Tax Preparer Bonds

What is a tax preparer bond?

Bonds for tax preparers are enforceable contracts between three parties: non-exempt tax preparers, the state agency in charge of tax preparer registration and licensing, and a surety firm.

The Obligee is the state regulatory body, and it sets the requirements that the Principal (the tax preparer) must adhere to. The bond ensuring the tax preparer's performance is issued by the surety business. Only California and Nevada will require surety bonds for tax preparers as of 2021.

What is the purpose of a tax preparer bond?

Before non-exempt tax preparers can be licensed to work on clients' tax returns, the California Tax Education Council (CTEC) and Nevada Secretary of State both require tax preparer bonds. These are those preparers who are qualified but lack a CPA or EA license. Since they already go through a rigorous licensing process and are answerable to the Internal Revenue Service, Certified Public Accountants (CPAs) and Enrolled Agents (EAs) are exempt from posting a tax preparer bond requirements (IRS).

In the event of fraud, misrepresentation, theft, or negligence on the part of the tax preparation, tax preparer bonds offer protection to the preparer's clients. When the surety firm gives the bond, it is giving the state agency a promise that any financial damages suffered by clients of a registered tax preparer as a result of a breach of the laws and rules outlined by the license would be compensated.

The surety will compensate bond holders up to the bond amount if the tax preparer breaches the state agency's requirements. The preparer is responsible for the losses and is legally obligated to pay back any damages that were paid by the surety firm in accordance with the bond.

What is the cost of a tax preparer bond?

The price of a surety bond for a tax preparer varies according on the total bond amount and premium rate. The surety firm calculates the premium rate, which is the proportion of the entire bond amount paid as the premium, and the state agency sets the necessary bond amount.

A credit check is necessary for tax preparer bonds in the state of Nevada. Although applicants with good credit typically pay the lowest rates, having bad credit won't stop you from getting a surety bond for a car dealer. Even those with poor credit ratings or other financial difficulties can still get affordable rates with EZSurety.

In the State of California, tax preparer bonds are often provided without a credit check; nevertheless, the surety firm choose how to underwrite the bond.

California offers premiums as low as $25.

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