7 states that regulate paid tax preparers
Wednesday, July 11, 2018
The role of Supreme Court nominee Brett Kavanaugh in preventing the Internal Revenue Service from aggressively regulating tax preparers has prompted some questions about such oversight.
Currently, the IRS uses a voluntary tax professional oversight system, but is expected to continue to push for Congressional authority to implement more stringent tax preparer regulations.
Those who agree with the IRS (like the agency's National Taxpayer Advocate) argue that regulating tax pros is necessary in order to protect taxpaying clients. It also, they contend, would lead to more accurate tax returns and ensure a fairer and more efficient tax system
Opponents of such regulation, however, fire back that, among other things, that the market already takes care of bad tax preparers. Federal and state authorities have done a good job catching dishonest preparers, they say. Plus, regulation doesn't automatically guarantee a tax professional's competence or ethics.
Handful of state preparer regs: Meanwhile, as the tax pro regulation debate rages on at the federal level, some states have stepped in to overs the tax pros who operate within their jurisdictions.
Four states — California, Maryland, New York and Oregon — were at the forefront of tax preparer regulation. For years these states have been requiring their tax professionals to be licensed.
Slowly, and with varying degrees of oversight, other states have also boarded the tax preparer regulatory train.
The latest to require some extra steps of tax pros are Connecticut, Illinois and Nevada. (If I've missed any, I fully expect to hear from you dear readers so that I can add them to this post.)
Here's a look at the regulations these seven states impose upon paid tax preparers.
California: Tax preparers in the Golden State must take a state-approved 60-hour course, purchase a $5,000 tax preparer bond, obtain a Preparer Tax Identification Number (PTIN) from the IRS and register (at a cost of $33) with the state. Twenty hours of continuing professional education (CPE) also is required: 10 hours on federal tax law, three hours of updated federal tax law information, two hours of ethics and five hours regarding state tax law. A tax preparer who is an attorney, certified public accountant (CPA) or enrolled agent (EA) is exempt.
Connecticut: Since Oct. 1, 2017, all tax preparers in the state have been required to adhere to specified standards of conduct or face a civil penalty of $500 for each of 13 possible violations. Effective Oct. 1, 2018, Connecticut will require preparers to sign a disclosure agreement to prevent identity theft and to protect taxpayers from overpaying for services. On Jan. 1, 2019, tax preparers in the Nutmeg State must obtain a bi-annual (that's every two years for those of y'all who get as confused as I do at "bi" time frames) permit. The permit costs $100. To apply for it, state preparers also must be ach individual applying for a permit must be at least 18 years old, have earned a high school diploma and must have an IRS PTIN. The however, offers a variety of exemptions that go beyond the usual lawyer, CPA and EA credential standards.
Illinois: The Prairie State's law regulating tax return preparers took effect on Jan. 1, 2017. Officials now require paid tax return preparers within the state to place their federal PTIN on Illinois tax returns. The law also requires the Illinois Department of Revenue to develop rules for barring and fining tax preparers for good cause and to enter into an agreement with the IRS to share PTIN information. CPAs, attorneys and EAs who follow their professional accreditation rules are exempt. The legislation was created with input from the Illinois CPA Society, which says it provides taxpayer protections "without imposing additional regulatory burdens and marketplace confusions that would create barriers to doing business in Illinois."
Maryland: The Old Line state requires tax preparers to have a high school diploma or GED certificate, complete 80 hours of tax law education and pass a state exam with at least https://www.crosslinktax.com/tax-updates/State-Requirements-for-Preparers-Which-Offer-Tax-Refund-Loan-Products.asp#.W0ZV_NJKi00a 70 percent grade to obtain a professional license. The fee for the exam is $65 and must be completed every two years. Before taking the exam or renewing, a tax preparer must complete at least 16 hours of CPE. A PTIN from the IRS also is required. CPAs, EAs and attorneys, as well as state, local and federal government employees who perform tax return services in accordance with their official duties, are exempt from Maryland's licensing requirements.
Nevada: The Silver State last year enacted a series of new registration requirements for document preparation services within its borders. The law that did so also expanded the definition of such service to include tax preparers. However, it does exempt CPAs, certain attorneys and financial planners. Since July 1, 2017, Nevada tax preparers have had to register with the state and renew their registration every year. The initial fee is $50; renewal is $25 per year. Tax preparers then will be issued a state certificate of registration. In addition, the registration process requires the tax pro to obtain a $50,000 surety bond or cash bond to be filed with the Secretary of State.
New York: The Empire State requires its paid tax preparers to be 18 years of age or older and have a high school diploma or equivalent. Individuals who prepared 10 or more New York state personal tax returns or reports must complete four hours of continuing education each year (after having previously completed more substantial courses). As in other states, certain credentialed professionals are exempt from the N.Y. registration requirements.
Oregon: The Beaver State's tax preparer requirements demand applicants have a high school diploma or GED certificate, complete 80 hours of tax law education and pass an examination with at least a 75 percent grade. But before a preparer goes through that licensing process, he/she also must obtain a PTIN from the IRS. All state tax preparer licenses expire every year on Sept. 30. Certain individuals are exempt from licensure by the Oregon Board of Tax Practitioners, including attorneys, fiduciaries, CPAs and public accountants who hold a permit from the Oregon Board of Accountancy and employees of those entities.
In addition, 20 states have regulations for tax preparers who offer tax refund-related products, such as refund anticipation loans (RALs) or refund anticipation checks (RACs).
Essentially, these states require these tax professionals to register and/or provide clients with disclosures about the full costs of the loans.
You also might find these items of interest:
- Checking out your tax professional
- Tax refund loans, checks still cost taxpayers lots of money
- IRS loses lawsuit challenging tax preparer registration, testing
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