If you want to prepare taxes for others and get paid for it, federal law requires one step before you touch a single return: obtain a Preparer Tax Identification Number (PTIN) from the IRS. That applies whether you’re building a full practice or just helping a handful of neighbors each spring. Everything else — credentials, representation rights, due diligence, data security — layers on top of that baseline.
Get a PTIN Before You Accept Payment
Any compensation triggers the PTIN requirement, and “compensation” is read broadly: non-cash payments and barter arrangements count. You apply and renew through the IRS online system. The renewal fee is $18.75, and PTINs must be renewed each year before you prepare returns for the coming filing season.1Internal Revenue Service. PTIN Requirements for Tax Return Preparers
Every return you prepare for pay must carry your PTIN and your signature. Under IRC 6695, missing either one triggers a penalty; the base statutory amount is $50 per violation with a $25,000 annual cap per type, adjusted for inflation.2Office of the Law Revision Counsel. 26 USC 6695 – Other Assessable Penalties With Respect to the Preparation of Tax Returns for Other Persons For returns filed in 2025, the adjusted amount was $60 per failure with a $31,500 cap.3Internal Revenue Service. Tax Preparer Penalties Working without a valid PTIN can also draw discipline from the IRS Office of Professional Responsibility.4Internal Revenue Service. Frequently Asked Questions: Do I Need a PTIN?
Some states pile their own registration or licensing on top of the federal PTIN, typically with an annual fee somewhere between $35 and $100. Check with your state’s tax authority before opening for business.
Volunteers Follow a Different Path
If you help friends or family for free, or work through the IRS-sponsored VITA or TCE programs, you don’t need a PTIN.4Internal Revenue Service. Frequently Asked Questions: Do I Need a PTIN? VITA and TCE volunteers pass IRS-standard tax law training that includes taxpayer confidentiality, and every return prepared at a site goes through quality review before filing.5Internal Revenue Service. Free Tax Return Preparation for Qualifying Taxpayers It’s a legitimate way to build experience before charging.
Know the Limits of a PTIN-Only Practice
A PTIN lets you legally prepare returns for pay. It does not give you the authority to represent clients the way a credentialed professional can. If you hold only a PTIN, your representation rights are narrow: you can represent a taxpayer only during an examination, only before revenue agents or customer service representatives, and only on a return you personally signed.6Internal Revenue Service. Treasury Department Circular No. 230 Appeals, collections, and any return you didn’t prepare are off-limits.
Enrolled Agents, Certified Public Accountants, and attorneys have unlimited representation rights. They can advocate for any taxpayer on any matter before the IRS regardless of who prepared the return. EAs earn that status by passing an IRS-administered exam covering individual and business tax law; CPAs and attorneys qualify through state licensing. All three are governed by Treasury Department Circular 230.7Internal Revenue Service. Office of Professional Responsibility and Circular 230
The Annual Filing Season Program
If you’re not going to sit for the EA exam or a state license, the Annual Filing Season Program (AFSP) is the middle path. Earning the AFSP Record of Completion takes 18 hours of continuing education annually: a 6-hour Annual Federal Tax Refresher course with a comprehension test, 10 hours of federal tax law topics, and 2 hours of ethics. You also need a valid PTIN and must consent to the practice obligations in Circular 230.8Internal Revenue Service. General Requirements for the Annual Filing Season Program Record of Completion AFSP doesn’t expand representation rights beyond the limited PTIN-holder scope, but it signals competence to clients and keeps your knowledge current.
Get Written Authorization Before Touching a Client’s IRS Account
Preparing someone’s return means handling sensitive financial data, and the IRS draws sharp lines around what a preparer can do with that information. Two forms govern access.
Form 2848, Power of Attorney and Declaration of Representative, authorizes you to act on the taxpayer’s behalf before the IRS: sign agreements, receive confidential information, and perform essentially any act the taxpayer could regarding the matters listed on the form.9Internal Revenue Service. Instructions for Form 2848 The representative named must be eligible to practice before the IRS under Circular 230.10Internal Revenue Service. About Form 2848, Power of Attorney and Declaration of Representative One catch for PTIN-only preparers: unenrolled return preparers named on a 2848 cannot execute closing agreements, extend the assessment or collection period, execute waivers, or sign documents on the taxpayer’s behalf.
Form 8821, Tax Information Authorization, is narrower. It lets you inspect or receive the taxpayer’s confidential information, but grants no authority to represent them or sign anything.11Internal Revenue Service. Form 8821, Tax Information Authorization It’s the right choice when you just need to verify a prior filing or check refund status.12Internal Revenue Service. About Form 8821, Tax Information Authorization Both forms require the taxpayer’s signature and must specify the tax types and periods covered.
Beyond authorization forms, IRC Section 7216 makes it a misdemeanor for a preparer to knowingly or recklessly disclose or misuse information a taxpayer furnished for return preparation.13Office of the Law Revision Counsel. 26 USC 7216 – Disclosure or Use of Information by Preparers of Returns Certain regulatory exceptions exist, but the default rule is strict: information given to you for a return stays with that return unless the taxpayer provides informed written consent.
Collect the Right Documents Before You Start
Chasing missing paperwork after you’ve begun a return wastes hours and invites errors. Start with identity: Social Security numbers or ITINs for the taxpayer, spouse (if joint), and every dependent. A wrong or missing SSN is one of the most common reasons the IRS rejects an e-filed return.14Internal Revenue Service. Publication 501 – Dependents, Standard Deduction, and Filing Information Confirm filing status early, because it drives the standard deduction, bracket thresholds, and credit eligibility.
For income, gather Form W-2 for wages and the applicable 1099s: 1099-NEC for freelance income, 1099-INT for interest, 1099-DIV for dividends, 1099-R for retirement distributions, and others as they apply. The IRS already has these figures on file, so any mismatch on Form 1040 generates a notice.14Internal Revenue Service. Publication 501 – Dependents, Standard Deduction, and Filing Information
If the client will itemize, you need receipts for medical expenses, the mortgage interest statement (Form 1098), property tax records, and documentation of charitable gifts, which go on Schedule A. Charitable contributions of $250 or more require a written acknowledgment from the organization. Adjustments like student loan interest go on Schedule 1.15Internal Revenue Service. 2025 Instructions for Schedule A (Form 1040)
Credits deserve extra attention. Eligibility for the Earned Income Tax Credit depends on earned income, filing status, investment income, and qualifying children.16Internal Revenue Service. Earned Income and Earned Income Tax Credit (EITC) Tables The Child Tax Credit has its own household composition and income tests.17Internal Revenue Service. Who Qualifies for the Earned Income Tax Credit (EITC) Getting the details wrong on these credits is where paid preparers most often run into trouble.
Follow the Due Diligence Rules for High-Risk Credits
When a return claims the Earned Income Tax Credit, Child Tax Credit (including the Additional Child Tax Credit and Credit for Other Dependents), American Opportunity Tax Credit, or head-of-household filing status, you must complete Form 8867 and file it with the return. The form documents that you interviewed the taxpayer, asked adequate questions, and reviewed enough to confirm eligibility. For the AOTC specifically, you must verify the actual amount of qualified tuition paid, because Form 1098-T may not reflect what the student really spent.18Internal Revenue Service. Instructions for Form 8867, Paid Preparer’s Due Diligence Checklist
Keep five categories of records for at least three years: a copy of Form 8867, the applicable worksheets, copies of any taxpayer-provided documents you relied on, a record of how and from whom you obtained the information, and notes on additional questions you asked with the taxpayer’s responses.18Internal Revenue Service. Instructions for Form 8867, Paid Preparer’s Due Diligence Checklist If anything in the client’s information looks inconsistent or incomplete, make reasonable inquiries and document them.
The due diligence penalty under IRC 6695(g) applies separately to each credit or filing status you failed to verify on a single return. For returns filed in 2026, the penalty is $650 per failure.19Internal Revenue Service. News and Updates for Paid Preparers A single return improperly claiming three of those items can generate $1,950 in penalties.
Worse consequences sit under IRC 6694. If an understatement of tax liability results from willful or reckless disregard of rules or regulations, the penalty is the greater of $5,000 or 75% of the income you earned from that return.20Office of the Law Revision Counsel. 26 USC 6694 – Understatement of Taxpayer’s Liability by Tax Return Preparer Inflating a refund to win or keep a client is always more expensive than doing the work honestly.
File the Return
The E-file Mandate
A paid preparer who reasonably expects to prepare and file 11 or more individual income tax returns during the calendar year is a “specified tax return preparer” and must file those returns electronically.21Internal Revenue Service. E-file Requirements for Specified Tax Return Preparers The count aggregates across everyone in your firm, not just returns you personally handled.22eCFR. 26 CFR 301.6011-7 – Specified Tax Return Preparers Required to File Individual Income Tax Returns Using Magnetic Media Below 11, e-filing is optional but still faster for clients.
When e-filing isn’t possible, attach Form 8948 explaining why. Acceptable reasons include the taxpayer choosing to file on paper, an e-file rejection that couldn’t be resolved, or software that doesn’t support a required form. Keep the taxpayer’s written statement of their choice in your files rather than sending it to the IRS.23Internal Revenue Service. Form 8948, Preparer Explanation for Not Filing Electronically Electronic filings generally return an acceptance or rejection notice within 24 to 48 hours.24Internal Revenue Service. How Taxpayers Can Check the Status of Their Federal Tax Refund Rejection codes flag specific issues like a mismatched Social Security number or a duplicate filing.
Paper Filing and Missed Deadlines
Paper returns go to the IRS service center for the taxpayer’s region, and the address differs depending on whether a payment is enclosed. Certified mail with a return receipt gives you proof of a timely postmark if a filing date is ever disputed.
The failure-to-file penalty is 5% of the unpaid tax for each month or partial month a return is late, capped at 25%.25Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax It accumulates quickly, and clients will hold you responsible if the delay was on your end. Resolve any e-file rejection the day it arrives.
Write and Maintain a Data Security Plan
Most new preparers don’t realize they qualify as financial institutions under federal law. The Gramm-Leach-Bliley Act treats tax and accounting professionals that way, which means you must maintain a written data security plan, commonly called a Written Information Security Plan (WISP).26Internal Revenue Service. IRS, Security Summit Remind Tax Pros They Must Have a Written Information Security Plan to Protect Client Data
The FTC’s Safeguards Rule requires the plan to designate at least one employee to coordinate information security, identify and assess risks to client data, implement and test safeguards, and vet service providers for adequate protections.26Internal Revenue Service. IRS, Security Summit Remind Tax Pros They Must Have a Written Information Security Plan to Protect Client Data Solo preparers working from home are included. The plan must be written, accessible, and updated regularly. Paired with the Section 7216 criminal exposure for misusing return information, data protection is a legal requirement on day one, not something to build toward.