How To Become A Tax Preparer In California

Overview

There are numerous qualifications you need to meet if you want to work as a tax preparer. You need to register with the IRS and in many cases pass the exams to become a Certified Public Accountant (CPA). You also need to comply with the regulations in your state.

In the State of California, any person that assists or prepares for another person in exchange for a fee must register as a professional tax preparer with the California Tax Education Council (CTEC). Local jurisdictions may have their own requirements for tax professionals.

In this post, we will outline a step-by-step process for how you can become a tax preparer in California.

California Registered Tax Preparer Requirement

Anyone who prepares tax returns for a fee in California is required by law to register as a tax preparer with the California Tax Education Council. Tax preparers who are California certified public accountants (CPAs), enrolled agents (EAs), attorneys who are members of the State Bar of California, and certain specified banking or trust officials are exempt from the requirement.

Requirements to become a new CTEC registered tax preparer (CRTP):

Individuals registering for the first time must:

• Take a 60-hour qualifying education course from a CTEC approved provider within the past 18 months.
• Purchase a $5,000 tax preparer bond from an insurance/surety agent.
• Obtain a Preparer Tax Identification Number (PTIN) from the Internal Revenue Service (IRS).
• Register and submit the $33 registration fee online.
• Annual CTEC Renewal Requirements:

How to renew a California tax preparer license

California tax preparer licenses are valid for a one-year period. To renew your license, you need to complete a minimum of 20 hours of continuing education from a CTEC-approved provider during the year.

This includes 10 hours of federal law topics, 5 hours of state law, 2 hours of ethics training, and 3 hours of tax law updates.

If you have more than two years of current experience preparing income tax returns, you may be exempt from the continuing education requirement. Tax preparers that meet this qualification can mail a petition to the CTEC who will decide whether to grant your exemption.

Renewing your license also requires you to submit a renewal application to the CTEC along with the $33 annual registration fee.

The renewal period begins on August 1. Tax preparers have until October 31 to renew their license. If you fail to renew by this time, you will have to pay a $55 late fee.

You can renew your license up until January 15. After that, you will need to start the whole licensing process over again.

You will also need to renew your PTIN with the IRS and ensure that your surety bond remains active. Tax preparer surety bonds can be issued for periods longer than one year so you may not need to renew the bond along with your license.

Steps for obtaining a California tax preparer license

1. Complete education requirements

The CTEC requires all non-exempt tax preparers to complete a 60-hour qualifying education course. This course must be issued by a provider approved by the CTEC.

There is a mix of self-study courses and in-person lessons taught by an instructor. You can find a list of CTEC-approved education providers on their website. 

2. Get your Preparer tax identification number

If you want to get paid to prepare federal tax returns, you must obtain a Preparer Tax Identification Number (PTIN) from the Internal Revenue Service (IRS).

You can apply for the PTIN on the IRS website. The application takes about 15 minutes to complete. There is a $35.95 fee that you will need to pay.

Anyone who prepares federal tax returns for money must have a valid Preparer Tax Identification Number (PTIN). You obtain it from the IRS. Getting a PTIN registers you as an “unenrolled preparer,” granting you the minimum level of clearance to prepare federal taxes. You use the PTIN to identify yourself as a paid preparer in the returns you draw up for your clients.  You can obtain your PTIN online, and it’s free. To get a PTIN, you must

•  Be at least 18 years old
•  Provide your address
•  Provide your Social Security number
•  Explain any felony convictions, and
•  Explain if you owe money to the IRS
• There are no other requirements. But, if you have felony convictions or owe money to the IRS, it might hold up your PTIN.

3: Get your Electronic filing identification number

Next, you will need to get your Electronic Filing Identification Number (EFIN) from the IRS. This will allow you to submit tax returns for your clients electronically.

To get the EFIN, you need to create an IRS e-Services account, submit an application, and pass a Suitability Check.

You can learn more about the process for becoming an authorized e-file provider on the IRS website.

4. Obtain a tax preparer surety bond

The CTEC requires tax preparers to post a California surety bond before they can receive a tax preparer license. The bonds help protect taxpayers from misstatements, fraud, or other unlawful acts or omissions by the tax preparer.

California tax preparer bonds have a $5,000 total bond amount. You are responsible for paying a small portion of this amount as a premium in order to obtain your bond. Most tax preparer bonds do not require credit checks as part of the underwriting process. However, the surety may choose to do so if it deems it necessary.

EZ Surety Bonds offers the following prices for California tax preparer bonds:

• 1-year term: $25
• 2-year term: $35
• 3-year term: $50
• 4-year term: $64
• 5-year term: $80

5. Register with the CTEC

Once you complete the previous steps, you will be ready to register with the CTEC. The application for new tax preparers can be completed online using the CTEC website.

There is a $33 registration fee that you will need to pay when submitting your application. You will also need to provide a copy of your surety bond and the certificate of completion from your 60-hour education course.

What if the tax preparer is not registered?

California law requires anyone who prepares tax returns for a fee within the State of California and is not an exempt preparer to register as a tax preparer with the California Tax Education Council (CTEC). Exempt preparers are California certified public accountants (CPAs), enrolled agents (EAs), and attorneys who are members of the State Bar of California.

As of January 1, 2005, the California Franchise Tax Board (FTB) has the authority to identify and penalize unregistered tax preparers.

“Failure to register as a tax preparer with the California Tax Education Council, as required by Section 22253 of the Business and Professions Code, unless it is shown that the failure was due t reasonable cause and not due to willful neglect.

• The amount of the penalty under this subdivision for the first failure to register is two thousand five hundred dollars ($2,500). This penalty shall be waived if proof of registration is provided to the Franchise Tax Board within 90 days from the date notice of the penalty is mailed to the tax preparer.

• The amount of the penalty under this subdivision for a failure to register, other than the first failure to register, is five thousand dollars ($5,000).”

Consumers can report unregistered tax preparers by filling out the Noncompliant Complaint Form through CTEC’s website. All reports are kept confidential.

How much do tax preparers make in California?

The average salary for a tax preparer in California is around $52,020 per year.

Who can prepare tax returns in California?

California law requires anyone who prepares tax returns for a fee within the State of California — and is not an exempt preparer — to register as a tax preparer with CTEC. Exempt preparers include: California Certified Public Accountants (CPAs) Enrolled Agents (EAs).

FAQS

• Can multiple individuals or one office share one PTIN?

No, every individual who, for compensation, prepares or assists in the preparation of a tax return or claim for refund must have his or her own PTIN and each tax return preparer may only obtain one PTIN.

• If I don’t have a PTIN, can I still prepare tax returns for compensation?

No. You must have a PTIN to prepare tax returns for compensation. 

• Is there an age requirement for obtaining a PTIN?

Yes, applicants must be at least 18 years of age.

• What penalties can be imposed against tax return preparers who don’t have a current PTIN?

Failure to have a current PTIN could result in the imposition of Internal Revenue Code section 6695 penalties, injunction, and/or disciplinary action by the IRS Office of Professional Responsibility.

• What is the difference between a PTIN and an EFIN? Does a preparer need both?

A Preparer Tax Identification Number (PTIN) is a number issued by the IRS to paid tax return preparers. It is used as the tax return preparer’s identification number and, when applicable, must be placed in the Paid Preparer section of a tax return that the tax return preparer prepared for compensation. There is a non-refundable fee to obtain a PTIN. Reference form W-12 for fees for specific year(s).

An Electronic Filing Identification Number (EFIN) is a number issued by the IRS to individuals or firms that have been approved as authorized IRS e-file providers. It is included with all electronic return data transmitted to the IRS. There is no fee for an EFIN.

Preparer Tax Identification Numbers are issued to individuals. Electronic Filing Identification Numbers are issued to individuals or firms. Most preparers need both.

• If an employee of a business prepares the business’ tax returns as part of their job responsibilities, do they need to obtain a PTIN?

No. An employee who prepares his employer’s federal tax returns is not required to sign as a paid preparer. Accordingly, unless the employee prepares other federal tax returns for compensation, he or she is not required to register and obtain a PTIN.

• Are e-file transmitters or intermediate service providers that do not prepare returns subject to the PTIN requirements?

No. E-file providers that assist in the formatting and transmission of tax returns electronically, but do not prepare all or substantially all of a federal tax return or claim for refund for compensation, are not required to obtain a PTIN.

How do I get my California tax preparer licence?

Pass with a 75% or above on the tax board’s examination for tax preparers. With your application for a licence, you must send a copy of your certificate proving that you took the 80-hour basic tax course.

How much do tax preparers make in California?

The average annual wage for tax preparers in California is $26,638, which equates to $12.81 per hour. This amounts to $512 each week or $2,219 per month.

How much does a $5000 tax preparer bond cost?

A $5,000 tax preparer bond costs $25 annually. A 3 year bond costs $50, and a 5 year bond costs $80.

Is being a tax preparer worth it?

The possibility of starting a successful tax preparation business makes it a terrific method to supplement your income while just working part-time.

How to become a certified tax preparer online?

Before applying for an EFIN, create your Preparer Tax Identification Number (PTIN).

Sign up with your state. Work in an office and pick a tax preparation programme.

Tax preparer course california

Qualifying education CTEC-approved. Obtain a bond for a $5,000 tax preparer from surety agent.obtain a Preparer Tax Identification Number (PTIN). Scan of Appropriate Lives.

How to become a tax preparer for free ?

Participate in Counseling for the Elderly (TCE) programmes as a volunteer to assist your community in preparing taxes without charge. The VITA site locator app can be used to find the closest free tax preparation facility.

Free certified tax preparer courses

There are a few online platforms and websites where you may learn tax preparation for free, and some of these websites offer certificates once the course is complete.

Irs approved tax preparation courses

The Basics, Reporting Income, Income Adjustments, Itemizing vs. Standard Deduction, Taxes and Credits, Other Taxes, Tax Payments, Wrapping-Up, and Supplemental Materials.

California tax preparer

Basic tax preparation does not require advanced degrees, but a licensed tax preparer in California must demonstrate competency by passing a formal exam or working for the IRS.

Best tax preparer course

The fundamentals of tax preparation, Tax updates and new rules, Small company tax returns, Corporate taxes, and in-depth information.

Tax preparer certification

Get a $5,000 tax preparer bond from an insurance agent. pay the $33 registration cost and request a Preparer Tax Identification Number (PTIN) from the IRS.