Every year at tax time, millions of Americans bring their taxes to a tax preparer. These clients trust their tax preparers with some of their most sensitive financial information, which is why it's so important that tax preparers conduct their business with the highest standards of ethics and integrity.
Some U.S. states require certain non-exempt tax preparers to become licensed by a state government agency and to obtain a tax preparer surety bond as part of the process. What is a tax preparer bond, which tax preparers are classified as non-exempt, and what should a tax preparer expect when obtaining a tax preparer surety bond? Get the straight answers from Surety Bonds Direct.
Tax Preparer Bonds: The Basics
A tax preparer bond is a type of surety bond. Our article What Is a Surety Bond? covers the basics of surety bonds in more detail, but here's a quick explanation: A surety bond is a three-party contract that provides a financial guarantee that one party (the principal) will fulfill its obligations to another party (the obligee), with a third party (the surety) playing the role of a neutral guarantor.
In this case, the principal is the tax preparer, the obligee is the state regulatory authority that registers and licenses tax preparers, and the surety is the insurance company that issues the bond.
What Does a Tax Preparer Bond Protect Against?
A tax preparer bond is for the benefit of a tax preparer's clients. It will protect the preparer's clients in the event that the preparer commits a legal or ethical violation, including:
- Any other acts of dishonesty or omission
Most tax preparers will never need their tax preparer surety bond. However, should a dispute occur between a preparer and their client, a tax preparer bond provides a simple and legally binding way to mediate claims and protect the client in the event of any preparer misconduct.
Which Types of Tax Preparer Need a Tax Preparer Surety Bond?
Two of the most common types of tax preparers, Certified Public Accountants (CPAs) and Enrolled Agents (EAs), do not need a tax preparer surety bond. These tax preparers are required to pass a rigorous government licensing exam and are highly accountable to agencies such as the IRS.
However, a third type of tax preparer, called a non-credentialed or non-exempt tax preparer, does have to obtain a tax preparer surety bond in a few states. A non-exempt tax preparer is someone who has tax preparation skills and does tax preparation work but does not have a CPA or EA license. Many such professionals work at large tax preparation businesses, but others are in private practice. Although non-exempt tax preparers are still highly skilled, a tax preparer surety bond helps ensure that they are held to a high standard of accountability.
Which States Require Tax Preparer Bonds?
Currently, California and Nevada are the only two states that require tax preparers to obtain surety bonds to get a tax preparer's license. Each has slightly different requirements for the bonding process.
In California, non-exempt tax preparers must be licensed by the California Tax Education Council (CTEC). The licensing process involves taking a 60-hour tax preparer education course and paying a registration fee to CTEC. In addition, a tax preparer must obtain a $5,000 California tax preparer surety bond.
Nevada's non-exempt tax preparers have been required to register and obtain surety bonds since July 2017. Preparers in Nevada must register as a document preparation service and obtain their licenses via an application to the Nevada Secretary of State's office. Nevada tax preparer surety bonds also require a substantially higher penal sum than California. The penal sum varies based on the number of registrants.
|Number of registrants
|201 or more
Tax Preparer Bonds from Surety Bonds Direct
Working with Surety Bonds Direct is the fastest and easiest way to get a tax preparer surety bond. We work directly with a network of reliable sureties to get the most affordable rates on tax preparer bonds for our customers, and we have numerous options available for businesses that need to get a surety bond with bad credit.
California tax preparer surety bonds are available from Surety Bonds Direct as a one-time instant purchase with immediate approval and no credit check. Nevada document preparer surety bonds do require a credit check and take a few business hours to get a great price but, thanks to our exclusive system that automatically matches our customers with the best bonds for their needs, Surety Bonds Direct can still provide a faster and more affordable quote than any other surety bond broker service.
If you're a non-exempt tax preparer getting a tax preparer's license and you need advice on how to get a tax preparer surety bond, we'll be happy to help. Call us at 1-800-608-9950 or use our free online surety bond quote form to get a quick and easy quote today: Instant Approval and Purchase for a California Tax Preparer Surety Bond or Request a Quote for a Nevada Document Preparer Surety Bond.