California Tax Education Council

The IRS “Nonexempt” Debate Continues…

The next phase of the new IRS rules for tax preparers is set to start soon. Tax Preparers who are not attorneys, CPAs or enrolled agents will be required to complete federal continuing education each year and pass an exam. It means all CTEC-registered tax preparers (CRTPs) must now meet federal regulations and state rules.

It is a sore subject for some CRTPs that usually leads to the question: Why did CTEC not push the IRS to exempt CRTPs?

Here’s why…

The focus of CTEC is to protect California taxpayers, not California tax preparers. The requirements CRTPs must follow are meant to protect taxpayers against fraud and to help lower the risk for errors on tax returns.

That said, the California State Legislature never wanted its requirements to create a hardship on the tax preparer industry—which is why CTEC has always worked to keep the costs to comply with state requirements to a minimum.

The $25 registration fee pays for the administration of the registering tax preparers, Franchise Tax Board enforcement costs and public awareness campaigns to educate taxpayers on how to find a legal tax preparer. CTEC runs the entire program on its registration fees at no cost to the state. 

As for the complaint that CTEC did not do “enough” to combat the new IRS rules, please understand the IRS will do what it sees fit.  The IRS is looking at it from a federal perspective, not what is best for each state.

If CTEC decided to lobby for CRTP exemption, it would be breaking state law. The State Legislature did not create CTEC to be the voice of tax preparers nor did it want CTEC to be a membership organization for CRTPs.

State lawmakers limited CTEC to the following duties: Establish tax education standards, approve tax education providers who meet CTEC standards, register nonexempt tax preparers as defined by state law, partner with the Franchise Tax Board to enforce tax preparer compliance, and educate the public about the requirements. That is it. 

Again, the State Legislature created CTEC to be an oversight entity for its requirements, not a membership organization for CRTPs.

CTEC newsletters and blogs—traditionally seen as “membership” perks—are just a part of the CRTP tax education “lesson plan” so to speak.

When CTEC started in 1997, there were approximately 27,000 registered tax preparers. Today, there are more than 44,000 CRTPs statewide. The council believes newsletters and blogs are simply the best way to communicate updates so there is no confusion on how to comply with the law. 

Still have a question? Please feel free to post a comment, e-mail CTEC at info@ctec.org or call 877-850-2832.

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