Changes to state law on CTEC exemption
Effective June 23, 2008, California Senate Bill 797 (Ch. 33, Stat 2008) clarifies the definition of who is exempt, and who is not exempt from the requirement to register with the California Tax Education Council (CTEC).
In 1996, the California State Legislature passed the Tax Preparers Act (Business and Professions Code Sections 22250-22259), and subsequently established CTEC to promote competent tax preparation within the State of California.
The Tax Preparer Act identified who was required to register with CTEC, and who was exempt from this requirement. Required to register is “Any person who for a fee, assists with or prepares a State or Federal tax return, or assumes responsibility for such a return, or who offers these services.“ The Act also specifies that Certified Public Accountants (CPAs), Enrolled Agents (EAs), and attorneys are exempt from the CTEC registration requirement. Under certain circumstances, the law also allows exemption status for employees working under a CPA, EA, or attorney.
Allowing employee exemption was based on the reasoning that the CPA, EA, or attorney would review employees’ work, and would sign the returns. However, recent CTEC visits to tax preparation offices have shown this is not always the case, and many exempt-status employees are preparing and signing returns without any supervision. Consequently, the newly revised law requires that all CPAs, EAs, and attorneys must sign the returns prepared by their exempt employees so they are held fully accountable for the employees’ work. If they prefer not to sign the return prepared by the employee, then the employee must register with CTEC so he or she can legally sign the return.
In addition to clarifying employee exemptions, the revised law also expanded the definition of “tax preparation” to include data entry. California Business and Professions Code 22251 defines “tax preparer” as a person “who prepares tax returns” or “assists with” preparing tax returns. Since “inputting tax data” is assisting with preparing the return, the law was revised to include data entry. Individuals who input tax-related data into a computer are now required by the revised law to register as a CTEC registered tax preparer.
For more information about how to become a CTEC registered tax preparer, go to the CTEC website and check out the Q&A section.