Whether you are considering a career in tax prep, preparing your first return for a paying client, or building a long-term tax practice, it's important to know how to get started and the most common tax rules your clients will ask you about. This guide brings both together in one place for you to use as a starting map. Each section gives a high-level overview and links to a deeper Becker guide when you are ready to learn more.
In this guide:
- Starting Your Tax Career: PTINs, tax preparer basics, the Annual Filing Season Program, VITA, Enrolled Agents and IRS representation, and Circular 230
- Recent Tax Law Changes: The One Big Beautiful Bill, no tax on tips, and no tax on overtime
- Core Tax Topics for Client Work: Entity choice, independent contractors, Social Security benefits, student loan forgiveness, charitable deductions, the AMT, and loss limitations
- Protecting Clients From IRS Issues: Audit red flags, common filing mistakes, penalty abatement, and innocent spouse relief
Starting Your Tax Career
The only legal requirement to prepare federal returns for pay is a Preparer Tax Identification Number (PTIN). Everything beyond that, from IRS representation rights to long-term earning potential, depends on the credentials and experience you add over time.
How to Get a PTIN
A PTIN is the IRS-issued number every paid preparer must include on the federal returns and refund claims they prepare. It replaced the old practice of listing your own Social Security number on client returns, which protects your identity as a preparer.
Key points to know:
- Who needs one: Anyone who prepares, or assists in preparing, federal returns for compensation, including seasonal staff, firm employees, and CPAs and attorneys who prepare returns.
- How to apply: Online through the IRS Tax Professional PTIN System, which now uses ID.me for identity verification. Most online applications take about 15 minutes once identity is verified.
- Renewal: Every PTIN expires on December 31 and must be renewed each year, with renewal typically opening in mid-October.
- Limits: A PTIN is a registration, not a credential. On its own, it does not give you the right to represent clients before the IRS.
Read more: How to Get a PTIN: A Guide for Aspiring Tax Professionals
How to Become a Tax Preparer
Once you have a PTIN, you can begin preparing returns, meeting with clients, gathering documents, entering data into tax software, identifying deductions and credits, and keeping organized records in case the IRS or a client needs them later.
Many preparers start here and then add credentials that expand the services they can offer. Only three designations carry unlimited IRS representation rights: Enrolled Agent (EA), Certified Public Accountant (CPA), and tax attorney.
Read more: How to Become a Tax Preparer
The IRS Annual Filing Season Program
The Annual Filing Season Program (AFSP) is a voluntary IRS program for non-credentialed preparers. To earn an AFSP Record of Completion, you complete 18 hours of continuing education from an IRS-approved provider, hold an active PTIN, and consent to specific Circular 230 practice obligations.
The program breaks down into:
- 6 hours: Annual Federal Tax Refresher course, with a comprehension test
- 10 hours: other federal tax law topics
- 2 hours: ethics
Record of Completion holders are listed in the IRS public directory of preparers and receive limited representation rights for returns they prepared and signed.
Read more: What Is the IRS Annual Filing Season Program?
Volunteer Income Tax Assistance (VITA)
VITA is an IRS program, run through local partner organizations, that offers free tax preparation to qualifying taxpayers, generally including lower-income individuals, people with disabilities, and taxpayers with limited English skills. Volunteers who prepare or review returns must pass IRS tax law training.
For new tax professionals, VITA offers free IRS training, hands-on return preparation experience, and a meaningful resume addition. Most recruiting happens between October and January.
Read more: Volunteer Income Tax Assistance Program: What It Is and How to Get Involved
IRS Representation and the Enrolled Agent Credential
IRS representation is the authority to act on a taxpayer's behalf with the IRS: speaking directly with the agency, responding to notices, negotiating payment arrangements, and representing clients in audits, collections, and appeals.
The Enrolled Agent credential is issued directly by the IRS and focuses entirely on taxation. EAs have unlimited representation rights in all 50 states, and there is no degree requirement. To become an EA, you obtain a PTIN, pass all three parts of the Special Enrollment Examination (Individuals; Businesses; and Representation, Practices and Procedures), apply for enrollment, and pass a suitability check.
| Status | Can prepare returns for pay | IRS representation rights |
|---|---|---|
| PTIN only | Yes | None |
| AFSP Record of Completion | Yes | Limited: only returns they prepared and signed, and only before certain IRS employees |
| Enrolled Agent, CPA, or tax attorney | Yes | Unlimited: any taxpayer, any tax matter, any IRS office |
Read more: What Is IRS Representation? Why Clients Need Enrolled Agents
Circular 230: The Rules of Practice
Circular 230 is the set of Treasury Department regulations, codified at 31 CFR Part 10, that governs who may practice before the IRS and how they must conduct themselves. It applies to attorneys, CPAs, EAs, enrolled retirement plan agents, enrolled actuaries, and others who represent taxpayers.
For day-to-day practice, the most important areas are due diligence, standards for written advice, conflicts of interest, contingent fee limits, and conduct the IRS Office of Professional Responsibility treats as disreputable. Violations can lead to censure, suspension, disbarment, or monetary penalties, separate from any state licensing action.
Read more: What Is Circular 230? A Guide for Tax Professionals
Recent Tax Law Changes
The One Big Beautiful Bill Act, signed into law on July 4, 2025, is the most significant federal tax legislation since the Tax Cuts and Jobs Act (TCJA). Several of its provisions directly affect everyday individual returns, so new preparers will see them quickly.
The One Big Beautiful Bill Act
The law makes many TCJA provisions permanent that were scheduled to expire after 2025, including the lower individual tax rates, the higher standard deduction, and the qualified business income deduction. It also adds new, temporary deductions and changes several existing rules.
Highlights for new tax professionals include:
- Permanent TCJA extensions: Individual rates, standard deduction, child tax credit enhancement, and higher estate and gift tax exemptions
- Higher SALT cap: The state and local tax deduction limit rises to $40,000 starting in 2025, with a phaseout for higher-income taxpayers, before reverting to $10,000 in 2030 unless extended
- New temporary deductions: For qualified tips, overtime pay, and auto loan interest, generally available for tax years 2025 through 2028
- Expanded casualty loss deduction: Now includes certain state-declared disasters, not only federally declared ones
Read more: The One Big Beautiful Bill Act: Top 7 Takeaways for Tax Professionals
No Tax on Tips and No Tax on Overtime
Despite the names, neither provision makes tips or overtime fully tax free. Each creates a capped federal income tax deduction that eligible taxpayers can claim whether they itemize or take the standard deduction. Payroll taxes still apply.
| Provision | Maximum deduction | Phaseout begins (MAGI) | Who qualifies | Tax years |
|---|---|---|---|---|
| No tax on tips | $25,000 per year | $150,000 ($300,000 married filing jointly) | Workers in occupations that customarily received tips on or before December 31, 2024; tips must be reported on a W-2, 1099, or Form 4137 | 2025 through 2028 |
| No tax on overtime | $12,500 ($25,000 married filing jointly) | $150,000 ($300,000 married filing jointly) | Non-exempt W-2 employees under the Fair Labor Standards Act; only the premium portion of overtime pay counts | 2025 through 2028 |
A few details trip up new preparers. For tips, workers in a specified service trade or business are not eligible. For overtime, only the "half" in time and a half is deductible, and independent contractors do not qualify. In both cases, accurate employer reporting and good client recordkeeping are essential.
Read more:
- What Tax Professionals Need to Know About the No Tax on Tips Provision
- What Tax Professionals Need to Know About the No Tax on Overtime Deduction
Core Tax Topics for Client Work
Beyond new legislation, a handful of recurring topics come up again and again with individual and small business clients. Knowing the basics of each helps you ask the right questions and spot issues early.
S Corp vs. LLC: Helping Clients Choose an Entity
An LLC is a state-law entity that offers liability protection and flexible ownership, with tax treatment that depends on its elections: disregarded entity, partnership, or corporation. An S corporation is a federal tax election that passes income through to shareholders and can reduce self-employment tax, because only the owner's reasonable salary is subject to payroll taxes.
The tradeoff is usually potential self-employment tax savings with an S corp versus lower compliance costs and greater flexibility with an LLC. S corps are limited to 100 shareholders and one class of stock, and they require payroll, a defensible salary, and Form 1120-S filings.
Read more: S Corp vs. LLC: How Do I Help My Clients Decide?
Independent Contractor Taxes
Gig workers and freelancers are often surprised by their tax bill. The first step is confirming worker classification: someone is generally an independent contractor when the client controls only the results of the work, not how it is done.
Independent contractors report business income and expenses on Schedule C, pay both halves of Social Security and Medicare through self-employment tax, and generally must make quarterly estimated payments to avoid underpayment penalties. Common deductions include business mileage and the home office deduction.
Read more: Tax Tips for Accountants: Independent Contractor Taxes
Form SSA-1099 and Social Security Benefits
Form SSA-1099 reports the Social Security benefits a client received, but it does not tell you how much is taxable. Taxability depends on the client's combined income: adjusted gross income, tax-exempt interest, and half of their Social Security benefits. Depending on that total, none, up to 50%, or up to 85% of benefits may be taxable.
Common mistakes include using Box 3 (gross benefits) instead of Box 5 (net benefits), overlooking a spouse's form, and forgetting to include tax-exempt interest in the calculation.
Read more: SSA-1099 Guide for Tax Professionals
Is Student Loan Forgiveness Taxable?
It depends on the type of forgiveness and when it occurs. The temporary federal exclusion for most forgiven student debt expired after 2025, so most forgiveness on or after January 1, 2026 is again treated as taxable cancellation-of-debt income.
Public Service Loan Forgiveness, Teacher Loan Forgiveness, and death or total and permanent disability discharges remain excludable. Income-driven repayment forgiveness is generally taxable, though clients who were insolvent at the time of discharge may be able to exclude some or all of it using Form 982. State treatment varies widely.
Read more: Is Student Loan Forgiveness Taxable?
Charitable Contribution Deductions
Donations are deductible only when made to a qualified organization, such as a nonprofit with IRS tax-exempt status. Gifts to individuals, including through crowdfunding platforms, generally do not qualify, and the value of volunteer time is never deductible.
Deduction limits are a percentage of adjusted gross income and depend on the type of property and the type of charity. Substantiation rules are strict: a single contribution of $250 or more requires a contemporaneous written acknowledgment, and noncash donations over $500 require Form 8283. Starting in 2026, non-itemizers may also be able to deduct a limited amount of cash contributions.
Read more: A Tax Professional's Guide to Charitable Contribution Deductions
The Alternative Minimum Tax
The alternative minimum tax (AMT) is a parallel tax system with a broader income base, designed to ensure higher-income taxpayers pay at least a minimum amount of tax. You calculate tax under both systems, and the client pays the higher amount.
Common AMT triggers include large state and local tax deductions and the exercise of incentive stock options. The One Big Beautiful Bill Act made the higher AMT exemption amounts permanent, with inflation adjustments.
Read more: Navigating the Alternative Minimum Tax
Loss Limitations and NOLs
A net operating loss (NOL) arises when allowable business deductions exceed income. Under current law, most NOLs cannot be carried back, can be carried forward indefinitely, and can offset only up to 80% of taxable income in a given year.
Losses also pass through several layers of limits before they reach the NOL calculation: at-risk rules, passive activity loss rules, and excess business loss rules. State rules often differ from federal rules.
Read more: A Guide to Loss Limitations and NOL Limitations
Protecting Clients From IRS Issues
Much of a tax professional's value comes from preventing problems before a return is filed and helping clients resolve them when they arise. These four topics cover both sides.
Avoiding IRS Red Flags
Certain patterns on a return are more likely to draw IRS attention. Common red flags include:
- Data errors: Mismatched Social Security numbers, EINs, or addresses that stall processing
- Unreported income: Missing Forms W-2, 1099, or K-1 that the IRS matches automatically, often resulting in a CP2000 notice
- Rounded numbers: Schedule C or E expenses that look estimated rather than documented
- Weak substantiation: Noncash charitable contributions without required appraisals or Form 8283
- Repeated losses: Activities that may be treated as a hobby rather than a business
- Refundable credits: Earned Income Tax Credit, Child Tax Credit, and American Opportunity Tax Credit claims, which carry preparer due diligence requirements and Form 8867
Read more: Avoiding IRS Red Flags on Your Clients' Tax Returns
Common Tax Filing Mistakes
Even with tax software, preventable errors remain common. The most frequent include incorrect client information, missing income sources, miscalculated credits and deductions, incorrect filing status, missed deadlines, and poor recordkeeping.
Not every mistake requires an amended return. The IRS typically corrects simple math errors on its own and requests missing forms by mail, while substantive errors in income, deductions, or credits usually do call for an amendment.
Read more: How to Avoid Tax Filing Mistakes: A Guide for Tax Professionals
Penalty Abatement
Penalty abatement reduces or removes IRS penalties for issues like filing or paying late. There are three main types:
- First-time abatement: For taxpayers with a clean compliance history and no penalties in the prior three tax years
- Reasonable cause: For taxpayers who exercised ordinary care but were prevented from complying by circumstances such as a natural disaster or serious illness
- Statutory exception: For situations specifically covered by the tax code, such as relying on incorrect written advice from the IRS
Requests can be made by phone or in writing, often using Form 843.
Read more: Tax Penalty Abatement: Helping Clients Reduce Their Tax Burdens
Innocent Spouse Relief
When spouses file jointly, each is liable for the full tax, even after a divorce. Innocent spouse relief under Section 6015 can relieve one spouse of tax caused by the other spouse's income or deductions.
There are three types, all requested on Form 8857:
| Type | What it does | Key requirement |
|---|---|---|
| Innocent spouse relief, 6015(b) | Removes liability for an understatement | The requesting spouse didn't know and had no reason to know of the error |
| Separation of liability, 6015(c) | Allocates the deficiency between spouses | The requesting spouse is divorced, legally separated, widowed, or has lived apart for 12 months |
| Equitable relief, 6015(f) | Covers understatements and unpaid tax | Holding the requesting spouse liable would be unfair based on all facts and circumstances |
Deadlines matter. Requests under 6015(b) and (c) must be filed within two years of the IRS's first collection activity against the requesting spouse, while equitable relief has a longer window.
Read more: Innocent Spouse Relief: A Practitioner's Guide to Section 6015
Frequently Asked Questions
What Do I Need to Become a Tax Professional?
The only legal requirement to prepare federal tax returns for pay is a Preparer Tax Identification Number (PTIN) from the IRS. Many tax professionals go on to earn the Enrolled Agent credential, a CPA license, or complete the IRS Annual Filing Season Program to expand the services they can offer.
Can a Tax Preparer Represent Clients Before the IRS?
Not with a PTIN alone. Annual Filing Season Program Record of Completion holders have limited representation rights for returns they prepared and signed. Enrolled Agents, CPAs, and attorneys have unlimited representation rights.
What Is the Difference Between a Tax Preparer and an Enrolled Agent?
A tax preparer with a PTIN can prepare returns for pay. An Enrolled Agent is credentialed directly by the IRS after passing the three-part Special Enrollment Examination and can represent any taxpayer on any tax matter before any IRS office.
What Is Circular 230?
Circular 230 is the set of Treasury Department regulations that governs practice before the IRS. It sets standards for due diligence, conflicts of interest, fees, and professional conduct for CPAs, EAs, attorneys, and others who represent taxpayers.
Are Tips and Overtime Tax Free Under the One Big Beautiful Bill?
Not entirely. The law created two temporary federal income tax deductions for tax years 2025 through 2028: up to $25,000 for qualified tips and up to $12,500 ($25,000 for joint filers) for qualified overtime pay. Both phase out at higher incomes, and payroll taxes still apply.
Is Student Loan Forgiveness Taxable in 2026?
Most federal student loan forgiveness is taxable again starting January 1, 2026, after a temporary exclusion expired. Public Service Loan Forgiveness, Teacher Loan Forgiveness, and death or disability discharges remain tax free at the federal level.
What Is Innocent Spouse Relief?
Innocent spouse relief allows a spouse who filed a joint return to be relieved of tax owed because of the other spouse's errors or unpaid tax. Taxpayers request it on Form 8857, and the IRS considers three types of relief under Section 6015.
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