Taxpayer Protection Act Signed into Law to Protect Taxpayers from Incompetent Tax Return Preparers

According to the IRS, about 60% of taxpayers use professionals, such as Certified Public Accountants, to prepare their annual income tax returns.  However, there are very few laws currently in place to protect taxpayers from deceitful preparers who are knowingly unqualified and repeatedly submit incorrect tax returns on a taxpayer’s behalf.  Until now, it has largely been up to the taxpayers themselves to do their own due diligence to ensure their tax return preparer is doing the right thing.

On August 27, 2018, Delaware Governor John Carney signed a law aimed at protecting taxpayers from dishonest and incompetent tax preparers. The law will require all tax preparers in Delaware to provide their Preparer Tax Identification Number, or PTIN, when filing a state tax return. This measure will allow the Delaware Department of Revenue to investigate and track both inept and/or fraudulent tax preparers whilst giving them the power to charge and shut down such businesses.

With Delaware’s Taxpayer Protection Act (the “Act”), paid tax preparers will be required to sign any tax return or refund claim they file, making them subject to a $50 penalty for any violation, with a maximum penalty of $25,000 in any given calendar year. It will also prohibit any tax preparer from understating a taxpayer’s liability by taking an unreasonable position. The Act allows a court to enjoin a paid tax preparer from the following:

  1. Failing to provide a copy of a tax return or claim for refund to the taxpayer;
  2. Failing to sign a return or claim for refund, failing to furnish an identifying number;
  3. Failing to retain a copy of the return filing; and,
  4. Failing to act diligently or failing to correct information.

It also allows for a court injunction if the preparer negotiates a check without permission, engages in any criminal conduct, guarantees payment of any specific tax refund amount, or engages in any other fraudulent or deceptive conduct.

In January of 2018, we published our post Ten Tips for Choosing a Tax Preparer.  We encourage everyone to continue to do their due diligence before choosing a tax preparer.

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CONTACTING CAROPRESE & COMPANY

This publication is provided by Caroprese & Company as a service to its clients and colleagues.  The information and content included in this publication should not be construed as technical advice.  Questions regarding any matters discussed in this publication should be directed to Brandon Caroprese whose contact information is listed below:

Brandon Caroprese, CPA, MST

Tel. (201)-591-1783

Email. bcaroprese@caroprese.co

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