $2,150
    Depreciation $2,070 $2,070 $2,070
    Leased Equipment $0 $0 $0
    Utilities $4,000 $4,250 $4,500
    Insurance $1,800 $1,800 $1,800
    Rent $6,500 $7,000 $7,500
    Payroll Taxes $34,510 $40,726 $46,942
    Other $0 $0 $0
    Total Operating Expenses $188,766 $220,744 $252,722
    Profit Before Interest and Taxes $105,205 $146,040 $186,875
    EBITDA $107,275 $148,110 $188,945
    Interest Expense $0 $0 $0
    Taxes Incurred $26,838 $37,315 $47,792
    Net Profit $78,367 $108,725 $139,083
    Net Profit/Sales 30.00% 39.32% 48.64%

    8.3.1 Profit Monthly

    Tax Preparation Business Plan Sample - Profit Monthly

    8.3.2 Profit Yearly

    Tax Preparation Business Plan Sample - Profit Yearly

    8.3.3 Gross Margin Monthly

    Tax Preparation Business Plan Sample - Gross Margin Monthly

    8.3.4 Gross Margin Yearly

    Tax Preparation Business Plan Sample - Gross Margin yearly

    8.4 Projected Cash Flow

    Tax Preparation Business Plan Sample - Projected Cash Flow

     Pro Forma Cash Flow      
    Cash Received Year 1 Year 2 Year 3
    Cash from Operations
    Cash Sales $40,124 $45,046 $50,068
    Cash from Receivables $7,023 $8,610 $9,297
    SUBTOTAL CASH FROM OPERATIONS $47,143 $53,651 $59,359
    Additional Cash Received
    Sales Tax, VAT, HST/GST Received $0 $0 $0
    New Current Borrowing $0 $0 $0
    New Other Liabilities (interest-free) $0 $0 $0
    New Long-term Liabilities $0 $0 $0
    Sales of Other Current Assets $0 $0 $0
    Sales of Long-term Assets $0 $0 $0
    New Investment Received $0 $0 $0
    SUBTOTAL CASH RECEIVED $47,143 $53,651 $55,359
    Expenditures Year 1 Year 2 Year 3
    Expenditures from Operations
    Cash Spending $21,647 $24,204 $26,951
    Bill Payments $13,539 $15,385 $170,631
    SUBTOTAL SPENT ON OPERATIONS $35,296 $39,549 $43,582
    Additional Cash Spent
    Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
    Principal Repayment of Current Borrowing $0 $0 $0
    Other Liabilities Principal Repayment $0 $0 $0
    Long-term Liabilities Principal Repayment $0 $0 $0
    Purchase Other Current Assets $0 $0 $0
    Purchase Long-term Assets $0 $0 $0
    Dividends $0 $0 $0
    SUBTOTAL CASH SPENT $35,296 $35,489 $43,882
    Net Cash Flow $11,551 $13,167 $15,683
    Cash Balance $21,823 $22,381 $28,239

    8.5 Projected Balance Sheet

     Pro Forma Balance Sheet      
    Assets Year 1 Year 2 Year 3
    Current Assets
    Cash $184,666 $218,525 $252,384
    Accounts Receivable $12,613 $14,493 $16,373
    Inventory $2,980 $3,450 $3,920
    Other Current Assets $1,000 $1,000 $1,000
    TOTAL CURRENT ASSETS $201,259 $237,468 $273,677
    Long-term Assets
    Long-term Assets $10,000 $10,000 $10,000
    Accumulated Depreciation $12,420 $14,490 $16,560
    TOTAL LONG-TERM ASSETS $980 $610 $240
    TOTAL ASSETS $198,839 $232,978 $267,117
    Liabilities and Capital Year 1 Year 2 Year 3
    Current Liabilities
    Accounts Payable $9,482 $10,792 $12,102
    Current Borrowing $0 $0 $0
    Other Current Liabilities $0 $0 $0
    SUBTOTAL CURRENT LIABILITIES $9,482 $10,792 $12,102
    Long-term Liabilities $0 $0 $0
    TOTAL LIABILITIES $9,482 $10,792 $12,102
    Paid-in Capital $30,000 $30,000 $30,000
    Retained Earnings $48,651 $72,636 $96,621
    Earnings $100,709 $119,555 $138,401
    TOTAL CAPITAL $189,360 $222,190 $255,020
    TOTAL LIABILITIES AND CAPITAL $198,839 $232,978 $267,117
    Net Worth $182,060 $226,240 $270,420

     8.6 Business Ratios

     Ratio Analysis        
    Year 1 Year 2 Year 3 Industry Profile
    Sales Growth 4.35% 30.82% 63.29% 4.00%
    Percent of Total Assets 4.35% 4.71% 5.80%  9.80%
    Accounts Receivable 5.61% 4.71% 3.81% 9.70%
    Inventory 1.85% 1.82% 1.79% 9.80%
    Other Current Assets 1.75% 2.02% 2.29% 27.40%
    Total Current Assets 138.53% 150.99% 163.45% 54.60%
    Long-term Assets -9.47% -21.01% -32.55% 58.40%
    TOTAL ASSETS 100.00% 100.00% 100.00% 100.00%
    Current Liabilities 4.68% 3.04% 2.76% 27.30%
    Long-term Liabilities 0.00% 0.00% 0.00% 25.80%
    Total Liabilities 4.68% 3.04% 2.76% 54.10%
    NET WORTH 99.32% 101.04% 102.76% 44.90%
    Percent of Sales
    Sales 100.00% 100.00% 100.00% 100.00%
    Gross Margin 94.18% 93.85% 93.52% 0.00%
    Selling, General & Administrative Expenses 74.29% 71.83% 69.37% 65.20%
    Advertising Expenses 2.06% 1.11% 0.28% 1.40%
    Profit Before Interest and Taxes 26.47% 29.30% 32.13% 2.86%
    Main Ratios
    Current 25.86 29.39 32.92 1.63
    Quick 25.4 28.88 32.36 0.84
    Total Debt to Total Assets 2.68% 1.04% 0.76% 67.10%
    Pre-tax Return on Net Worth 66.83% 71.26% 75.69% 4.40%
    Pre-tax Return on Assets 64.88% 69.75% 74.62% 9.00%
    Additional Ratios Year 1 Year 2 Year 3
    Net Profit Margin 19.20% 21.16% 23.12% N.A.
    Return on Equity 47.79% 50.53% 53.27% N.A.
    Activity Ratios
    Accounts Receivable Turnover 4.56 4.56 4.56 N.A.
    Collection Days 92 99 106 N.A.
    Inventory Turnover 19.7 22.55 25.4 N.A.
    Accounts Payable Turnover 14.17 14.67 15.17 N.A.
    Payment Days 27 27 27 N.A.
    Total Asset Turnover 1.84 1.55 1.26 N.A.
    Debt Ratios
    Debt to Net Worth 0 -0.02 -0.04 N.A.
    Current Liab. to Liab. 1 1 1 N.A.
    Liquidity Ratios
    Net Working Capital $120,943 $140,664 $160,385 N.A.
    Interest Coverage 0 0 0 N.A.
    Additional Ratios
    Assets to Sales 0.45 0.48 0.51 N.A.
    Current Debt/Total Assets 4% 3% 2% N.A.
    Acid Test 23.66 27.01 30.36 N.A.
    Sales/Net Worth 1.68 1.29 0.9 N.A.
    Dividend Payout 0 0 0 N.A.

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