Tax Preparer Bonds: How to Obtain a California Tax Preparer Bond

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The California Tax Education Council (CTEC) requires that all tax return preparers who practice in California obtain a tax preparer surety bond in the amount of $5,000. This white paper discusses key aspects of tax preparer bonds, how to comply with the law. It also contains a tutorial to help tax preparers obtain a bond quickly and easily.

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Tax Preparer Bonds: How to Obtain a California Tax Preparer Bond

  1. 1. w w w . 1 0 4 0 T a x S c h o o l . c o m 2013 Tax Preparer Bonds How to Apply for a California Tax Preparer Bond Charles Davidson ACCELERATED TAX SYSTEMS
  2. 2. © 2013 Accelerated Tax Systems i www.1040TaxSchool.com Tax Preparer Bonds: How to Apply for a California Tax Preparer Bond Written by Charles Davidson Published by Accelerated Tax Systems Release Version 1.0 © 2013 Accelerated Tax Systems Copyright is not claimed in any material secured from official U.S. government sources. Notice of Rights No part of this publication may be reproduced, transmitted, transcribed, stored in retrieval systems, or translated into any language or computer language, in any form or by any means, electronic, mechanical, magnetic, optical, chemical, manual, or otherwise, without prior written permission of Accelerated Education Systems, except under the terms of a licensing agreement. You do not have the right to reprint, resell, give away, or otherwise share the content herein. Accelerated Education Systems 2910 Weald Way No. 514 Sacramento, CA 95833 916-717-6454 – Phone 425-962-5401 – FAX www.AcceleratedTaxSystems.com www.1040TaxSchool.com
  3. 3. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems ii www.TaxBusinessAdvisor.com Terms and Conditions Sample versions. If the course you are viewing is marked as NOT FOR TRAINING, SAMPLE, or similar, then it is made available for content and style review only and cannot be used in any part of a training course. Sample versions may be shared but cannot be re-sold to a third party. For licensed users. This document may only be used under the terms of the license agreement from Accelerated Education Systems. Accelerated Education Systems reserves the right to alter the licensing conditions at any time, without prior notice. Notice of Liability We make a sincere effort to ensure the accuracy of the material described herein, however, Accelerated Education Systems makes no warranty, expressed or implied, with respect to the quality, correctness, reliability, accuracy, or freedom from error of this document. The information in this course is distributed on an “as is” basis, without warranty. While every precaution has been taken in the preparation of this publication, neither the authors nor Accelerated Tax Systems shall have any liability to any person or entity with respect to any loss or damage caused or alleged to be caused directly or indirectly by the instructions contained in this book. The information in this book is for general use in teaching income tax law or tax practice and is not for the purpose of rendering legal or other professional services or advice. The information is as timely and accurate as possible as of the publication date, but because of legislative changes and administrative interpretations subsequent to that date, caution must be used in the application of any information contained herein. Data used in examples are intended to be fictional. Any resemblance to real persons or companies is entirely coincidental. Earnings Disclaimer Any and all earning statements or income statements, examples, or case studies are to be considered estimates of what Accelerated Tax Systems and its owners believe you may earn. There are no guarantees, promises, or assurances that you will generate any specific amount of income by using information contained in our publications or on our websites. Where specific income statistics or figures are presented, and attributed to individual or business success, there is no assurance that you will be able to replicate those results, or that you will achieve any level of success with our information. Any and all forward-looking statements here, on our websites, or on any of our sales material are intended to express our opinion of earnings potential. Many factors will be important in determining your actual results and no guarantees are made that you will achieve results similar to ours or those featured in testimonials or case studies presented by our company. Your purchase and use of our information should be based on sound judgment and proper due diligence, and not on any representation, including testimonials, case studies, examples and success stories offered throughout website or marketing materials. You agree that our company is not responsible for the success or failure of your business decisions relating to the information found within this information product, and that you use our information based on your own due diligence.
  4. 4. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems iii www.TaxBusinessAdvisor.com Affiliate Compensation Disclosure Accelerated Tax Systems (“The Company”) is required by law to inform you that a relationship may exist between Accelerated Tax Systems and the products or services it reviews, recommends, or promotes whether on its websites or in printed publications. This notice is provided in compliance with the Federal Trade Commission rules and guidelines (16 CFR Part 255). If you purchase a product or service, The Company may earn commissions or referral fees. It is recommended that before you purchase products or services on the internet, including those recommended by The Company, that you conduct your own research and exercise due diligence. Material Affiliation. It is advisable to assume that any mention of a product or service is made because there exists, unless otherwise stated, a material connection between the product or service owners (“The Vendor”) and The Company. It should be understood that any recommendation made for any product or service has been made in good faith. These recommendations reflect the fact that The Company, its owners or employees, have either tried the product or service or has extensively researched them and can give an honest opinion to the merit of the product or service. When any company makes any recommendation of a product or service, it is advisable to assume the possibility of a material connection or relationship with the owners of those products or services. Product or Service Partiality. Due to the material connections between The Company and The Vendors of the products or services recommended, it must be understood that a bias for these products or services might exist. These biases, although based on facts, could have developed because of compensation for such recommendations from The Vendors although every effort has been made to provide accurate and true reviews of each product or service. Regardless of whether The Company has or will receive compensation from The Vendors, it should be understood that a relationship exists between the two so there does exist, established or not, the potential for a material connection between The Vendor and The Company or its owners. Before entering into any agreement or purchasing any product from a website or publication owned by The Company, it is advisable to understand the potential partiality of The Company and its owners due to possible compensation from The Vendors. You should perform your own research and exercise due diligence prior to purchasing products or services from any company or website. Compensation. The Company may receive compensation for recommendations made in reference to the products or services in this publication. This compensation maybe in the form of money, services, or complimentary products and could exist without any action from a client, customer, reader or website visitor. Should you purchase a product or service that was recommended by a publication or website owned by The Company, it is understood that some form of compensation might be made to The Company or its owners. Disclosure. Every effort has been made to provide true and accurate statements in regard to any and all products and services mentioned, reviewed, or recommended by this publication or on our websites. Should you have any questions, comments, or concerns and would like to receive an answer or ask a question prior to purchasing any product or service mentioned in this publication, you may contact Accelerated Tax Systems at the address and phone number provided elsewhere in this publication or website. .
  5. 5. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems iv www.TaxBusinessAdvisor.com ABOUT CHARLES H. DAVIDSON Charles H. Davidson is a California Registered Tax Preparer (CRTP) and a Registered Tax Return Preparer (RTRP). He is the owner of Accelerated Tax Systems, a private company that specializes in providing educational programs, products, and services to the tax industry. Accelerated Education Systems is approved by the California Tax Education Council and the Internal Revenue Service to offer educational programs to Enrolled Agents (EAs), Registered Tax Return Preparers (RTRPs), and California Registered Tax Preparers (CRTPs). Charles holds a Master of Science degree in Higher Education from Drexel University (2013) and a Bachelor of Arts (with distinction) from Simpson University (2003). He will complete a Doctorate in Educational Leadership and Management from Drexel University in 2015. With over 10 years of experience in the tax industry, Charles is an expert in tax office operations and consults with tax professionals who are focused on starting or growing a tax practice. During his time in the tax industry he has worked with national tax franchises, including H & R Block and Jackson Hewitt Tax Service, as well as small, independent tax preparation firms. Through his tax education and training programs, he has helped over 300 students begin a professional career in the tax industry. From 2007 to 2009, Charles served on the Taxpayer Advocacy Panel (TAP), a federal advisory committee with a goal of recommending improvements to IRS customer service and programs. Appointed by Secretary of the Treasury Henry Paulson, he served as a representative for taxpayers in California, Nevada, Alaska, and Hawaii. He was instrumental in bringing grassroots issues to the attention of the IRS. During his time on the panel, he served on the Small Business / Self-Employed (SB/SE) and Volunteer Income Tax Assistance (VITA) committees, working closely with IRS program directors in Washington, D.C. As National Chair of the TAP, Charles met with IRS Commissioner Douglas Shulman and National Taxpayer Advocate Nina Olson to present the TAP Annual Report and discuss issues of concern to taxpayers. He co-authored the panel’s recommendation for nationwide tax preparer regulation. Charles also appeared before the President’s Economic Recovery Advisory Board to outline the panel’s recommendations for changes to be included in President Obama’s tax reform agenda.
  6. 6. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems v www.TaxBusinessAdvisor.com In addition to his work in the tax industry, Charles has held positions in business education including community training, educational administration, technical writing, and public speaking. He has given CPE-qualified presentations to local and statewide professional organizations including the California Society for Enrolled Agents (CSEA). He regularly appears on news programs and writes for several online blogs and websites where he shares his expertise on tax issues. Charles Davidson is available as a speaker or business consultant. Contact him by email at davidson@acceleratedtaxsystems.com or by phone at 916-717-6454. ABOUT ACCELERATED TAX SYSTEMS Accelerated Tax Systems provides the training, products, services, and resources that tax professionals need to start and grow a thriving tax practice. The company has built its service model around the Five Principles of a Successful Tax Practice: regulatory compliance; effective business models, leveraging technology, operations management, and practice development. Located in Sacramento, California, Accelerated Tax Systems is approved by the Internal Revenue Service and the California Tax Education Council to offer tax education programs for Registered Tax Return Preparers (RTRPs), Enrolled Agents (EAs), and California Registered Tax Preparers (CRTPs). The Accelerated Tax System network includes the following websites and products: www.AcceleratedTaxSystems.com www.TaxBusinessDirect.com www.TaxBusinessAdvisor.com www.TaxBusinessExpert.com www.1040taxschool.com
  7. 7. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems vi www.TaxBusinessAdvisor.com TABLE OF CONTENTS Tax Preparer Regulation In California..................................................................... 1 How a Bond Works ................................................................................................. 2 Bond Requirements ................................................................................................ 3 When to Apply for a Bond ...................................................................................... 3 Finding a Good Bond Company .............................................................................. 3 SimpleBond.com..................................................................................................... 4 SimpleBond.com Tutorial........................................................................................ 5 Visit the SimpleBond.com Website.................................................................... 5 Select Your State ................................................................................................ 6 Bond Type .......................................................................................................... 6 Bond Term.......................................................................................................... 7 Name and Contact Information ......................................................................... 7 Reference Code and Effective Date ................................................................... 9 Billing Options .................................................................................................. 10 Credit Card Information................................................................................... 10 Receiving Your Bond ........................................................................................ 11 Need Help?............................................................................................................ 12
  8. 8. © 2013 Accelerated Tax Systems 1 www.TaxBusinessAdvisor.con TAX PREPARER BONDS HOW TO APPLY FOR A TAX PREPARER BOND TAX PREPARER REGULATION IN CALIFORNIA The tax preparation industry in California is regulated by the California Tax Education Council (CTEC). CTEC sets the educational and professional requirements that each tax preparer in the state must follow. Tax professionals who complete the requirements to become a tax preparer in California earn the right to use the California Tax Return Preparer (CRTP) designation. In order to become a tax preparer in California, you must complete the following four steps:  Complete a 60-hour qualifying education course offered by a CTEC- approved educational provider;  Obtain a Preparer Tax Identification Number (PTIN) from the Internal Revenue Service;  Obtain a $5,000 tax preparer surety bond; and  Register with the California Tax Education Council. Tax preparers must renew their registration every year which includes completing 20 hours of continuing education and maintaining a valid PTIN and bond. This special report provides an overview of the bond requirements for California as well as a detailed, step-by-step tutorial to assist you in applying for a tax preparer bond. More detail about the requirements to become a California Registered Tax Preparer can be found at our website www.taxbusinessadvisor.com.
  9. 9. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems 2 www.TaxBusinessAdvisor.com HOW A BOND WORKS Before you apply for a tax preparer bond, you should have a basic understanding of how the bond works. A surety bond protects the client against “damaged by any fraud, dishonesty, misstatement, misrepresentation, deceit, or any unlawful acts or omissions by the tax preparer” (California Business and Professions Code, Section 22250 (b)). Tax preparers in the state of California are required to maintain a surety bond in the amount of $5,000 at all times. Many tax preparers falsely believe that a bond is like an insurance policy; if there’s a claim against the tax preparer, the insurance company pays a settlement. Rather, a bond is a promise to pay in the event a client files a claim resulting from negligence, fraud, or other unlawful acts as described by law. When a claim is made on a tax preparer bond, the insurance company pays the claim amount up to the $5,000 amount posted. Unlike an insurance policy, however, the tax preparer is liable for the amount paid. The tax preparer must pay the amount to the insurance company or face fines or a possible law suit. It’s important to remember: a tax preparer bond does not protect the tax preparer; it protects the client. As a tax preparer, you may want to purchase a special type of insurance to protect yourself against clients who may want to take you to court. Errors and Omissions (E & O) insurance protects the tax preparer if a client sues due to a mistake or negligence. Any claim against your bond is a serious matter. Failure to respond to inquiries about a claim or to pay the amount required as a result of a claim could jeopardize your bond and your career. It could also result in costly legal action. Although claims against a tax preparer bond are rare, it’s important that you take any claims against your bond seriously and deal with the matter promptly so you don’t compound the problem.
  10. 10. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems 3 www.TaxBusinessAdvisor.com BOND REQUIREMENTS Tax professionals in California are required to maintain a tax preparer surety bond in the amount of $5,000. Bond information must be submitted with your application to become a CTRP. Fortunately, bonds are easy to obtain and most can be purchased under $100 from an insurance agent who specializes in these kinds of bonds. A bond may be valid for a period of time ranging from one year to five years. It’s usually more cost-effective to purchase a bond for the longest period of time allowed by the insurance company. The difference between one and two years is negligible. A four-year bond usually costs about $95 while a one-year bond costs $55. Buying a four-year bond instead of renewing a one-year bond every year results in a total savings of $125. WHEN TO APPLY FOR A BOND While you must have your bond before you register with CTEC, you can apply at any time. You don’t have to wait until you finish your tax education course to apply for a bond. We recommend you apply for a bond shortly before you complete your course so that you have all of your information handy when you are ready to register. FINDING A GOOD BOND COMPANY You’ll want to find a company that specializes in these kinds of bonds. While most insurance agents can help you, many will not be familiar with a tax preparer surety bond. It’s not a bad idea to check with your insurance agent, especially if you can get a good deal but be prepared to look for a specialized bond company to avoid problems in the long run. There are a lot of companies that offer tax preparer bonds. Although many companies provide similar services, there are major differences including:  Wide variety of prices. Prices for a bond range from $50 to $125. Be sure to compare bond terms when looking at prices.
  11. 11. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems 4 www.TaxBusinessAdvisor.com  Limited bond terms. Some companies only provide bonds for one or two years. Try to find the longest possible term for the least amount of money.  Payment terms. Mailing a check to your bond company can take extra time to process your bond. Look for a company that accepts major credit cards. Online processing is even better.  Delivery time. Many companies prepare bonds in their office and mail them to you. It can take a week or more to get your bond. Try to find a company with same-day service.  Credit checks. Some companies may require a credit check before issuing a bond. If you are denied a bond due to credit worthiness, you’ll need to look for another bond company. SIMPLEBOND.COM At Accelerated Education Systems, we are committed to providing you with the best products and services you need to succeed with your tax practice. For that reason, we’ve partnered with SimpleBond.com, an online company that provides California tax preparer bonds at a reasonable price. They do not require a credit check and, if you purchase your bond online, you will receive your bond information as soon as you complete your payment. Our partnership with SimpleBond.com provides our clients with many advantages:  Low premiums  Bond terms from one year to four years  Most credit cards accepted  Instant approval  Same day service  No credit checks required We encourage you to try SimpleBond.com. The rest of this special report will walk you through the steps to apply for a bond with SimpleBond.com.
  12. 12. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems 5 www.TaxBusinessAdvisor.com SIMPLEBOND.COM TUTORIAL Applying for a bond with SimpleBond.com is easy and fast. Just follow the steps below to apply for a bond. If you pay using a credit card online, you will receive your bond information once your payment clears. Follow these steps to apply for a bond from SimpleBond: 1. Visit the SimpleBond.com website 2. Select your state 3. Select the type of bond you wish to purchase 4. Select the term of your bond 5. Enter your contact information 6. Enter AES as your Reference Code 7. Enter your bond effective date Each of the steps is presented below in more detail. VISIT THE SIMPLEBOND.COM WEBSITE Visit www.simplebond.com and click on the Buy Bonds link to get started.
  13. 13. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems 6 www.TaxBusinessAdvisor.com SELECT YOUR STATE On the following screen select the state in which you reside. In this case, select California. BOND TYPE Apply for a Tax Preparer Bond. This is the bond required by CTEC. Caution: You may wish to apply for Errors and Omissions insurance at a later time. For now, make sure you apply for a Tax Preparer Bond.
  14. 14. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems 7 www.TaxBusinessAdvisor.com BOND TERM On the following screen, select the term of the bond. In order to register with CTEC, you must obtain a $5,000 tax preparer bond. The length of the term does not matter as long as you are covered for the year in which you prepare taxes. The annual price of a bond is less expensive when you purchase a multiple-year bond. Once you have selected the term of your bond, click Continue. NAME AND CONTACT INFORMATION On the following screen enter your name as it should appear on the bond. Enter your contact information. Note: Be sure to enter a valid email address. Once you have completed your bond application, a copy of your bond will be sent to your email address. When you are finished entering in your contact information, click Continue.
  15. 15. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems 8 www.TaxBusinessAdvisor.com On the following screen, enter your mailing address and physical address. Click Continue when you are finished entering your information.
  16. 16. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems 9 www.TaxBusinessAdvisor.com REFERENCE CODE AND EFFECTIVE DATE Important: On the following screen, enter AES as the Reference Code. This identifies you as a client of Accelerated Tax Systems. Enter the date you would like the bond to become effective. You may enter the current date or a future date (such as January 1). Note: Don’t backdate your bond unless you have a very good reason. For example, your previous bond has expired and you don’t want a lapse in coverage. Enter any additional comments you may have and click Continue.
  17. 17. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems 10 www.TaxBusinessAdvisor.com BILLING OPTIONS Select your billing option. You can choose to pay with a credit card or you can have an agent from SimpleBond contact you to discuss billing options. Click Continue when you have made your choice. Note: If you pay with a credit card, you will receive your bond immediately after you submit your application. CREDIT CARD INFORMATION Enter your credit card information and billing address. Click Continue to submit your application.
  18. 18. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems 11 www.TaxBusinessAdvisor.com RECEIVING YOUR BOND Your bond will be emailed to the address you provided. You will not receive a hard copy of your bond in the mail. Print a copy of your bond for safekeeping. FIGURE 1. SAMPLE BOND
  19. 19. Tax Preparer Bonds: How to Apply for a Tax Preparer Bond © 2013 Accelerated Tax Systems 12 www.TaxBusinessAdvisor.com NEED HELP? Accelerated Tax Systems is a full-service company that assists tax professionals with starting and growing their tax practice. Want it done for you? We can apply for your bond and assist you with completing any other state or federal applications required to start your tax practice. Simply give us a call at 916-717-6454 or visit us at www.taxbusinessdirect.com.

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