State Laws Help Protect Consumers
It’s that time of year again … tax time is upon us. Tax preparers all over the country are in full swing, working hard and crunching numbers to help their clients save money.
Because tax preparers have direct access to their clients’ personal information and accounts, it could be easy for them to take advantage of the situation and commit acts of theft, fraud or dishonesty.
Most states don’t regulate tax preparers. But the IRS has seen instances of tax preparer abuse rise in the 1990’s and established the IRS Criminal Investigation Return Preparer Program in 1996 to help identify, investigate and prosecute abusive return preparers. In 2010, the IRS launched their oversight program to regulate paid tax return preparers.
Even with these IRS programs in place, tax preparer fraud continues at the expense of the government and the paying public. Only a handful of states have enacted stricter regulations due to growing concerns over identity theft, consumer fraud and privacy of personal information. The state regulations for tax preparers can include registering with the state, continuing education, and for California and Nevada, obtaining a surety bond.
California Tax Preparer Bond
California has been requiring tax preparation services to be bonded since 1999. A $5,000 bond is required for annual registration, along with no less than 60 hours of instruction in federal and state income tax law education. Registrants also need a PTIN (Preparer Tax Identification Number) from the IRS, and pay a $33 registration fee.
Renewing a registration requires 20 hours of continuing education, maintaining the PTIN and surety bond, and paying the renewal fee of $33.
Anyone who prepares tax returns for a fee must register as a tax preparer with the California Tax Education Council. Those exempt are CPAs, EAs, attorneys who are members of the State Bar of California, and certain banking or trust officials.
If a tax preparer is not registered, they can be penalized $2,500 for their first failure to register and $5,000 for additional offenses.
Nevada Tax Preparer Bond
The State of Nevada enacted Assembly Bill 324 on July 1, 2017 to help prevent fraud, dishonesty, negligence or other wrongful conduct among tax preparers.
Bill 324 redefines the definition of “document preparation services” to include those who assist in preparing federal or state tax returns or a claim for a tax return, certain paralegals, and bankruptcy petition preparers. The bill excludes CPAs, certain attorneys, and financial planners.
Nevada Tax Preparers must register with the state, and renew their registration every year. The application fee is $50, and renewal fees are $25 a year. Tax preparers may not conduct business in Nevada until they are issued a Certificate of Registration. The registration covers an individual, not the business, so each person in a business must register.
A requirement of the registration process is to obtain a $50,000 surety bond or cash bond, to be filed with the Secretary of State. The Legal Document Assistant Bond protects clients from unethical tax preparers.
The bond is continuous until canceled. The Secretary of State’s Office must receive proof of an annual bond renewal.
How to Get a Bond
SuretyGroup.com is licensed to write tax preparer surety bonds in California and Nevada. For a free, no-obligation quote, contact our Surety Bond Specialists at 1‑844‑432‑6637, or email firstname.lastname@example.org and we’ll help you get bonded quickly and easily.
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