Tax Preparers’ Repsonsibilities to You
It is an inescapable reality all of us will eventually face aside from death. Taxes. There is no denying it is a daunting task and ultimately more than half of us will surrender our calculators and hire a professional tax preparer.
It sounds like an easy out, but what many taxpayers fail to realize is not all tax preparers are created equal.
Professional Credentials
Although Congress is considering a national licensing requirement for all professional tax preparers, California, Maryland and Oregon are currently the only three states that have set requirements for its paid tax preparers.
In California, anyone who is charging a fee to prepare tax returns and is not an attorney, certified public accountant (CPA) or enrolled agent (EA), is required by law to register with the California Tax Education Council (CTEC). All CTEC Registered Tax Preparers (CRTPs) must complete tax education courses each year and keep a current bond before they can prepare tax returns for a fee.
In Oregon, all tax preparers must be licensed through the Oregon State Board of Tax Practitioners. Each is required to pass a competency test.
Maryland recently passed legislation in 2008 to also require that its tax preparers complete continuing education requirements and pass an exam before they can prepare tax returns professionally.
As for the rest of you, choose your tax preparer cautiously. There is no oversight for tax preparers in other states who are not an attorney, CPA or EA. In other words, the training, education and ethical standards these tax preparers go by are set at their own discretion. If you hire a tax preparer who is not an attorney, CPA or EA, make sure he or she is insured and up-to-date on tax laws.
Insurance and Bonds
There are two types of policies for tax preparers, errors and omissions (E&O) insurance and a $5,000 tax preparer surety bond.
CRTPs are the only tax preparers required by law to purchase a surety bond to help protect clients against fraud. If a CRTP violates any of the rules and regulations under the California Tax Preparer’s Act, the victim can file a claim.
E&O insurance is highly recommended in the tax industry, but it is not requirement for tax preparers. E&O insurance protects the tax preparer against mistakes made on the tax return that could lead to a lawsuit. If there is an error, E&O insurance will cover the penalty or interest for the client.
Privacy Policy
In an effort to combat the identity theft scare, all tax preparers are required to have a written privacy policy and provide clients with a copy of it. This means tax preparers, no matter what state you live in, cannot share your private information unless you give them permission.
The policy should list what protections the company has in place to guarantee your privacy. It should also include what is considered “private information” and who will have access to it.
Remember that lawful tax preparers are only interested in your income and expenses. If a tax preparer asks questions that do not relate to income and expenses, you should beware.
CTEC is a nonprofit organization established in 1997 by the California State Legislature to protect the public by registering tax preparers within the state. For more information, call 877-850-CTEC or visit www.ctec.org.
