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State of California Franchise Tax Board

Be Cautious When Selecting a Tax Preparer

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Public Affairs Office
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For Immediate Release

03.17.2011

Sacramento – The Franchise Tax Board (FTB) and the California Tax Education Council (CTEC) reminded California taxpayers who use a tax professional to make sure they select them carefully.

CTEC, a non-profit corporation established by the California legislature, and FTB have partnered to educate taxpayers about tax preparers’ legal responsibilities, and to make sure those preparers are complying with the law. While more than 44,000 registered tax preparers are ready to assist California taxpayers, some operate outside the law and run the risk of penalties for themselves and their clients.

Taxpayers are cautioned to avoid tax preparers who:

  • Claim they can get bigger refunds than other tax preparers.
  • Base their fee on a percentage of the refund amount.
  • Refuse to sign the tax return as the paid preparer even though it is required by law.
  • Do not provide a copy of the tax return for the taxpayer’s records.

FTB Publication 982, How to Select an Income Tax Return Preparer offers more guidance on choosing a tax professional. Taxpayers should make sure their preparer is a licensed certified public accountant (CPA), enrolled agent, attorney, or a registered tax preparer.

California requires anyone preparing state and federal tax returns for a fee and who is not an attorney, CPA or enrolled agent to register as a tax preparer with CTEC. Each CTEC-registered tax preparer must complete courses on federal and state tax laws each year, plus obtain a $5,000 surety bond to protect clients against fraud.

Unregistered individuals are issued a $2,500 penalty, which doubles if the individual continues to prepare returns. Last year, FTB assessed 45 tax preparers with penalties for failing to be properly licensed or registered.

If taxpayers suspect a tax preparer is fraudulent, they should inform FTB online at ftb.ca.gov by selecting “Report Tax Fraud” under the online services, or by calling 800.540.FILE (3453). If a tax preparer cannot be verified as an attorney, CPA, CTEC-registered tax preparer, or enrolled agent, consumers are asked to fill out a “Noncompliant Complaint Form” at www.ctec.org.

For more information on other taxes and fees in California, visit: taxes.ca.gov.

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