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New York State Proposes Regulating Preparers

Albany, N.Y. (September 25, 2013)

By Jeff Stimpson

Tax preparers are beginning to respond to the recent proposal by the New York State Department of Taxation and Finance to further regulate paid preparers.

The department has proposed amendments to its Personal Income Tax Regulations and Procedural Regulations (N.Y. Comp. Codes R. & Regs, tit. 20, proposed Part 2600) to impose minimum standards on who can become a return preparer, a continuing education requirement and a competency exam.

New York, which for five years has required preparers to register with the state, proposes that preparers meet applicable IRS requirements; take a 16-hour basic tax course if new to preparing New York State personal income tax returns; pass a New York State competency exam; and take four hours of CPE in New York State personal income tax topics annually.

The department estimates that beginning preparers will incur an initial annual cost of $605 for CPE tuition and time spent completing CPE coursework. Beginning preparers who have satisfied their initial annual requirements, as well as experienced preparers, will pay an estimated annual cost of $151. There will also be a one-time additional cost of approximately $31 for time spent completing the competency exam, plus a fee for taking the exam.

New York expects to spend some $800,000 to start the regulation, according to state estimates.

The proposed ruling comes as the IRS appeals to reinstate preparer regulation nationwide.

“It was just a matter of time before states started imposing their own rules. States will have a much easier time withstanding court challenges,” noted one writer on the

“The rule protects [New York State] taxpayers from unscrupulous and incompetent tax preparation without imposing undue burdens on tax return preparers,” reads one supporting document for the Albany proposal. “The education, testing and disciplinary provisions will enhance the competency and integrity of the tax preparation industry.” This and other documents also call paid preparers “commercial tax preparers.”

As with the IRS RTRP proposal of last year, attorneys, Enrolled Agents and CPAs and their employees who prepare returns under their supervision are not considered return preparers for the purposes of these proposed rules.

“Duh!” wrote Robert D Flach on his blog The Wandering Tax Pro. “Enrolled Agents are certainly tax return preparers, and attorneys, public accountants, CPAs and ‘supervised’ employees thereof may very well be tax return preparers -- but apparently not as ‘commercial tax return preparer’ is defined in the law.”

[mcb39]

I find this interesting as I am trying to resurrect a 2009 return for a client of mine. I referred them to another preparer in 2009 because I could not deal with the husband. They were already separated and divorced in 2010. The wife came back to me. Now she is getting hit by the State for an Exxon settlement paid to her X in 2009; which the preparer did not report properly on Federal and not at all on state. I think there needs to be some recourse for taxpayers to go after some restitution from an erroneous preparer. At the very least, she should refund the preparation fee. She is no longer returning my calls. The Feds already withheld their cut from my client's 2011 refund. (How hard are they trying to find him? Probably not very hard because she is a sitting duck.) He had this Exxon spill issue long before she even married him.

[Guest Taxed]

“It was just a matter of time before states started imposing their own rules. States will have a much easier time withstanding court challenges,” noted one writer on the

Who wrote that??

[Guest Taxed]

I find this interesting as I am trying to resurrect a 2009 return for a client of mine. I referred them to another preparer in 2009 because I could not deal with the husband. They were already separated and divorced in 2010. The wife came back to me. Now she is getting hit by the State for an Exxon settlement paid to her X in 2009; which the preparer did not report properly on Federal and not at all on state. I think there needs to be some recourse for taxpayers to go after some restitution from an erroneous preparer. At the very least, she should refund the preparation fee. She is no longer returning my calls. The Feds already withheld their cut from my client's 2011 refund. (How hard are they trying to find him? Probably not very hard because she is a sitting duck.) He had this Exxon spill issue long before she even married him.

if the 2009 return was filed MFJ the IRS is not going to waste their time looking for him. They got their tax from her.

I am not sure if 2009 being a closed year will make a difference BUT if the Exxon check was payable ONLY to the husband, she could try to file an innocent spouse appeal claiming she was not aware of this payment.

Going after the tax preparer may work if it can be proved that she screwed up the reporting. They could recover the penalty and interest associated with the under reporting. Obviously this involves suing the tax preparer so legal expenses has to be considered.

[mcb39]

We have considered all of the above options. Fed is done and gone. WI, however, has a 4 year look back. Yes, the check was only in his name and I have furnished the auditor that I am working with all of the current info that I can find on him. Unfortunately, since this is not a new game to him, he knows how to stay one step ahead. Since she is a responsible teacher who has held the same job for years, she is an easy mark. Hindsight: Should have filed MFS., maybe.

[Guest Taxed]

I am doing a return on extension right now and I recommended MFS given the situation with this couple. Husband still owes from 2008. Wife has a steady job and they don't agree on anything???