Surety Bond Encyclopedia

Tax Preparer $5,000 (5 year term) Bond - NNA California in California

Brief Summary

Every California CTEC Registered Tax Preparer has to keep a $5,000 bond in force every day they prepare returns for pay. A five year term means one purchase covers five renewal seasons, so a lapse never shuts your office down in the middle of filing season.

Business and Professions Code 22250.1 requires every non-exempt California tax preparer to maintain a $5,000 bond from a surety admitted in California, payable to the people of the State of California. The bond is uploaded to your CTEC account before you can register. California CPAs, enrolled agents, California State Bar attorneys and specified banking or trust officials are exempt from CTEC registration. Cash cannot be deposited in place of the bond.

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How to Apply for a Tax Preparer $5,000 (5 year term) Bond:

Confirm you are not exempt as a California CPA, enrolled agent, California State Bar attorney or specified banking or trust official.
Complete the 60 hour qualifying education course from a CTEC approved provider and get a PTIN from the IRS.
Pass the Live Scan background check through your CTEC application.
Purchase the $5,000 bond and provide the surety proof you are at least 18.
Upload the bond to your CTEC account when the Register Now option appears and pay the registration fee.
Renew CTEC registration each year by October 31 and keep the bond in force without a gap.

Detailed Information About the California Tax Preparer $5,000 (5 year term) Bond:

Who needs it and who does not

California's Tax Preparation Act covers anyone who, for a fee or other consideration, prepares or assists with state or federal income tax returns, assumes final responsibility for them, or offers those services. Entering tax data into a computer counts. Preparing only federal returns does not get you out of it. The Franchise Tax Board lists the exempt groups: California CPAs, enrolled agents, attorneys who are members of the California State Bar, and specified banking or trust officials. Everyone else registers with the California Tax Education Council (CTEC) as a CRTP and carries the bond.

What the statute requires

Under BPC 22250.1, the bond is $5,000 for each individual preparing returns, written by a surety admitted in California, and payable to the people of the State of California for anyone harmed by the preparer's fraud, dishonesty, misrepresentation or other unlawful acts. You must prove to the surety that you are at least 18. Section 22250.1(f) bars a cash deposit in lieu of the bond. A firm's bond covers its employed or associated preparers, but the total required for one firm never has to exceed $125,000, and changes in staff must be amended onto the bond within 30 days.

What a five year term does and does not do

A multi year bond saves you from buying a new bond every year. It does not raise the coverage. The statute caps the surety's aggregate liability at $5,000 per preparer no matter how many claims are made or how many years the bond stays in force. CTEC registration itself still renews every year by October 31, with 20 hours of continuing education, a current PTIN and the annual registration fee.

Keeping it in force

You cannot do business without a current bond. The surety must give you and CTEC 30 days written notice before cancelling, and if no replacement is in place by that date you must stop preparing returns until one is. CTEC will not accept an uploaded bond whose effective date is more than 10 days in the future. You must also give each client your bond number in writing before preparing their return.

Eligibility and Requirements for a California Tax Preparer $5,000 (5 year term) Bond:

Bond amount of $5,000 per individual preparer.
Surety company admitted to do business in California.
Bond payable to the people of the State of California.
No cash deposit in place of the bond.
Firms list every employed or associated preparer and amend the bond within 30 days of any change.
Bond number given to every client in writing before preparing a return.

California Tax Preparer $5,000 (5 year term) Bond FAQs:

Does a five year bond give me more than $5,000 of coverage?

No. BPC 22250.1 caps the surety's total liability at $5,000 per preparer regardless of how many years the bond is in force or how many claims are filed. The longer term only saves you from rebuying the bond each year.

Am I exempt from the bond?

You are exempt from CTEC registration if you are a California CPA, an enrolled agent, an attorney who is a member of the California State Bar, or a specified banking or trust official. Everyone else who prepares returns for pay in California needs the bond.

Can I deposit $5,000 cash instead?

No. Section 22250.1(f) says a tax preparer may not make a deposit in lieu of bond.

Do I still renew with CTEC every year?

Yes. Registration renews annually by October 31 with 20 hours of continuing education, a renewed PTIN and the registration fee. The bond term does not change that deadline.

What does the bond cost?

You pay a one time premium for the full term. It is set by the surety based on the $5,000 bond amount, the term and the applicant's credit, and you see the quote before you buy.