Key takeaways
- Get a PTIN before anyone at the firm touches a federal return, and renew it for 2027 before current PTINs expire on December 31, 2026.
- Do not use the CPA title until a state board has issued a license in your name.
- Submit the e-file application at least 45 days before the first date you plan to transmit a return.
- Collect Social Security numbers and EINs through a secure link, never by email.
Decide which credential you can claim
The CPA title is a state license. The IRS does not issue it, and the state board decides who can use it. Federal practice rules follow the state license: 31 CFR 10.3(b) lets a certified public accountant practice before the IRS only if the CPA is currently qualified as a certified public accountant and is not under suspension or disbarment.
The requirements differ by state, so pull the current page from the board in each state where the owner plans to practice. The Texas board, for example, lists 120 semester hours for exam eligibility, including 21 semester hours of upper-level accounting. Its page says the upper-level accounting requirement rises to 24 semester hours on August 1, 2026. A candidate who starts coursework now should plan against the 24-hour figure.
If the owner is not a CPA, keep the CPA title off the website, the engagement letter and the email signature. Use the exact credential the owner holds, and no other. The Texas board says it is authorized to act against persons who practice public accountancy without a license it issued, so the title is the first thing to check before launch.
With no credential and no experience, you can still prepare returns for pay, but only after you have a PTIN, and you cannot present yourself as a CPA or enrolled agent. The IRS calls preparers without a credential non-credentialed. Put the scope in the engagement letter as bookkeeping or return preparation, and do not promise audit representation you are not authorized to give.
Get your PTIN before any federal return touches the firm
Anyone paid to prepare or assist in preparing federal returns needs a PTIN, whatever their credential. The IRS PTIN page says the PTIN must be valid before preparing returns, so the owner gets one first, then each staff member who does preparation work gets their own.
PTINs renew every year. IR-2026-130, dated Nov. 4, 2026, says current PTINs expire December 31, 2026, and the renewal is for 2027. The IRS says online renewal is the fastest method and takes about 15 minutes. The fee is $18.75, which is nonrefundable and nontransferable. A paper Form W-12 takes about 6 weeks to process, which is too slow for a firm that is hiring in January.
Decision rule: if a bookkeeper's output goes into a federal return, treat that person as assisting in preparation and give them a PTIN. A bookkeeper who only categorizes transactions in the books may not need one, but ask the owner to confirm the line for each role in writing before the first season.
Failure mode: a PTIN lapses in February and the staff member keeps preparing returns. Fix it by renewing in November, while the portal is quiet, and keeping a list of every person with their PTIN and renewal date.
Apply for the EIN, then the e-file provider application
Get the firm's EIN online from the IRS. If the application is approved, the IRS issues the EIN immediately. The applicant must be the responsible party or an authorized representative, must have the responsible party's SSN or ITIN, and the entity must be domestic. The IRS says you can apply for only 1 EIN per responsible party per day, so a second entity started the same day waits until the next day.
To transmit client returns, the firm applies to become an authorized IRS e-file provider through e-Services. The IRS says essential individuals must be approved for an e-Services account before the firm can begin the application. Principals and Responsible Officials without certified or licensed professional status must be fingerprinted, and each person schedules their own Livescan appointment from the application summary page.
The IRS says approval can take up to 45 days from submission. Count back 45 days from the first date you plan to transmit a return, not from the filing deadline. IRS Publication 3112, IRS e-file Application and Participation, gives the step-by-step.
Failure mode: the owner applies in February and expects to file the first return that week. The suitability check can include a credit check, a tax compliance check and a criminal background check. An old unpaid balance or a prior e-file violation surfaces at that stage, so run the owner's own history first.
Choose the entity before the first engagement
A new firm needs an entity decision before it signs client engagement letters, because the entity is the party named in the letter and the one that holds the bank account and the insurance. Your state's formation filing is separate from any federal tax election, so confirm both steps with a business attorney or CPA.
If the firm wants S corporation tax treatment, the election is made on Form 2553. The Form 2553 instructions say the election must be made no more than 2 months and 15 days after the beginning of the tax year it is to take effect, or at any time during the tax year before that year. Confirm the exact day for your tax year in the instructions before you file.
Two partners who want S corporation treatment starting in tax year 2028 can file the election at any time during 2027, which is the tax year before 2028. The instructions also say an S corporation can have no more than 100 shareholders, and each shareholder consents by signing and dating the form or a separate consent statement.
Set insurance before the first engagement
I did not find an IRS rule that requires a professional liability policy for a return preparer, so the requirement comes from your lender, your landlord or your own risk tolerance. Ask a broker for a quote that covers tax preparation and bookkeeping under one policy, and confirm in writing that the policy covers the work of staff who are not CPAs.
Decision rule: if the firm offers advisory work or gives a written view on a tax position, quote the policy against the largest return the firm expects to prepare in a year. Ask the carrier whether a claim about a return prepared under a PTIN, without a CPA license, is covered.
Failure mode: the engagement letter promises a result, such as a clean audit, that the policy excludes. Match the letter's scope to the policy's coverage, and review both when the firm adds a service.
Set up client intake before the first document request
Send the engagement letter first, then a single intake form that asks for the legal name, entity type, prior-year return and the bank accounts the client uses. Collect the SSN or EIN through the secure upload link, not as a typed answer in an email or a form that a team member copies into a spreadsheet.
Send this to a new client who starts by email: "Please upload your Social Security number and the prior-year return through the secure link below. We cannot accept Social Security numbers by email." Then log the date the upload was requested, so the file shows what was asked and when.
Clients will also ask the firm for its own Form W-9. The IRS says Form W-9 is used to provide the correct Taxpayer Identification Number to the person who is required to file an IRS information return. Keep one current copy of the firm's W-9, with the new EIN, and send it with the engagement letter.
Decision rule: if a client sends an SSN by email, do not forward it. Reply with the wording above, delete the message from the shared inbox where your system allows, and note the date in the client file.