How to Become A Tax Preparer in Canada

Canada is famous for being among the top countries with the highest tax rate. The market size of tax preparation services in Canada has grown by 5.0% per year in the last five years. In addition, the current market size of the tax preparation industry is expected to be $1.7bn in 2023.

While tax preparers are highly demanded in Canada, breaking into the market requires you to consider specific factors and meet certain criteria. So, in this article, you’ll find the processes involved in becoming a tax preparer in Canada.

Let’s take a look.

Who is a tax preparer?

A tax preparer is a professional that helps businesses, organizations, and individuals file their taxes and get the most from their deductions. Many tax preparers are accountants and professionals licensed by the CRA.

Primarily, a tax preparer completes the tax forms submitted to the Internal Revenue Service of Canada. In addition, a tax preparer depends on taxpayers' taxes with the CRA on audits and tax court issues. However, tax preparers’ responsibilities are limited to their credentials and representation rights.

Tax preparers work for their clients and the CRA. For example, while they help their clients maintain compliance with state and federal tax regulations, they also streamline the tax preparation process. Moreover, while fulfilling their clients' obligations, they must follow CRA regulations and comply with all tax preparation policies.

How to become a tax preparer in Canada

Becoming a tax preparer in Canada involves specific processes. Here are the five significant steps required to become a tax preparer in Canada.

Gain high school certification or GED

Enroll in a high school or General Educational Development (GED) and earn your certification to be eligible for various positions in the field. Mathematics, writing, and business-related courses are recommended to fit into the job position.

Get trained

Becoming a tax preparer in Canada requires adequate training. So, acquire sufficient training in your profession's theory and practical aspects to boost your expertise. By doing this, you will have hands-on experience in your field and deliver your roles effectively when you start your business.

Many institutions in Canada offer tax preparation training. Technical or vocational training colleges also offer tax preparation courses. Moreover, you can obtain accreditation through the Accreditation Council of Accountancy and Taxation. The National Association of Tax Professionals also offers accreditations for intending tax preparers, and you can opt for on-field training with a tax preparation expert.

Common courses included in tax preparation courses include:

• State tax codes
• Annual filings
• Calculation of funds
• Paystub and T4 slip
• Tax forms
• Taxpayer interviews
• Taxpayer filing status

Get a degree

After training in specific tax preparer-related courses, you can acquire an undergraduate degree. While a formal degree is not a must-have requirement, it boosts your credibility and gives you more opportunities as a tax preparer.

Get a Preparer Tax Identification Number

An CRA Preparer Tax Identification Number (PTIN) is issued by the CRA to the tax preparer. It is required to become a certified tax preparer in Canada as it qualifies them to accept payment to prepare tax returns. To obtain your tax identification number, fill out an application form with your details. This includes your name, date of birth, address, and social security.

After your application is approved, you can work as an unenrolled tax preparer to file basic tax returns for individuals and organizations. However, you must obtain your Electronic Filing Identification Number, EFIN, through the CRA to start your tax preparation company.

The CRA will research your criminal background before providing your EFIN. If your application is approved, you will become eligible to file e-tax returns for your clients. In addition, the tax preparer is required to put the PTIN on every tax return they prepare.

However, you don’t need a PTIN to file your tax return, a tax return for your relative, or any tax return while volunteering in an organization.

Obtain a tax preparation license in your province

Depending on your province policies, you may be required to provide a license after acquiring your ID number through the CRA. So, check in with your province to know if you need to obtain a license to practice as a tax preparer in your location.

Get a professional liability insurance

Professional liability insurance is among the most vital coverages for tax preparers. Your client may sue you based on errors or omissions. If this happens, your professional liability insurance covers all legal expenses associated, preventing a costly lawsuit.

Set up your business

Launch your business to perform tax preparation activities in Canada. Your business setup can be corporate or self-employed, depending on your preference. When starting your business, you can also acquire a business name from your province.

Final thoughts

Becoming a tax preparer in Canada is less complicated when you follow the appropriate processes. First, learn about how tax preparation works in Canada. Second, acquire adequate training, and obtain a degree, PTIN, and license (if required). Finally, get professional liability insurance and start your business.

FAQ

How much do tax preparers make in Canada?

The average tax preparer earns about $34,125 per year or $17.50 per hour. Entry level and positions range from $30,225 annually. In addition, experienced tax preparers earn about $43,875 yearly.

Is being a tax preparer worth it?

Tax preparation is a profitable career as professional tax preparers earn consistent income with minimal expenses. For example, a tax preparer can make up to $100 per hour for filing a 1040 tax return. In addition, the amount increases as a tax preparer files more complex returns.

How long does it take to learn how to prepare taxes?

It takes about two seasons to learn essential tax preparation. Beginner tax preparers mainly concentrate on raw data entry in the first year. While they progress into complex tax preparation activities as they grow in the field.