Delaware Gov. John Carney has signed legislation aimed at protecting the state’s taxpayers from unscrupulous tax professionals.
Accounting Today reports the legislation, called the Taxpayer Protection Act, became law this week. Among other things, it requires tax preparers in the state to include their Preparer Tax Identification Number (PTIN) whenever they file a state tax return.
The legislation allows the Delaware Department of Revenue to use the PTIN to analyze and track incompetent or fraudulent preparers. The department also has the backing of the new law to penalize bad tax preparers – and even shut down their business.
The Internal Revenue Service says most American taxpayers use a tax professional to prepare their income tax returns. However, states have been slow to enact legislation to protect taxpayers from unqualified tax preparers or ones who repeatedly submit inaccurate tax returns.
The Taxpayer Protection Act requires tax pros to sign any return or refund they file. Each violations is subject to a $50 civil penalty with a cap of $25,000 for any calendar year.
Accounting Today reports Delaware courts can now enjoin a paid tax preparer from understating taxpayer liability or taking “an unreasonable position.”
Other actions that can draw court orders under the new Act include:
- Failing to furnish a copy of a tax return (or refund claim)
- Failing to retain a copy of the return
- Failing to furnish an identifying number
- Failing to follow due diligence procedures
- Failing to correct erroneous information
- Negotiating a check without permission
- Engaging in any criminal conduct
The Act also allows a court to issue an injunction if a paid preparer guarantees payment of any specific income tax refund amount or engages in any other type of fraudulent or deceptive actions.