The New York State Department of Taxation and Finance (DOTAF) has announced that “The New York State Task Force on Regulation of Tax Return Preparers has issued its report”.
“Legislation enacted in 2009 required the Commissioner of Taxation and Finance to convene a task force charged with making recommendations related to the effective regulation of tax return preparers.”
The members of the Task Force come from the tax profession, business, academia, advocacy groups, and state agencies,
Currently the State of New York extorts an annual $100.00 fee from “unenrolled” tax preparers for the privilege of preparing New York State tax returns. There are no requirements other than being able to come up with the $100.00.
I charge each of my clients with a NYS return an additional “NYS tax return preparer extortion fee” (so separately identified on my invoice) of $5.00 to cover this payment.
Here, from the report, is what has been recommended (any highlights are mine) -
“The Task Force proposes the following additional qualifications for commercial tax return preparers (those who prepare 10 or more returns annually for compensation) who prepare NYS personal income tax returns. These qualifications would be in addition to the existing statutory registration requirements. Such preparers would have to:
• Meet the IRS requirements, including passing the competency exam.
• If new to the field of NYS personal income tax, take a 16-hour basic New York income tax course prior to preparing returns for compensation. Experienced preparers, as defined by the Commissioner of Taxation and Finance, would not be required to take this course.
• Pass a New York State income tax competency exam prior to preparing returns for compensation. Experienced preparers would be allowed to take and pass the exam within a 3-year phase-in period.
• Annually participate in 4 hours of continuing professional education (CPE) in New York personal income tax topics, in addition to the IRS requirement.
• Be at least age 18 and a high school graduate or equivalent (G.E.D).
Commercial tax return preparers who prepare NYS income tax returns but are located outside New York State would have to comply with these requirements.
The Task Force developed additional guiding principles for administration of these requirements -
• The Department of Taxation and Finance should enroll all tax return preparers in its subscription services mailing list as they register on-line.
• New York State’s regulation of tax preparers should build on and complement the IRS initiative to regulate tax preparers. Duplicative requirements should be avoided.
• The IRS initiative requires all compensated preparers to register, even if they are members of other regulated professions, while the current New York registration program exempts public accountants, CPAs, attorneys, and enrolled agents. In light of the new IRS initiative, the Legislature should consider whether ending these exemptions from registration would serve the overall purposes of the program.
• The Department should work with the IRS and other states to share tax preparer information and identification numbers as much as possible, in order to make registration and testing processes easy and efficient. A single, seamless registration system should be the goal for the
• The Department should maintain a public database so that anyone can check whether a particular tax preparer has met the minimum qualifications and has registered.
• Administrative costs are an important consideration, both to tax preparers and to New York State.
• The Department should insure that cost-effective CPE is available to preparers, using new technology where appropriate.
• The Department should annually provide information about the most common issues and mistakes made on personal income tax returns.
• The Department should use available data to analyze patterns and identify preparers who are not doing what they are supposed to do.
• The Department needs to learn more about the population of preparers who operate in New York, the types of returns they prepare, the types of clients they serve, and the characteristics of their business models.
• The Department should gain experience in administering testing and educational requirements for income tax preparers before expanding these requirements to preparers of other types of returns.
• Volunteer tax preparers should be encouraged to participate in continuing education activities.”
While I like that there is some grandfathering with regard to the required 16-hour course, I personally would be tempted to sit in on the course to refresh my NYS knowledge, I would, however, want this grandfathering be expanded to cover the initial proficiency test.
And I actually would not object to 4 hours of CPE in NYS tax updates each year, as long as “cost-effective CPE is available to preparers”.
The above requirements are, at this point, only recommendations by the Task Force and are nowhere near becoming actual law – so there is no need for immediate concerns. However I expect that a form of these recommendations will eventually be passed.
To be honest, if these recommendations do eventually become law I would simply make sure that I did not “prepare 10 or more returns annually for compensation”. I would have to choose those clients for whom I currently prepare NYS returns that provide the most potential for agita (or actual agita) and tell them that I am no longer able to prepare their returns – so as to bring the number of IT-201s and IT-203s that I do each season down to 9. The 3-year time period to be tested would allow me to “phase-out” these clients over a couple of tax seasons.
The DOTAF also has an update on the state’s “E-fileMandate for Tax Preparers”. Luckily I am not covered under this mandate. According to the mandate “You must e-file all mandated tax documents if , , , you use tax software to prepare one or more of these tax documents in 2012” – and I do not use flawed and expensive tax software to prepare any income tax returns.