Tax Preparers Must Pass Background Check Before Tax Season

More than 3,700 registered tax preparers missed the renewal deadline and cannot prepare tax returns

SACRAMENTO, Calif.--(BUSINESS WIRE)--Out of 40,000 tax preparers registered with the California Tax Education Council (CTEC), 3,770 did not to renew their registration on time and cannot prepare tax returns for clients until they start the registration process all over again, which now includes passing a criminal background check, among other requirements.

“You should always verify the legal status of your tax preparer every year,” said Brandon Chanley, chair of CTEC, a state mandated nonprofit organization that manages the registration of California tax preparers. “This new requirement can take weeks to process.”

The background check is phase two of California Assembly Bill 3143, also known as “The Tax Preparation Act,” which aims to increase the protection of taxpayers by adding new provisions and responsibilities for the council, as well as tax preparers registered with CTEC.

Passing a background check, which took effect July 2020, is an addition to other requirements. To obtain a CTEC registration, applicants must also pass a 60-hour tax education course, purchase a $5,000 surety bond, plus obtain a Preparer Tax Identification Number (PTIN) from the Internal Revenue Service. After their initial registration, CTEC-registered tax preparers (CRTPs) are required to complete 20 hours of continuing education each year.

By law, CTEC must also publicly list any disciplinary actions taken against a CRTP by the council, including misconduct that results in suspending or revoking a registration. All actions taken against a CRTP, including bond claims, are posted on the CTEC website.

“It’s possible some of them just decided to quit the business,” Chanley said. “This number is actually lower compared to last year. So far we haven’t seen a drop in registrants, which we thought could happen with COVID.”

CTEC is a nonprofit organization established in 1997 by the California State Legislature to protect taxpayers. Only attorneys, certified public accountants (CPAs) and enrolled agents (EAs) are exempt from CTEC registration. Visit ctec.org for more information.