Smith Island cakes and tax preparer legislation
Day 2 of hearings, this time in the Senate. We were there to testify on Senate Bill 817, "Maryland Individual Tax Preparers Act." This was another major issue brought up by MACPA members at our town hall / professional issues updates. More than 1,000 members attended these and ranked this and mobility legislation as the top two issues.
Recent tax frauds with low-income taxpayers with Refund Anticipation Loans (RALs) have brought this front and center in Maryland, in many other states, and at the federal level.
The bill attempts to register and require "paid" individual tax preparers to take a competency exam and maintain continuing education credits. This bill has taken shape after we offered the comments we received from our members over the past year. It still wasn't quite there yesterday, so we testified as "FWA" -- favorable with amendments.
Here are the areas that we have focused on:
The bill would create a State Board of Individual Tax Preparers under the auspices of the Department of Labor, Licensing, and Regulation (DLLR). The new board would consist of eight members with four-year terms, including a designated seat for an MACPA appointment. The bill would create an "Individual Tax Preparers Fund" that would be administered by the Comptroller, making this a registration of tax preparers (not a licensure or certification). There is a provision for the board to set fees, select an examination and oversee enforcement activities. Penalties of up to $5,000 per violation can be assessed after due process by the board. That should be a major deterrent to fraudulent tax preparation. We were successful in getting CPAs exempt from this legislation (along with enrolled agents and tax attorneys).
The bill has addressed almost all of our issues, except these four, which we testified to yesterday:
- We need a full exemption for the staffs of CPAs who may be involved in tax preparation.
- We believe all tax preparers should be registered under this act, not just individual income tax preparers, due to the public interest of small business tax returns, estate and other types of returns.
- The examination should be specified by law as given by an independent regulatory authority like the IRS or Comptroller, so as to not allow inferior credentials that have no real oversight, like the ACAT credentials for tax preparers we uncovered in a prior post.
- Disclosure that the tax preparer is not a CPA, enrolled agent or tax attorney should be made first after the name and address information of the preparer.
We hope to have these amendments refined in the next few days and will keep you posted as things develop. We believe these are critical to accomplishing the intent of the bill and protecting the interests of CPAs.
- See the prior post on the misinformation by the Maryland Society of Accountants.
- Here is a copy of our testimony.
Oh, and by the way, the bill before ours was the Smith Island Cake Bill, or SB 287. It is very hard to compete with a eight-layer, delicious confection delivered by Mrs. Kitching from Smith Island! We would meet Mrs. Kitching and her team who testified on their bill in a coffee shop later that afternoon. I am ordering one of those cakes!