A Guide for California Tax Preparers

A-Guide-for-California-Tax-Preparers

California is among five states that extensively regulate tax preparers by implementing licensing and educational requirements. Anyone in the State of California that assists with or prepares a state or federal income tax return for a fee must abide by these regulations, and it all starts by registering with the California Tax Education Council (CTEC). Tax preparers are required to renew their registration with CTEC annually for as long as they wish to continue preparing income tax returns. 

However, there are several groups who are exempt from these additional regulations, including California Certified Public Accountants (CPAs), Enrolled Agents (EAs) and attorneys who are members of the California State Bar.

Take a 60-hour education course, get $5,000 surety bond, PTIN, pass a background check, submit an application and $33 fee.

How do you become a tax preparer in California?

California tax preparers must complete the following tasks prior to receiving their license:

  1. Take a 60-hour course (45 federal and 15 state) from an approved qualifying education provider
  2. Obtain a $5,000 California tax preparer surety bond
    • With the passage of Senate Bill 1307, tax preparers may acquire their bond prior to completing the tax course, as long as they get the bond before registering with CTEC
  3. Acquire a Preparer Tax Identification Number (PTIN) from the Internal Revenue Service (IRS)
  4. Pass a criminal background check and submit fingerprint images to CTEC (starting July 1, 2020 and not applicable to tax preparers who were already registered prior to that date)
  5. Submit an application along with a $33 registration fee
    • Print, fill out and mail the application to CTEC or complete online

California tax preparers are responsible for completing the registration requirement, even if the employer is providing or paying for the surety bond and CTEC registration. All unregistered tax preparers will be personally accountable for any penalties they may face.

In general, CPAs, Attorneys, Enrolled Agents and anyone employed by these individuals are exempt from going through this CTEC registration and licensing process.

What is required for renewing CTEC registration?

Once a tax preparer registers with CTEC, they must renew their license each year by fulfilling the following requirements:

  1. Take a minimum of 20 hours of continued education from a CTEC-approved provider (10 hours of federal tax law topics, 3 hours of tax law updates, 2 hours of ethics and 5 hours of state)
  2. Ensure $5,000 tax preparer surety bond remains in effect
  3. Renew the PTIN number with the IRS
  4. Renew registration through CTEC and submit the renewal application along with the $33 annual registration fee

Renewal registration begins August 1. All CTEC registered tax preparers (CRTP) who fail to renew their registration before October 31 will be charged a $55 late fee in addition to the $33 registration fee and must renew by January 15 of the following year at the absolute latest. Registration renewal is not optional. Individuals in California who prepare taxes for a fee must renew their registration for their surety bond to remain valid. If a CRTP fails to renew by the deadline in January each year, they will have to undergo all of the requirements once again, such as retaking the 60-hour education course, passing a final exam from an approved education provider, undergoing a background check and submitting fingerprint images (starting July 1, 2020), and paying all applicable fees.

An individual who holds a minimum of two current years of experience in preparing personal income tax returns may be exempt from going through the continued education requirement. These individuals may send a petition to CTEC, who will determine if their experience is equivalent to the required education. If the education and experience match, these individuals may receive a “certificate of completion.”

What is the California Tax Education Council (CTEC)?

CTEC is a California non-profit corporation that approves tax schools and registers tax preparers. The organization was established by the California State Legislature to promote adept tax preparation within the State of California. CTEC is the second largest division of tax preparation professionals in California, following Certified Public Accountants (CPAs).

With the passage of Assembly Bill 3143, some changes were brought about for both CTEC and California Tax Preparers.

As of January 1, 2019:

  • CRTPs must provide the CTEC website to clients in writing prior to rendering tax preparation services

As of July 1, 2019:

  • The CTEC will post on its website all disciplinary actions taken against registrants by the council as well as a list of registrants on probation
  • CTRPs are required to post all paid claims against their surety bond to CTEC
  • CTEC is required to post a notice of the paid surety bond claims on ctec.org

The purpose of this bill is to increase the protection of taxpayers by adding more responsibilities for CTEC and registered California tax preparers.

How does California differ from other states regarding regulation of tax preparers?

In addition to California, the four other states that regulate tax preparers are Maryland, New York, Oregon, and Connecticut. Minnesota and Illinois have also implemented a few regulations for tax preparers, but they are not as in-depth as the other states mentioned.

  • Maryland imposes the mandatory education requirement and requires preparers to register after passing a state or IRS exam, or bringing proof of considerable experience preparing tax returns. Additionally, Maryland authorizes the state attorney general to obtain injunctive relief in the event a tax preparer does not abide by state requirements.
  • New York has annual registration and continuing education requirements for its tax preparers.
  • Oregon tax practitioners and consultants must pass a state exam with at least a 75% and complete 30 hours of continuing education in order to maintain their license.
  • Connecticut imposed increased regulation for tax preparers starting in October 2017. The state borrows components from the other existing states with regulatory procedures.
  • Minnesota developed standards of conduct for tax preparers.
  • Illinois recently initiated PTINs to identify fraudulent tax preparers.

Need more information on California tax preparer bonds?

At SuretyBonds.com, California tax preparer bonds cost $55 for two years of coverage, $70 for three years of coverage, and $80 for four years of coverage. We make it easy when it comes time for renewal.

If you need more information about surety bonds for California tax preparers, you are in luck! Give our office a call at 1 (800) 308-4358 and one of our surety experts will gladly answer any of your questions. If you’re ready to purchase your bond, our secure online bond checkout allows you to get bonded as a tax preparer in just a few minutes.

Visit the CTEC website for tax professionals for more information. Watch the video below for another look inside the bonding process.

About the Author

Megan Linberger
Megan is a 2019 graduate of the University of Missouri-Columbia with a Bachelors of Journalism (Strategic Communications) and a minor in Art. She is the graphic designer on the marketing team of SuretyBonds.com, which is the leading provider of online bonding for clients nationwide.