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State Tax Commissioner says “Taxpayers Deserve Basic Protections”

Connecticut Commissioner of Revenue Services Kevin B. Sullivan wants to protect taxpayers by setting basic standards for paid commercial tax preparers.  Said Sullivan, “Every tax season, thousands of our taxpayers go to commercial tax preparers.  Most probably get good service at a reasonable cost, but far too many do not.  In fact, we are seeing increased evidence of preparers’ errors, unfair practices and even fraud.”

Added Sullivan, “It’s pretty much the wild, wild west out there.  No one even knows who most of these commercial tax preparers are, their qualifications or how they are charging and treating customers.  This doesn’t call for regulatory over-kill.  But taxpayers should be able to count on some measure of quality assurance and protection from predatory practices.”

Under the proposed legislation, commercial tax preparers would qualify for a renewable two-year permit based on evidence of a high school diploma, Internal Revenue Service (IRS) issued preparer tax identification number and experience, education or training in income tax preparation.  Starting in 2020, completing available basic IRS training would also be required.  Tax preparers who are already regulated – including accountants, attorneys, individual enrolled agents, and IRS qualified volunteers - would be exempt.

The legislation would also prohibit predatory practices.  Said Commissioner Sullivan, “Unsophisticated taxpayers face a lot of bad business practices that should not be allowed.  Fly-by-night preparers will pop up, take the money – including taxpayer refunds – and run.  Others operate with business tie-ins like the commercial preparer affiliated with a major retail chain that requires taxpayers to get refunds in cash or store debit card at an affiliated store location.  Too often, taxpayers don’t even get fair disclosure up front of the total charges to be paid.”

The new legislation would require prior disclosure of a preparer’s qualifications, their services and fees, an estimated cost of services to be performed and encryption or other security measures provided to protect taxpayers’ personal identity, financial, and tax record information. The legislation will prohibit the following practices:

·         Knowingly giving false or misleading information;

·         Refund anticipation loan fees in excess of the actual fee charged by the originating bank or other creditor;

·         Actions violating the state or federal Taxpayer Bill of Rights;

·         Refund anticipation loans conditioned upon taxpayers waiving legal rights or giving security interests other than the refund payment;

·         Failure or refusal to return taxpayer documents or provide copies of documents requiring taxpayer signature;

·         Requiring taxpayers to sign blank forms;

·         Allowing a taxpayer to designate the preparer as payee of a tax refund;

·         Requiring taxpayers to use a specific depository institution or debit card and promoting any commercial affiliation; and

·         Failing to sign a prepared return and include the preparer’s federal identification number.

“Most filers believe that anyone charging to prepare their taxes must be qualified, but in fact there are no state or federal regulations,” said Jim Horan of the Connecticut Association for Human Services, which coordinates the state’s largest free tax preparation program.  “We hope that the legislature will support Commissioner Sullivan’s common sense regulation of paid tax preparers, and help protect consumers from getting ripped off.”