Tax Preparer Bonds: How to Obtain a California Tax Preparer Bond

w w w . 1 0 4 0 T a x S c h o o l . c o m

2013

Tax Preparer Bonds

How to Apply for a

California Tax Preparer Bond Charles Davidson

ACCELERATED TAX SYSTEMS

© 2013 Accelerated Tax Systems i www.1040TaxSchool.com

Tax Preparer Bonds:

How to Apply for a California Tax Preparer Bond

Written by Charles Davidson Published by Accelerated Tax Systems

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Tax Preparer Bonds: How to Apply for a Tax Preparer Bond

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© 2013 Accelerated Tax Systems iv www.TaxBusinessAdvisor.com

ABOUT CHARLES H. DAVIDSON

Charles H. Davidson is a California Registered Tax Preparer

(CRTP) and a Registered Tax Return Preparer (RTRP). He is

the owner of Accelerated Tax Systems, a private company

that specializes in providing educational programs,

products, and services to the tax industry. Accelerated

Education Systems is approved by the California Tax

Education Council and the Internal Revenue Service to offer

educational programs to Enrolled Agents (EAs), Registered

Tax Return Preparers (RTRPs), and California Registered Tax

Preparers (CRTPs).

Charles holds a Master of Science degree in Higher Education from Drexel University

(2013) and a Bachelor of Arts (with distinction) from Simpson University (2003). He will

complete a Doctorate in Educational Leadership and Management from Drexel

University in 2015.

With over 10 years of experience in the tax industry, Charles is an expert in tax office

operations and consults with tax professionals who are focused on starting or growing a

tax practice. During his time in the tax industry he has worked with national tax

franchises, including H & R Block and Jackson Hewitt Tax Service, as well as small,

independent tax preparation firms. Through his tax education and training programs,

he has helped over 300 students begin a professional career in the tax industry.

From 2007 to 2009, Charles served on the Taxpayer Advocacy Panel (TAP), a federal

advisory committee with a goal of recommending improvements to IRS customer

service and programs. Appointed by Secretary of the Treasury Henry Paulson, he served

as a representative for taxpayers in California, Nevada, Alaska, and Hawaii. He was

instrumental in bringing grassroots issues to the attention of the IRS. During his time on

the panel, he served on the Small Business / Self-Employed (SB/SE) and Volunteer

Income Tax Assistance (VITA) committees, working closely with IRS program directors in

Washington, D.C.

As National Chair of the TAP, Charles met with IRS Commissioner Douglas Shulman and

National Taxpayer Advocate Nina Olson to present the TAP Annual Report and discuss

issues of concern to taxpayers. He co-authored the panel’s recommendation for

nationwide tax preparer regulation. Charles also appeared before the President’s

Economic Recovery Advisory Board to outline the panel’s recommendations for changes

to be included in President Obama’s tax reform agenda.


© 2013 Accelerated Tax Systems v www.TaxBusinessAdvisor.com

In addition to his work in the tax industry, Charles has held positions in business

education including community training, educational administration, technical writing,

and public speaking. He has given CPE-qualified presentations to local and statewide

professional organizations including the California Society for Enrolled Agents (CSEA).

He regularly appears on news programs and writes for several online blogs and websites

where he shares his expertise on tax issues.

Charles Davidson is available as a speaker or business consultant. Contact him by email

at [email protected] or by phone at 916-717-6454.

ABOUT ACCELERATED TAX SYSTEMS Accelerated Tax Systems provides the training, products, services, and resources that

tax professionals need to start and grow a thriving tax practice. The company has built

its service model around the Five Principles of a Successful Tax Practice: regulatory

compliance; effective business models, leveraging technology, operations management,

and practice development.

Located in Sacramento, California, Accelerated Tax Systems is approved by the Internal

Revenue Service and the California Tax Education Council to offer tax education

programs for Registered Tax Return Preparers (RTRPs), Enrolled Agents (EAs), and

California Registered Tax Preparers (CRTPs).

The Accelerated Tax System network includes the following websites and products:

www.AcceleratedTaxSystems.com

www.TaxBusinessDirect.com

www.TaxBusinessAdvisor.com

www.TaxBusinessExpert.com

www.1040taxschool.com

mailto:[email protected]

http://www.acceleratedtaxsystems.com/

http://www.taxbusinessdirect.com/

http://www.taxbusinessadvisor.com/

http://www.taxbusinessexpert.com/

http://www.1040taxschool.com/


© 2013 Accelerated Tax Systems vi www.TaxBusinessAdvisor.com

TABLE OF CONTENTS Tax Preparer Regulation In California ..................................................................... 1

How a Bond Works ................................................................................................. 2

Bond Requirements ................................................................................................ 3

When to Apply for a Bond ...................................................................................... 3

Finding a Good Bond Company .............................................................................. 3

SimpleBond.com ..................................................................................................... 4

SimpleBond.com Tutorial........................................................................................ 5

Visit the SimpleBond.com Website .................................................................... 5

Select Your State ................................................................................................ 6

Bond Type .......................................................................................................... 6

Bond Term .......................................................................................................... 7

Name and Contact Information ......................................................................... 7

Reference Code and Effective Date ................................................................... 9

Billing Options .................................................................................................. 10

Credit Card Information ................................................................................... 10

Receiving Your Bond ........................................................................................ 11

Need Help? ............................................................................................................ 12

© 2013 Accelerated Tax Systems 1 www.TaxBusinessAdvisor.con

TAX PREPARER BONDS HOW TO APPLY FOR A TAX PREPARER BOND

TAX PREPARER REGULATION IN CALIFORNIA The tax preparation industry in California is regulated by the California Tax

Education Council (CTEC). CTEC sets the educational and professional

requirements that each tax preparer in the state must follow.

Tax professionals who complete the requirements to become a tax preparer in

California earn the right to use the California Tax Return Preparer (CRTP)

designation.

In order to become a tax preparer in California, you must complete the following

four steps:

Complete a 60-hour qualifying education course offered by a CTEC-

approved educational provider;

Obtain a Preparer Tax Identification Number (PTIN) from the Internal

Revenue Service;

Obtain a $5,000 tax preparer surety bond; and

Register with the California Tax Education Council.

Tax preparers must renew their registration every year which includes

completing 20 hours of continuing education and maintaining a valid PTIN and

bond.

This special report provides an overview of the bond requirements for California

as well as a detailed, step-by-step tutorial to assist you in applying for a tax

preparer bond.

More detail about the requirements to become a California Registered Tax

Preparer can be found at our website www.taxbusinessadvisor.com.

http://www.taxbusinessadvisor.com/


© 2013 Accelerated Tax Systems 2 www.TaxBusinessAdvisor.com

HOW A BOND WORKS Before you apply for a tax preparer bond, you should have a basic understanding

of how the bond works. A surety bond protects the client against “damaged by

any fraud, dishonesty, misstatement, misrepresentation, deceit, or any unlawful

acts or omissions by the tax preparer” (California Business and Professions Code,

Section 22250 (b)). Tax preparers in the state of California are required to

maintain a surety bond in the amount of $5,000 at all times.

Many tax preparers falsely believe that a bond is like an insurance policy; if

there’s a claim against the tax preparer, the insurance company pays a

settlement. Rather, a bond is a promise to pay in the event a client files a claim

resulting from negligence, fraud, or other unlawful acts as described by law.

When a claim is made on a tax preparer bond, the insurance company pays the

claim amount up to the $5,000 amount posted. Unlike an insurance policy,

however, the tax preparer is liable for the amount paid. The tax preparer must

pay the amount to the insurance company or face fines or a possible law suit.

It’s important to remember: a tax preparer bond does not protect the tax

preparer; it protects the client.

As a tax preparer, you may want to purchase a

special type of insurance to protect yourself

against clients who may want to take you to

court. Errors and Omissions (E & O) insurance

protects the tax preparer if a client sues due to

a mistake or negligence.

Any claim against your bond is a serious matter. Failure to respond to inquiries

about a claim or to pay the amount required as a result of a claim could

jeopardize your bond and your career. It could also result in costly legal action.

Although claims against a tax preparer bond are rare, it’s important that you

take any claims against your bond seriously and deal with the matter promptly

so you don’t compound the problem.



BOND REQUIREMENTS Tax professionals in California are required to maintain a tax preparer surety

bond in the amount of $5,000. Bond information must be submitted with your

application to become a CTRP.

Fortunately, bonds are easy to obtain and most can be purchased under $100

from an insurance agent who specializes in these kinds of bonds.

A bond may be valid for a period of time ranging from one year to five years. It’s

usually more cost-effective to purchase a bond for the longest period of time

allowed by the insurance company. The difference between one and two years

is negligible. A four-year bond usually costs about $95 while a one-year bond

costs $55. Buying a four-year bond instead of renewing a one-year bond every

year results in a total savings of $125.

WHEN TO APPLY FOR A BOND While you must have your bond before you register with CTEC, you can apply at

any time. You don’t have to wait until you finish your tax education course to

apply for a bond. We recommend you apply for a bond shortly before you

complete your course so that you have all of your information handy when you

are ready to register.

FINDING A GOOD BOND COMPANY You’ll want to find a company that specializes in these kinds of bonds. While

most insurance agents can help you, many will not be familiar with a tax

preparer surety bond. It’s not a bad idea to check with your insurance agent,

especially if you can get a good deal but be prepared to look for a specialized

bond company to avoid problems in the long run.

There are a lot of companies that offer tax preparer bonds. Although many

companies provide similar services, there are major differences including:

Wide variety of prices. Prices for a bond range from $50 to $125. Be

sure to compare bond terms when looking at prices.



Limited bond terms. Some companies only provide bonds for one or two

years. Try to find the longest possible term for the least amount of

money.

Payment terms. Mailing a check to your bond company can take extra

time to process your bond. Look for a company that accepts major credit

cards. Online processing is even better.

Delivery time. Many companies prepare bonds in their office and mail

them to you. It can take a week or more to get your bond. Try to find a

company with same-day service.

Credit checks. Some companies may require a credit check before

issuing a bond. If you are denied a bond due to credit worthiness, you’ll

need to look for another bond company.

SIMPLEBOND.COM At Accelerated Education Systems, we are committed to providing you with the

best products and services you need to succeed with your tax practice. For that

reason, we’ve partnered with SimpleBond.com, an online company that provides

California tax preparer bonds at a reasonable price. They do not require a credit

check and, if you purchase your bond online, you will receive your bond

information as soon as you complete your payment.

Our partnership with SimpleBond.com provides our clients with many

advantages:

Low premiums

Bond terms from one year to four years

Most credit cards accepted

Instant approval

Same day service

No credit checks required

We encourage you to try SimpleBond.com. The rest of this special report will

walk you through the steps to apply for a bond with SimpleBond.com.



SIMPLEBOND.COM TUTORIAL Applying for a bond with SimpleBond.com is easy and fast. Just follow the steps

below to apply for a bond. If you pay using a credit card online, you will receive

your bond information once your payment clears.

Follow these steps to apply for a bond from SimpleBond:

1. Visit the SimpleBond.com website

2. Select your state

3. Select the type of bond you wish to purchase

4. Select the term of your bond

5. Enter your contact information

6. Enter AES as your Reference Code

7. Enter your bond effective date

Each of the steps is presented below in more detail.

VISIT THE SIMPLEBOND .COM WEBSITE

Visit www.simplebond.com and click on the Buy Bonds link to get started.

http://www.simplebond.com/



SELECT YOUR STATE

On the following screen select the state in which you reside. In this case, select

California.

BOND TYPE

Apply for a Tax Preparer Bond. This is the bond required by CTEC.

Caution: You may wish to apply for Errors and Omissions insurance at a later

time. For now, make sure you apply for a Tax Preparer Bond.



BOND TERM

On the following screen, select the term of the bond. In order to register with

CTEC, you must obtain a $5,000 tax preparer bond.

The length of the term does not matter as long as you are covered for the year in

which you prepare taxes. The annual price of a bond is less expensive when you

purchase a multiple-year bond.

Once you have selected the term of your bond, click Continue.

NAME AND CONTACT INFORMATION

On the following screen enter your name as it should appear on the bond.

Enter your contact information.

Note: Be sure to enter a valid email address. Once you have completed your

bond application, a copy of your bond will be sent to your email address.

When you are finished entering in your contact information, click Continue.



On the following screen, enter your mailing address and physical address. Click

Continue when you are finished entering your information.



REFERENCE CODE AND EFFECTIVE DATE

Important: On the following screen, enter AES as the Reference Code. This

identifies you as a client of Accelerated Tax Systems.

Enter the date you would like the bond to become effective. You may enter the

current date or a future date (such as January 1).

Note: Don’t backdate your bond unless you have a very good reason. For

example, your previous bond has expired and you don’t want a lapse in

coverage.

Enter any additional comments you may have and click Continue.



BILLING OPTIONS

Select your billing option. You can choose to pay with a credit card or you can

have an agent from SimpleBond contact you to discuss billing options. Click

Continue when you have made your choice.

Note: If you pay with a credit card, you will receive your bond immediately after

you submit your application.

CREDIT CARD INFORMATION

Enter your credit card information and billing address. Click Continue to submit

your application.



RECEIVING YOUR BOND

Your bond will be emailed to the address you provided. You will not receive a

hard copy of your bond in the mail.

Print a copy of your bond for safekeeping.

FIGURE 1. SAMPLE BOND



NEED HELP? Accelerated Tax Systems is a full-service company that assists tax professionals

with starting and growing their tax practice.

Want it done for you? We can apply for your bond and assist you with

completing any other state or federal applications required to start your tax

practice. Simply give us a call at 916-717-6454 or visit us at

www.taxbusinessdirect.com.

http://www.taxbusinessdirect.com/