Know if Your Tax Preparer is Legit

The California Tax Education Council warns to beware of illegal tax preparers.

Sacramento, CA, March 05, 2009 --( Need a professional tax preparer? Before you Google, flip through the yellow pages or walk into the nearest tax preparation office, know this: If you live in California make sure your tax preparer is legal. Thousands of tax preparers are doing illegally business statewide. Below is a list of tips to know.

License or registration only
In California paid tax preparers who are not licensed attorneys, certified public accountants (CPAs) or enrolled agents (EAs), are required by law to register as a tax preparer 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 that protects clients against fraud.

If you cannot verify a tax preparer as one of those four professionals, he or she may be breaking state law. Hiring an illegal tax preparer can prevent you from having legal recourse against fraud, as well as increase your chances for additional taxes, interest and fines. Anyone caught preparing tax returns illegally could face penalties up to $5,000 from the Franchise Tax Board (FTB).

Signature required
A lawful tax preparer will stand by his or her work and sign your tax return.

“When a preparer signs your return, they are saying they applied all the tax codes and regulations with accuracy and to the best of their knowledge,” said Mary Beth LaMunyon-Jones, CRTP and CTEC board member. “Responsible preparers will always stand by their work for clients.”

You should also make it a point to review the return with your tax preparer to guarantee the information is correct. Remember in the end, it is you, not the tax preparer, who is ultimately held accountable for the information listed on the return, no matter if it is done accurately or fraudulently.

Proof of protection
There are two types of policies available for professional tax preparers: Errors and omissions (E&O) insurance and a $5,000 surety bond.

“A good tax preparer will have insurance and a bond, but that’s really going the extra mile,” said LaMunyon-Jones. “If they are not insured, taxpayers are out of luck unless the preparer is willing to pay the penalties and interest from the mistake.”

CRTPs are the only tax preparers required by law to purchase a surety bond to protect the client against fraud. If a tax preparer 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 preparer industry, but is not required by law. E&O insurance protects the tax preparer against mistakes made on the tax return. If there is an error, it will cover the penalty or interest for the client.

What else?

Do not hire a tax preparer if he or she:

Guarantees you a refund before looking at your tax information
Does not have a written privacy policy to protect your information
Bases the fee on your refund amount
Asks you to sign a blank tax return and/or sign it in pencil
Does not to provide a copy of your completed tax return


CTEC is a nonprofit organization that was established in 1997 by the California State Legislature to protect the public by registering tax preparers within the state.

CRTPs are the only tax preparers required to complete tax education on both state and federal tax laws each year and keep a current bond that protects clients against fraud. More than 42,000 CRTPs are registered statewide.

For more information or to verify a CRTP, visit or call (877) 850-CTEC.
California Tax Education Council
Gigi Campo