California Tax Education Council

Enforcement: Round 7

Hundreds of illegal tax preparers are getting a reality check this tax season from the Franchise Tax Board (FTB)— Either they follow the law or face hefty penalties.

As of March 30, 2012, the FTB Tax Preparer Enforcement Team has contacted 374 questionable tax preparers statewide. Of those, FTB reports that 59 percent of the cases have been resolved.

California law requires anyone who prepares tax returns for a fee and is not an attorney, certified public accountant (CPA) or enrolled agent (EA), to register as a tax preparer with CTEC.

Tax preparers who are caught preparing tax returns illegally are issued a $2,500 penalty letter from FTB and have 90 days to comply. If a tax preparer registers with CTEC by the deadline, the penalty is removed. If the tax preparer does not comply or complies late, the $2,500 penalty stands. In the next year, if that tax preparer still fails to comply and continues to prepare tax returns, the penalty increases to $5,000.

So far 27 unregistered tax preparers have been issued the $2,500 penalty for the 2011/2012 enforcement cycle. FTB reports that one unregistered tax preparer was also issued the $5,000 penalty.

If you have information regarding an illegal tax preparer, it is never too late to let us know. To report a questionable tax preparer, click on Report a Tax Preparer and fill out the form.

CTEC and FTB partnered in 2005 to help better protect consumers against fraud by enforcing tax preparer compliance. CTEC pays for the entire enforcement program. All penalties collected by FTB are deposited into the state’s general fund.

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