A tax preparer bond is necessary for professional tax filing specialists in California only. These bonds are intended to serve as some level of assurance for private citizens that their taxes are being handled by a knowledgeable professional who will perform the task in an honest and transparent way. Before the surety bond can even be obtained, the bond seeker must complete an extensive training course in state and federal tax law, so there is at least a guarantee that a bonded tax adviser has a good working knowledge of how taxes must be filed.
What Are Tax Preparer Bonds?
A tax preparer bond, a document that is required in certain circumstances for professionals who prepare taxes for others, are intended to provide assurances to those who engage tax preparation services that the tax professional will be acting in their best interest while working with their personal financial information.
Who Needs a Tax Preparer Bond?
In California, anyone who professionally prepares tax returns for others is required to obtain a $5,000 tax preparer bond before registering with the California Tax Education Council (CTEC). There are a few exceptions to this rule, including various banking officials, attorneys who are members of the California State Bar, enrolled agents and certified public accountants (CPAs).
Why Are These Bonds Important?
Tax preparer bonds protect the general public against fraudulent persons who might misstate information when filing taxes on their behalf. The bond acts as a kind of guarantee that the preparer will comply with all the provisions listed in the state Business and Professions Code and that they will represent tax information in an honest and forthright manner.
If any kind of malpractice should occur, the aggrieved party would have the option of filing a claim against the tax adviser for any damages incurred. Then the surety company that posted the bond would pay the amount of the claim, and immediately pursue the principal to seek reimbursement in the amount of the claim.
Why Are They Only Required in California?
There are no current federal regulations that govern the actions of paid tax consultants. In fact, it has been said that there are more constraints placed on hair stylists and barbers than on tax preparers. Enforcing honest and legitimate tax return preparation has been left to individual states.
Only four states have chosen to establish any kind of requirements for paid tax consultants: Oregon, Maryland, New York and California. While there are educational requirements imposed by the other three states, only California provides some method of redress (the surety bond) for cases where a taxpayer is affected by dishonest or non-compliant professional services.
Are There Special Requirements for Purchasing a Tax Preparer Bond?
Before you can purchase one, you must undergo 60 hours of training in federal tax law and in California state tax law. This training can be done either online or in a traditional classroom setting. Then you must contact a surety company that sells this kind of bond, one option being NFP, one of the country’s largest and most reliable surety companies. Upon receipt of your tax accountant bond, you must then register with CTEC before offering your services to clients in the state.
Errors and omissions insurance is also available through NFP. Rates are very affordable when compared to professional liability insurance through other insurance agencies.
Call today for a free quote and more information about all kinds of coverage. It is vital that all tax preparers maintain this protection for themselves and their clients. Call us at 800.863.3210.