Am I missing something? Does MD regulate Tax preparers?

[Pacun]

Is MD regulating Tax Preparers? Before being an EA, I prepared about 100 MD returns and I never heard of "regulations to tax preparers". Am I missing something?

http://www.nytimes.com/2014/04/08/opinion/rein-in-shady-tax-preparers.html?ref=opinion&_r=2

By Alex H. Levy - April 8th, 2014 print release date

When you hear the words "tax preparer," you may imagine a calculator-clutching accountant, carefully scrutinizing receipts beneath a green eyeshade. But the reality is that in most states nearly anyone can be a tax preparer. There's no test to pass or code of ethics to follow. Walk around a low-income community and you'll notice that check cashers, payday lenders, pawnbrokers and even furniture retailers offer tax-preparation services.

Of the 142 million individual income tax returns filed in 2011, 79 million were completed by paid preparers, and a majority of those, 42 million, were filled out by preparers who were neither licensed nor regulated. (The rest were prepared by accountants or other professionals, like lawyers and actuaries, or by a relatively small number of government-certified tax practitioners known as enrolled agents.)

With few barriers to entry, the field of tax preparation has drawn unscrupulous players. Many of them target low-income families who claim the earned-income tax credit, the nation's single biggest antipoverty program.

The earned-income credit delivered more than $63 billion in refunds last year. It's no surprise that unethical preparers have descended on low-income communities to get some share of this money. Preparers typically charge hundreds of dollars; federal investigators have found preparers charging as much as $1,000. They usually skim their fees off the top of their clients' refunds, so taxpayers may not grasp just how much they're losing.

The consequences of erroneous returns can be devastating: If the I.R.S. finds fraud, the taxpayer not only has to reimburse the government, plus interest, but may also be barred from claiming the credit for up to 10 years. Meanwhile, the preparer has likely closed up shop and can't be tracked down and penalized.

Undercover sting operations by consumer groups and government agencies have uncovered brazen fraud by untrained tax preparers. One investigation in New York State found fraud among roughly 40 percent of paid preparers. Even when preparers aren't committing fraud or charging onerous fees, they are often incompetent. For example, some preparers claim the standard deduction when itemizing deductions would be more advantageous for the taxpayer.

Only four states - Oregon and California, which pioneered tax-preparation regulation in the 1970s, and New York and Maryland, which followed suit within the last decade - regulate tax preparers. A national solution is both necessary and appropriate, but it has been blocked by small-government activists.

[Terry O]

NYS "regulation" is an additional $100 Registration with minimal continuing education requirements. They do however, verify that you have no outstanding NYS tax liability.

I suspect that is the reason that the number of preparer filed tax returns have declined in certain areas, and "self-prepared" returns are increasing.

[Lion EA]

http://www.dllr.state.md.us/license/taxprep/taxpreplic.shtml

DLLR's Division of Occupational and Professional Licensing Registration - Maryland Board of Individual Tax Preparers

The Board of Individual Tax Preparers is pleased to announce that applications for registration as an Individual Tax Preparer are now enabled on this website. Please be aware of the following before filing an application:

Federal PTIN
In order to legally prepare federal income taxes in Maryland you must apply for, be granted and annually renew a Preparer Tax Identification Number (PTIN) from the Internal Revenue Service. Find out more about the IRS-PTIN website.

Maryland Registration
A registration issued by the Maryland State Board is required to prepare Maryland individual tax returns. The holding of a current, valid federal PTIN is the primary credential required for the issuance of a state registration. You must be at least 18 years old and hold a valid High School Diploma or GED. Because the IRS has not yet established an electronic system that enables the Board to verify your PTIN, we must do so manually. The application provides instructions on forwarding a copy of the electronic confirmation you received when applying for the PTIN on line OR the "welcome letter" you received after your PTIN was issued. Failure to provide one of the requested documents will keep your registration from being issued.

Registration Fee
The registration fee for the initial two year registration and subsequent bi-annual renewal is $100. The expiration date will be two years from the date of issuance.

Exemptions from Maryland Registration
The following individuals are exempted by law from the requirement to hold a state individual tax preparers registration:

1. a current, active CPA registered by Maryland or any other State,
   
2. an individual in good standing and admitted to practice law in the State or in another state;
   
3. an individual employed by a local, state, or federal governmental agency but only in performance of official duties;
   
4. an individual enrolled to practice before the Internal Revenue Service who is governed under circular 230 (exemption applies only to Enrolled Agents of the IRS);
   
5. an individual serving as an employee of or assistant to an individual tax preparer or an individual exempted under this subsection in the performance of official duties for the individual tax preparer or the individual exempted in 1 to 4 above.

Examination
Maryland law requires that applicants for registration pass an examination, Section 21-302(e) of Title 16, BusinessOccupations and Professions, Annotated Code of Maryland. At its regular meeting held May 20, 2013, the Board resolvedthat Maryland registered tax preparers may practice until December 31, 2014 without having passed an exam, or, should the Internal Revenue Service again require the RTRP exam, until the deadline for taking the RTRP exam, whichever is earlier.

• FILE AN APPLICATION FOR AN INDIVIDUAL TAX PREPARERS REGISTRATION
• Interim Changes
• Renew Registration

[Pacun]

Has any one on this forum pass the MD exam? Is that a mute requirement?

[kcjenkins]

As I understand it, they don't have their own exam, they passed the law intending to require the Federal RTRP exam. So at this point, that requirement is 'suspended' until the feds reinstate the RTRP exam.

[joanmcq]

After the RTRP suit, I think NY has moved to require more than a simple registration fee for tax preparers, but I'm not sure on this. There were quite a few states that were moving towards some kind of licensing when the RTRP started, and thus suspended their programs. I suspect we'll see some of those states move forward on requiring some level of registration and competency testing.

[mrichman333]

Anything to get money

[Don in Upstate NY]

... I think NY has moved to require more than a simple registration fee for tax preparers, but I'm not sure on this ....

The original registration law provided for a committee to be set up to define the necessary criteria (education, experience, etc.) for NY registration. As I recall the committee was set up, but never funded. So we were left with the "qualification" of having $100 on a valid credit card. There are also other NY laws regulating tax preparers, (must provide a "Clients' Rights" publication to customers), but they also don't apply to CPA/EA/Atty unless selling bank products.

[Pacun]

So, only Oregon and California test preparers?

[Carolbeck]

Governor Cuomo Announces New Regulations to Protect Consumers Who Hire Tax Preparers

Warns New Yorkers to use caution when selecting a preparer

File a complaint about an unethical tax preparer by calling 518-530-HELP

[1]

Albany, NY (March 3, 2014)

Governor Andrew M. Cuomo today announced historic new regulations that will better protect New York consumers who hire a tax preparer. The regulations make New York one of only four states that regulate the tax preparer industry.

The comprehensive rules - covering 40,000 paid tax preparers throughout the state - will reduce errors and omissions on tax returns, reduce fraud and increase the level of competence and ethics among preparers.

"With 70% of New York taxpayers depending on a tax preparer to file their taxes, we need to ensure clear standards exist to prevent fraud and protect consumers,” Governor Cuomo said. “These new regulations will better protect New Yorkers who use tax preparers by requiring minimum qualifications and professional practices within the industry. In addition to these changes, I urge those putting their trust in a preparer to also do their homework: check the internet, get a referral, and make sure the person you hire is legally registered with the State Tax Department.”

Preparer scams to avoid

Governor Cuomo warned New Yorkers to be on guard for unethical actions by tax preparers, such as:

• Advertising or promising in-person to do an income tax return for a low price, but then billing the client for a much higher fee, arguing the return was more complicated than originally anticipated.
• Convincing a client to have their refund deposited into the preparer’s account instead of the client’s, and then the preparer covertly steals a portion of the refund.
• High-interest loans – often with unclear terms - offered by preparers prior to refunds being received.

Taxpayers should also avoid hiring tax preparers who offer to use illegal means to increase the amount of a refund.

“What unsuspecting taxpayers don’t realize when they agree to file false information on a return, is that they, in the end, will end up paying – perhaps steeply - for these fraudulent filings,” warned Commissioner of Taxation and Finance Thomas H. Mattox. “They are paying hard-earned money for advice that jeopardizes their future financial stability.”

Identifying and stopping fraud

The Tax Department continually investigates and arrests preparers for criminal activity. In addition, a new Fraud Analysis and Selection Team (FAST) detects large-scale tax preparer schemes. In just the past year alone, FAST has identified and stopped more than $26 million in improper refund payments.

Recent examples of tax preparer arrests include:

• Joseph Barrios, Jr., [2] 50, Mahwah, NJ, who will serve 6 months in Riker’s Island
• Susan Pemberton, [3] 43, Rockville Center, sentenced to up to 3 years in prison
• Crystal Sweet, [4] 38, Gloversville, sentenced to up to 6 years in prison
• Christopher Curry, [5] 40, Westbury, sentenced to up to 3 years in prison
• John Berry, [6] 42, Dunkirk, charged for filing returns using the names of 42 deceased people
• Chiara Hudson, [7] 24, Bronx, sentenced to up to 4 ½ years probation

New York’s first tax preparer regulations

Since 2011, the majority of tax preparers have been required to register annually with the Tax Department. Building on the registration, for the first time in New York State, most individuals who are paid to prepare at least ten New York State tax returns in a year will be required to:

• Pass a State competency examination
• Be at least 18 years of age and be a high school graduate, or possess the equivalent of a high school degree
• Meet applicable IRS requirements
• Take four hours of annual continuing education
• Beginning tax return preparers (with less than three years of experience preparing New York State tax returns) must take a 16-hour basic tax course

Violation of the new standards could result in a range of disciplinary actions, from remedial education to suspension or cancellation of a preparer’s registration.

Attorneys, certified public accountants, public accountants and enrolled agents are exempt from the regulations, but are required to meet specific professional standards set forth by their licensing agencies - and may be subject to formal sanctioning if they fail to meet those standards - as part of their professional certification.

For more information

Fact Sheet: New York’s First Tax Preparer Regulations [8]
Aware of illegal or improper conduct by a tax preparer?

Call 518-530-HELP, or File a complaint online [9]

Considering hiring a tax preparer?
Confirm that he or she is registered [10]

Consider free tax preparation options
Find an IRS-certified volunteer site [11](income max = $52,000)
Visit an AARP Tax-Aide site [12] (no income limit)

Read the Consumer Bill of Rights [13]

Fact Sheet

New York’s First Tax Preparer Regulations

Effective December 11, 2013

Applicability

As a general rule, the new regulations apply to anyone who prepares a substantial portion of

any tax return for compensation. Tax preparers who meet the eligibility criteria will be required

to register with the New York State Tax Department.

The regulations impose additional requirements on “commercial tax return preparers,” defined

as persons who:

 prepared ten or more returns for compensation in the preceding calendar year; and

 will prepare at least one return for compensation during the present calendar year.

Some individuals who prepare returns are exempt from the regulations:

 attorneys, public accountants, enrolled agents, certified public accountants, and their

employees

 volunteer tax preparers and employees of a business or partnership whose job is to only

prepare that business’s or partnership’s returns

Professional standards

To ensure that New Yorkers receive quality tax preparation services, the department imposes

the following requirements on commercial tax return preparers.

Continuing Professional Education (CPE) requirements

The regulations create two different continuing professional education requirements, depending

on the experience of the preparer.

 Commercial tax return preparers with less than three years’ experience are required to

complete 16 hours of CPE coursework by the end of the first calendar year after the

department has certified CPE providers. These individuals will have to complete four

hours of CPE coursework each year thereafter.

 Commercial tax preparers with three or more years’ experience must complete four

hours of CPE coursework each year.

Competency exam

 Commercial tax preparers must pass the IRS competency exam, if required for federal

purposes.

 Commercial tax preparers must pass a New York State competency exam by the third

calendar year after the exam is made available by the department.

Grounds for Denial of Tax Preparer Registration

The Tax Department can deny the registration application of any tax preparer who does not

meet the registration requirements, who is not in compliance with certain laws and obligations,

or who is otherwise not in compliance with the regulations.

Registration requirements

In order to successfully register, a preparer must:

 be at least 18 years of age, and possess a high school diploma or its equivalent

 fulfill continuing education and competency test requirements

 commercial tax return preparers must pay the registration fee

Compliance with laws and obligations

The department will deny the application of preparers under the following circumstances:

 criminal conviction where there is a direct relationship between the conviction and

the preparation of tax returns

 noncompliance with tax obligations.

 failure to comply with child support obligations.

 willful violation of the Tax Law

 failure to satisfy IRS requirements.

 adverse disciplinary actions within five years. Discipline must relate to tax return

preparation, violation of trust or fiduciary obligations, or the misuse of confidential

information.

Other conduct warranting denial

The department may also deny registration applications for the following reasons:

 the issuance of a registration would involve an undue risk to property or the public

welfare

 fraud or deceit as a preparer or with registration as a tax return preparer

 dishonest or unscrupulous behavior by a preparer

Discipline of Tax Return Preparers

Preparers who do not comply with the regulations are subject to discipline by the department.

In addition, the department may coordinate with federal, state, and local taxing authorities; and

professional licensing or other regulatory authorities to exchange information and make

disciplinary referrals.

Conduct warranting discipline

As in the case of registration denials, the department can discipline preparers who do not meet

the registration requirements, who are not in compliance with certain laws and obligations, or

who are otherwise unfit.

Registration requirements

Preparers who fail to register, pay the registration fee, or complete educational

requirements can be disciplined.

Compliance with laws and obligations

Preparers who violate any law, regulation, or obligation related to tax preparation are

subject to discipline. In addition, the following conduct can result in discipline:

 criminal convictions involving an unreasonable risk to property, safety or welfare

 adverse disciplinary actions in connection with conduct relating to tax preparation,

a violation of trust or fiduciary obligations, misuse of confidential information

 failure to comply with child support obligations

 willful noncompliance with tax obligations

Other conduct warranting discipline

Preparers can also be disciplined for engaging in the following conduct:

 engaging in contemptuous conduct in connection with a return prepared by the

preparer or in practice before the department regarding that return

 giving a false opinion, knowingly, recklessly, or through gross incompetence or

engaging in a pattern of providing incompetent opinions on questions arising under

federal, state, or local tax laws

 willfully using false or misleading representations to procure employment or

intimating that the preparer is able to improperly obtain special consideration or

action from the department or any officer or employee thereof

 providing false or misleading information to the department

 assisting noncompliance or tax evasion

 misappropriating client funds

 improperly influencing official actions

 aiding the practice by non-registered preparers

 willfully refusing to sign a return

 disclosing confidential information

 willful violation of the law including the Consumer Bill of Rights

Duties and responsibilities of tax return preparers

The department imposes certain duties and responsibilities on preparers. A preparer that

willfully, recklessly, or with gross incompetence fails to adhere to these duties and

responsibilities may be subject to discipline.

Communication and interaction with the Tax Department

A tax return preparer must:

 provide non-privileged available records to the department

 provide information concerning unavailable records

 promptly dispose of pending matters with the department where the preparer has

prepared the subject return.

A tax return preparer must not:

 interfere with lawful efforts by the department

 participate in false, fraudulent, deceptive or misleading solicitation and advertising.

 willfully, recklessly, or through gross incompetence submit returns, or advise their

clients to submit returns to the department that lack a reasonable basis

 take an unreasonable position or willfully attempt to understate the tax liability or is

in reckless or intention disregard of the rules or regulations

 take a frivolous position or advise a client to take a frivolous position on a tax return,

affidavit, or other document submitted to the department, whether in paper form or

electronically

 seek assistance from persons whose registration has been refused, cancelled, or

suspended

Communication and interaction with clients

A tax return preparer must:

 make reasonable efforts to learn of client’s omissions

 act diligently to ensure filed returns are accurate

 not charge unconscionable fees

 return client’s records

 advise their clients of potential penalties.

A tax return preparer must not:

 endorse or otherwise negotiate any check or other form of payment issued to a

client by the government in respect to a federal, state or local tax refund

 advise a client to submit a tax return, affidavit, or other paper or electronic

document to the department, if the purpose is to delay or impede the administration

of federal, state or local tax laws; the document or return contains a position that is

frivolous; or the document or return contains or omits information in a manner that

demonstrates an intentional disregard of a statute, regulation or established case

law unless the preparer also advises the client to submit a document that evidences

a good faith challenge to the statute, regulation or established case law.  prepare a return for a client or represent a client before the department in a matter

that would cause a conflict of interest with another of the preparer’s clients unless

both clients waive the conflict

 ignore the implications of information furnished to, or actually known by, the

preparer, and must make reasonable inquiries if the information as furnished by the

client appears to be incorrect, inconsistent with an important fact or another factual

assumption, or incomplete

In addition, any person, whether or not a tax return preparer, who has (or persons who have or

share) principal authority and responsibility for overseeing a firm’s practice of preparing tax

returns, claims for refunds, or other documents by tax return preparers for submission to the

department must take reasonable steps to ensure that the firm has adequate procedures in

effect for all members, associates, and employees for purposes of complying with the

regulations.

Forms of discipline

The department may discipline noncompliant preparers in the following ways:

 refusal, suspension or cancelation of a registration application

 denial, limitation, or placement of conditions on the preparer’s right to prepare or file

New York State tax returns. Such conditions may include placing the preparer on

probation, or ordering the preparer to attend remedial educational classes before being

allowed to prepare or file returns.

[Gail in Virginia]

Love that first scam - I have probably been guilty of that because sometimes the return IS more complicated than they told me over the phone. Which is why I hate pricing returns sight unseen. And why I warn them when I give them a range of prices that it might change if there is more involved in their return than I was aware of.

[TAXMAN]

Lets get back to the Maryland thing. I do 7 family returns in Maryland. Collect no fees. Am I supposed to pay Maryland $100 and be tested for these 7 returns?

[TAXMAN]

Just seeing if someone knows?

[jasdlm]

Bump

 

[TAXMAN]

it seems to me at one of the conferences you had to be preparing a certain # of returns and being paid. I too prepare my family returns in MD about 7-8 each year, efile and no problem. MD accepted them and went on. Can't lay my  hands on the exact language only what I was told.

[jklcpa]

 

12 hours ago, jasdlm said:

Bump

 

See the sections for "Exemptions" and "Waivers" on the linked page below. It's a safe link at the State of MDs licensing board.   Exempts are CPAs, EAs, and attorneys in MD or another state. Waiver if the preparer passed the IRS RTRP. The page below has additional links to forms to inform the St of MD why you are requesting the waiver:

https://www.dllr.state.md.us/license/taxprep/taxpreplic.shtml#waiver

[Lee B]

On 4/9/2014 at 5:46 AM, Pacun said:

So, only Oregon and California test preparers?

Oregon has been licensing and testing preparers since 1973.

[Lion EA]

NY

[jasdlm]

Sorry - I was bumping this for Pacun because he posted that he was looking for it, and I don't know how to simply link to it.

[MDEA]

MD has a test given by Prometric. All MD preparers  except those that are exempt must pass test. Just became law for this filing season did not hear what they are doing to people who file but have not taken test. Only time will tell.

[easytax]

On ‎2‎/‎25‎/‎2016 at 11:32 PM, jklcpa said:

 

 

See the sections for "Exemptions" and "Waivers" on the linked page below. It's a safe link at the State of MDs licensing board.   Exempts are CPAs, EAs, and attorneys in MD or another state. Waiver if the preparer passed the IRS RTRP. The page below has additional links to forms to inform the St of MD why you are requesting the waiver:

https://www.dllr.state.md.us/license/taxprep/taxpreplic.shtml#waiver

Thanks Judy.

Still have a question and may call MD tomorrow. I do NOT need the test (wavier is good) but as I read this, there is still a $100 registration fee regardless of any "waiver". Am I missing something?    Even NY is reasonable with a "less than 10" exemption to fee.

[jklcpa]

9 minutes ago, easytax said:

Thanks Judy.

Still have a question and may call MD tomorrow. I do NOT need the test (wavier is good) but as I read this, there is still a $100 registration fee regardless of any "waiver". Am I missing something?    Even NY is reasonable with a "less than 10" exemption to fee.

Easy, you are in PA. It would depend on how significant the # of MD returns is, and the significance of contacts within the State of MD.  I took that from this page (safe link) at the MD Division of Occupational and Professional Licensing. Quote from the page for those that don't like links:
 

Quote

 

3. Does registration apply only to tax professionals physically processing a Maryland state tax return in Maryland, or does it pertain to the personal residence of the employer? For example, if I am a tax professional who resides in Maryland, but I work and process tax returns in the state of Delaware, do I have to register with the state of Maryland?

Maryland Registration is not dependent on the preparer’s personal residence, but whether the preparer’s business includes preparing Maryland returns - either in state or out of state. If an out of state preparer is preparing Maryland returns as a significant part of his/her business, then he or she must register. However, those out of state tax professionals who prepare an occasional Maryland return for a walk-in client may not be required to register with Maryland.

The legal opinion from the Board’s Counsel states:

"[T]he requirement for registration would depend on what professional contacts the individual has with Maryland that concern providing, attempting to provide, or offering to provide tax preparation services in Maryland. If preparing Maryland returns is a significant part of the individual’s business, and the individual has significant contacts with Maryland, then the Board would expect the individual to register with Maryland."

 

 

[easytax]

Thanks AGAIN Judy.                My MD is occasional and really in this case depends on if some grandkids want theirs done or not. BUT, being "anal" I wanted to know.

It is interesting that their requirement sounds like a "political" statement --- can be, may be required, depends if significant (well defined, is it not).

AGAIN, appreciate all your help ---- now -- quit worrying about those "account statement logins" and relax, watch a good movie or go brain dead like me and watch a good "AcornTV" episode of a mystery.    Be well ///    

[easytax]

On 2/26/2016 at 9:11 PM, jklcpa said:

Easy, you are in PA. It would depend on how significant the # of MD returns is, and the significance of contacts within the State of MD.  I took that from this page (safe link) at the MD Division of Occupational and Professional Licensing. Quote from the page for those that don't like links:
 

 

Telephoned the Director for the Maryland preparer program (she called back and was informative).  Unwritten position (out of state preparers) is that if you do 5 or less then you do not -- really -- have to register (in keeping with substantial part of business -- just use your PTIN as number) /// BUT /// more than five and you should register and PAY the $100.00 registration fee.

Any changes or limitations as NY (less than 10 and no registration fee) is not currently even being thought or discussed.

Thanks again Judy for cites and info for contact numbers, etc..