Becoming A Paid Preparer

📘 Module 8: Becoming a Paid Tax Preparer

How to Legally Get Paid & Stay IRS-Compliant

👋 Welcome to Module 8!

In this module, we’ll break down the first step to becoming a legal, paid tax preparer — no fancy language, no extra stuff.

You’ll learn:

✅ What a PTIN is and how to get one
✅ What it means to follow “Due Diligence” rules
✅ What happens if you skip any steps or do things the wrong way

This is the starting point for anyone who wants to take tax prep from a side hustle to a real business.

🔑 Step 1: Apply for Your PTIN

✅ What is a PTIN?

PTIN = Preparer Tax Identification Number

If you’re charging anyone to file their taxes, even your cousin or best friend — you’re required by the IRS to have a PTIN.

No PTIN = not allowed to get paid.

📝 How to Get Your PTIN (It's Easy):

  1. Go to: irs.gov/ptin
  2. Create an IRS account
  3. Fill out your info (name, address, SSN, etc.)
  4. Pay the fee ($30.75, once per year)
  5. Save your PTIN number — you’ll need it when signing returns

Once you have a PTIN, you’re officially a registered tax preparer.

⚖️ Step 2: Understand Due Diligence

What is Due Diligence?

It means you’re doing your job the right way — not just typing in info or rushing through returns.

The IRS wants to make sure you:

✅ Ask the right questions
✅ Get the right documents
✅ Claim credits only when the client qualifies

✅ Credits That Require Extra Due Diligence:

  • Earned Income Credit (EIC)
  • Child Tax Credit (CTC)
  • Additional Child Tax Credit (ACTC)
  • Head of Household Filing Status

When you file returns with these credits, you’re legally required to ask for proof — not just take the client’s word.

📝 Form 8867 — Your Best Friend

Form 8867 is the Due Diligence Checklist.

  • You don’t send it in — just fill it out and keep it
  • If the IRS audits you, this form protects you
  • Shows you asked the right questions and didn’t guess

If you don’t do Due Diligence, the IRS can fine you $545 per return. Even if the client lied.

🚩 Don’t Do This (Ever)

  • Never file a return without a PTIN
  • Don’t claim a child unless you ask questions first
  • Never split or fake income to boost a refund
  • Don’t “just go with what the client says” — ask for backup

Your reputation and business are on the line. Keep it honest, and you’ll build faster.

🧠 Real Example:

Derek filed taxes for a family friend and claimed 3 kids — no questions asked. The IRS audited the return. He didn’t keep any notes or fill out Form 8867.

He was fined $1,635 and lost trust in his community.

✅ Don’t be Derek.

✅ Module 8 Activity

Scenario:
You want to start making money during tax season and help people get their returns filed correctly.

Instructions for students:

  1. What’s the first thing you need before charging anyone?
  2. What are two credits that require proof before claiming?
  3. What form protects you if the IRS audits the return?
  4. Why is it dangerous to “just trust” what a client says?

📝 Module 8 Quiz

1. What is a PTIN used for?
A) To get a refund
B) To legally prepare taxes for others
C) To claim a child
D) To work at the IRS

2. How often do you renew your PTIN?
A) Every 3 years
B) Every 6 months
C) Once a year
D) Never

3. What does Due Diligence mean?
A) Speeding up tax returns
B) Getting the best refund
C) Asking questions and checking info
D) Letting the client do their own return

4. What form should you fill out when claiming kids or credits?
A) Form 1040
B) W-2
C) 8867
D) 1099

5. True or False: You can charge for tax prep before getting your PTIN.
A) True
B) False

✅ Answer Key:

  1. B
  2. C
  3. C
  4. C
  5. B