Bonding Requirements

"Tax preparer bonds can be purchased from most insurance or surety companies, and can be found in your local yellow pages, through your insurance agent or using an online bonding agency."

Changes to the statute

The Law
California Business and Professions Code 22250-22259

Tax Preparers

22250. Surety bonds; conditions; cancellation or termination of bonds.
22251. Definitions.
22252. Disclosure of information to customers.
22253. Violations.
22254. Continuing education providers; standards and procedures; approval by council.
22255. Continuing Eeducation requirements; certificates of completion.
22256. Injuctions; violations of chapter, offense; punishment.
22257. Civil actions.
22258. Exemptions.
22259. Review; inoperative date and repeal of chapter.

22250. Surety bonds; conditions; cancellation or termination of bonds.

22250. (a) A tax preparer shall maintain a bond issued by a surety company admitted to do business in this state for each individual preparing tax returns for another person. The principal sum of the bond shall be five thousand dollars ($5,000). A tax preparer subject to this section shall provide to the surety company proof of the following before a surety bond may be issued:

(1) That the individual is at least 18 years of age.

(2) A "certificate of completion" of instruction as required by subdivision

(a) of Section 22255 and a "statement of compliance" of continuing education as required by subdivision (b) of Section 22255.

(b) The bond required by this section shall be in favor of, and payable to, the people of the State of California and shall be for the benefit of any person or persons damaged by any fraud, dishonesty, misstatement, misrepresentation, deceit, or any unlawful acts or omissions by the tax preparer, or the tax preparers employed or associated with it to provide tax preparation services.

(c) The tax preparer filing the bond shall identify all tax preparers employed or associated with the tax preparer and shall provide for each employee or associate the evidence required by paragraphs (1) and (2) of subdivision (a) to the surety company. A tax preparer employed or associated with a tax preparer shall be covered by the bond of the tax preparer with which he or she is employed or associated. However, in no event shall the total bond required for any single tax preparer and the tax preparers employed or associated with it be required to exceed one hundred twenty-five thousand dollars ($125,000). The aggregate liability of the surety to any and all persons regardless of the number of claims against the bond or the number of years the bond remains in force shall not exceed five thousand dollars ($5,000) for any one tax preparer.

Any revision of the bond amount shall not be cumulative. The liability of the surety on the bond shall not include payment of any civil penalties, fines, attorneys' fees, or any other cost provided by statute or regulation.

(d) The tax preparer shall file an amendment to the bond within 30 days of a change in information contained in the bond, including a change in the tax preparers employed or associated with the tax preparer.

(e) (1) A tax preparer may not conduct business without having a current surety bond in the amount prescribed by this section.

(2) Thirty days prior to the cancellation or termination of any surety bond required by this section, the surety shall send a written notice of that cancellation or termination to the tax preparer, identifying the bond and the date of cancellation or termination.

(3) If a tax preparer fails to obtain a new bond by the effective date of the cancellation or termination of the former bond, the tax preparer shall cease to conduct business until that time as a new surety bond is obtained.

(f) Notwithstanding Section 995.710 of the Code of Civil Procedure, a tax preparer may not make a deposit in lieu of bond.

(g) A tax preparer shall furnish evidence of the bond required by this section upon the request of any state or federal agency or any law enforcement agency.

(Added by Stats. 1996, Ch. 1137, Sec. 51. Effective January 1, 1997.
Operative July 1, 1997, by Sec. 54 of Ch. 1137. Inoperative July 1, 2002.
Repealed as of January 1, 2003, pursuant to Section 22259.)
LAFBILL - SB 1077

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22251. Definitions.

22251. For the purposes of this chapter, the following words have the following meanings:

(a) (1) Except as otherwise provided in paragraph (2), "tax preparer" includes:

(A) A person who, for a fee, assists with or prepares tax returns for another person or who assumes final responsibility for completed work on a return on which preliminary work has been done by another person, or who holds himself or herself out as offering those services. A person engaged in that activity shall be deemed to be a separate person for the purposes of this chapter, irrespective of affiliation with, or employment by, another tax preparer.

(B) A corporation, partnership, association, or other entity that has associated with it persons not exempted under Section 22258, which persons shall have as part of their responsibilities the preparation of data and ultimate signatory authority on tax returns or that holds itself out as offering those services or having that authority.

(2) Notwithstanding paragraph (1), "tax preparer" does not include an employee who, as part of the regular clerical duties of his or her employment, prepares his or her employer';s income, sales, or payroll tax returns.

(b) "Tax return" means a return, declaration, statement, refund claim, or other document required to be made or filed in connection with state or federal income taxes or state bank and corporation franchise taxes.

(c) An "approved curriculum provider," for purposes of basic instruction as described in subdivision (a) of Section 22255, and continuing education as described in subdivision (b) of Section 22255, is one who has been approved by the tax education council as defined in subdivision (d), or by the Council for Private Postsecondary and Vocational Education under Chapter 3 (commencing with Section 94300) of Part 59 of Division 10 of the Education Code. A curriculum provider who is approved by the tax education council is exempt from Chapter 3 (commencing with Section 94300) of Part 59 of Division 10 of the Education Code.

(d) A "tax education council" means a single organization made up of not more than one representative from each professional society, association, or other entity operating as a California nonprofit corporation which chooses to participate in the council and which represents tax preparers, enrolled agents, attorneys, or certified public accountants with a membership of at least 200 for the last three years, and not more than one representative from each for profit tax preparation corporation which chooses to participate in the council and which has at least 200 employees and has been operating in California for the last three years.

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22252. Disclosure of information to customers.

22252. Prior to rendering any tax preparation services, a tax preparer shall provide the customer in writing with the tax preparer's name, address, telephone number, and evidence of compliance with the bonding requirement of Section 22250, including the bond number, if any.

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22253.

22253. It is a violation of this chapter for a tax preparer to do any of the following:

(a) Make, or authorize the making of, any statement or representation, oral or written or recorded by any means, which is intended to induce persons to use the tax preparation service of the tax preparer, which statement or representation is fraudulent, untrue, or misleading.

(b) Obtain the signature of a customer to a tax return or authorizing document which contains blank spaces to be filled in after it has been signed.

(c) Fail or refuse to give a customer, for his or her own records, a copy of any document requiring the customer's signature, within a reasonable time after the customer signs such document.

(d) Fail to maintain a copy of any tax return prepared for a customer for four years from the date of completion or the due date of the return, whichever is later (e) Engage in advertising practices which are fraudulent, untrue, or misleading, including, but not limited to, assertions that the bond required by Section 22250 in any way implies licensure or endorsement of a tax preparer by the State of California.

(f) Violate the provisions of Sections 17530.5.

(g) Violate the provisions of Section 7216 of Title 26 of the United States Code.

(h) Fail to sign a customer's tax return when payment for services rendered has been made.

(i) Fail to return, upon the demand by or on behalf of a customer and after payment for services rendered, records or other date provided to the tax preparer by the customer.

(j) Knowingly give false or misleading information to the consumer pursuant to Section 22252, or give false or misleading information to the surety company pursuant to subdivision (a) of Section 22250.

22253. It is a violation of this chapter for a tax preparer to do any of the following:

(b) Obtain the signature of a customer to a tax return or authorizing document which contains blank spaces to be filled in after it has been signed.

(c) Fail or refuse to give a customer, for his or her own records, a copy of any document requiring the customer's signature, within a reasonable time after the customer signs such document.

(d) Fail to maintain a copy of any tax return prepared for a customer for four years from the date of completion or the due date of the return, whichever is later

(e) Engage in advertising practices which are fraudulent, untrue, or misleading, including, but not limited to, assertions that the bond required by Section 22250 in any way implies licensure or endorsement of a tax preparer by the State of California.

(f) Violate the provisions of Sections 17530.5.

(g) Violate the provisions of Section 7216 of Title 26 of the United States Code.

(h) Fail to sign a customer's tax return when payment for services rendered has been made.

(i) Fail to return, upon the demand by or on behalf of a customer and after payment for services rendered, records or other date provided to the tax preparer by the customer.

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22254.

22254. A provider of tax preparer education for tax preparers shall meet standards and procedures as approved by the tax education council, or by the Council for Private Postsecondary and Vocational Education. The tax education council shall either approve or decline to approve providers of tax preparer education within 120 days of receiving a request for approval. If approval is not declined within 120 days, the provider shall be deemed approved. A listing of those providers approved by the tax education council shall be made available to tax preparers upon request.

(Added by Stats. 1996, Ch. 1137, Sec. 51.
Effective January 1, 1997.
Operative July 1, 1997, by Sec. 54 of Ch. 1137. Inoperative July 1, 2002.
Repealed as of January 1, 2003, pursuant to Section 22259.)
LAFBILL - SB 1077

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22255.

22255 (a) The council shall issue a "certificate of completion" to the tax preparer when the tax preparer demonstrates that he or she has (1) completed not less than 60 hours of instruction in basic personal income tax law, theory, and practice by an approved curriculum provider within the previous 18 months; and (2) provides evidence of compliance with the bonding requirement of Section 22250, including the name of the surety company, the bond number, and the bond expiration date. Of the required 60 hours, 45 hours shall be concerned with federal tax curriculum and 15 hours shall be concerned with state tax curriculum.

(b) A tax preparer shall complete on an annual basis not less than 20 hours of continuing education, including 15 hours in federal taxation and 5 hours in California taxation from an approved curriculum provider. The council shall issue annually a "statement of compliance" when the tax preparer demonstrates that he or she has (1) completed the required 20 hours of continuing education, and (2) provides evidence of compliance with the bonding ;requirement of Section 22250, including the name of the surety company, the bond number, and the bond expiration date.

(c) An individual who possesses a minimum of two recent years experience in the preparation of personal income tax returns may petition the council to review the experience and determine if it is the equivalent of the required qualifying education. The council may provide that individual with a "certificate of completion" if it is determined that the experience is the equivalent of the required hours. Tax preparation performed in situations that violate this chapter, by an individual who is neither registered nor exempted, may not be used toward the qualifying experience needed for registration as a tax preparer.

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22256.

22256. (a) The superior court in and for the county in which any person acts as a tax preparer in violation of the provisions of this chapter, may, upon a petition by any person, issue an injunction or other appropriate order restraining the conduct. The proceedings under this paragraph shall be governed by Chapter 3 (commencing with Section 525) of Title 7 of Part 2 of the Code of Civil Procedure.

(b) A person who violates a provision of this chapter is guilty of a misdemeanor, which offense is punishable by a fine not exceeding one thousand dollars ($1,000), or by imprisonment in a county jail for not more than one year, or by both.

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22257.

22257. (a) If a tax preparer fails to perform a duty specifically imposed upon him or her pursuant to this chapter, any person may maintain an action for enforcement of those duties or to recover a civil penalty in the amount of one thousand dollars ($1,000), or for both enforcement and recovery.

(b) In an action to enforce these duties or to recover civil penalties, or for both enforcement and recovery, the prevailing plaintiff shall be entitled to reasonable attorney's fees and costs, in addition to the civil penalties provided under subdivision (a).

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22258.

22258. (a) The following persons are exempt from the requirements

of this title, subject to the requirements of subdivision (b):

1) A person with a current and valid license issued by the California Board of Accountancy.

2) A person who is an active member of the State Bar of California.

3) Any trust company or trust business as defined in Chapter 1 (commencing with Section 99) of Division 1 of the financial Code.

4) A financial institution regulated by the state or federal government, insofar as the activities of the financial institution with respect to tax preparation are subject to federal or state examination or oversight.

5) A person who is enrolled to practice before the Internal Revenue Service pursuant to Subpart A (commencing with Section 10.1) of Part 10 of Title 31 of the Code of Federal Regulations.

6) Any employee of any person described in paragraph (1), (2), (3), (4), or (5), while functioning within the scope of that employment.

7) Any employee of any corporation, partnership, association, or any entity described in subparagraph (B) of paragraph (1) of subdivision (a) of Section 22251.

(b) (1) Except for employees of entities described in paragraph (3) or (4) of subdivision (a), paragraph (6) of subdivision (a) shall apply only if all tax returns prepared by that employee are signed by a person described in paragraph (1), (2), or (5) of subdivision (a).

(2) Paragraph (7) of subdivision (a)shall apply only if all tax returns prepared by that employee are signed by the person described in paragraph (7) of subdivision (a).

(3) No person described in this subdivision as an employee may sign a tax return, unless that employee is otherwise exempt under this section, is registered as a tax preparer with the council, or is an employee of either a trust company or trust business described in paragraph (3) of subdivision (a), or any employee of a financial institution described in paragraph (4) of subdivision (a). (c) For purposes of this section, preparation of a tax return includes the inputting of tax data into a computer.

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22259.

22259. This chapter shall be subject to the review required by Division 1.2 (commencing with Section 473).

This chapter shall become inoperative on July 1, 2002, and, as of January 1, 2003, is repealed, unless a later enacted statute, which becomes effective on or before January 1, 2003, deletes or extends that date on which it becomes inoperative and is repealed.

(Added by Stats. 1996, Ch. 1137, Sec. 51. Effective January 1, 1997.
Operative July 1, 1997, by Sec. 54 of Ch. 1137. Repealed as of January 1, 2003, by its own provisions.
Note: Repeal affects Chapter 14, commencing with Section 22250.)
LAFBILL - SB 1077

22259. This chapter shall be subject to the review required by Division 1.2 (commencing with Section 473).

(Added by Stats. 1996, Ch. 1137, Sec. 51. Effective January 1, 1997.
Operative July 1, 1997, by Sec. 54 of Ch. 1137.
Repealed as of January 1, 2003, by its own provisions.
Note: Repeal affects Chapter 14, commencing with Section 22250.)
LAFBILL - SB 1077

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California Tax Education Council

Bonding Requirements