A small tax business is an ideal way to make a seasonal income or an annual income. If you open a tax preparation business that caters to individuals, you will have steady work from February through May. But if you wish to make an annual income, you can also serve small businesses that pay taxes quarterly, such as independent retailers and professionals such as architects, attorneys, engineers, real estate brokers and consultants.

Attend tax school. Visit any of the national tax preparation chains' websites such as Liberty Tax Service, H&R Block or Jackson Hewitt, and navigate to the section that offers tax preparation courses. Tax school is 84 hours of instruction given over a 13-week period and may be taken online or in a classroom. Some schools are free, provided you work for the company after completing the course, but some schools charge a tuition of up to $300 in 2010.

Earn experience as a tax preparer. Accept an offer of employment from a national tax preparation chain. Generally, after completion of tax school, the chain will extend seasonal, part-time employment to graduates. Use this as an opportunity to get real-world, hands-on experience in dealing with different tax brackets and circumstances and to get familiar with the IRS's electronic filing system for tax professionals.

Purchase professional tax preparation software. Software such as Intuit and Tax Works will cost, on average, $600 in 2010. These are professional-level preparation software systems that are more comprehensive than personal tax software and allow integration with the IRS's electronic filing system.

Obtain insurance. Ask an insurance professional for advice on what types and levels of insurance you should carry such as professional liability insurance or errors and omissions insurance. The type and amounts of insurance will depend on your particular circumstances and the state in which you practice.

Register your business with the state. If you plan on hiring other tax preparers in the future as independent contractors, you might want to form a limited liability company (LLC). Visit an online legal document preparation service such as Legal Docs or Legal Zoom and follow the steps for writing your Articles of Organization. Most of these online services will file the documents with the state for you.

Find office space and market your small tax business. Office space should be approximately 600 to 700 square feet--large enough to accommodate a reception area, an office and a small conference room for first-time consultations.

Have fliers and business cards printed and distribute the fliers in shopping mall and grocery store parking lots; hand out your business cards to family, friends and neighbors. Also use social networking sites to spread the word and to remind people about filing their taxes at the beginning of the calendar year.

Check with the department of business regulation in your state to find out whether you need to be registered or licensed in your state to set up a business as a tax preparer. The Internal Revenue Service in 2009 proposed establishing regulations on the federal level, but as of 2010 had not yet implemented those regulations.