California law requires anyone who, for a fee or for other consideration, assists with or prepares tax returns for another person or who assumes final responsibility for completed work on a return and is not an exempt preparer to register as a tax preparer with the California Tax Education Council (CTEC). The California State Legislature created the CTEC to promote competent tax preparation within the state.
Who is required to register with CTEC?
Any non-exempt tax preparer in California who, for a fee or for other consideration:
- Assists with or prepares state or federal income tax returns
- Assumes final responsibility for such returns
- Offers these services
Exempt prepares not required to register with CTEC are:
- California Certified Public Accountants (CPAs)
- Enrolled agents (EAs)
- Attorneys who are members of the California State Bar
- Specified banking or trust officials
Preparing a tax return includes inputting of tax data into a computer.
How to become a registered tax preparer
To become a CTEC registered tax preparer, you must:
- Take a 60-hour qualifying education course from a CTEC approved provider within the past 18 months
- Purchase a $5,000 tax preparer bond from an insurance/surety agent
- Get a Preparer Tax Identification Number (PTIN) from the IRS
- Approved Lives Scan
- Register and pay the $33 registration fee online
Annual renewal
You must renew your registration with CTEC annually to legally prepare income tax returns. Visit CTEC for more information.
To renew your CTEC registration, you must:
- Take a minimum of 20 hours continuing education from a CTEC approved provider, which must include:
- 10 hours of federal tax law
- 3 hours of federal tax update
- 2 hours of Ethics and
- 5 hours of California tax law
- Renew your PTIN number with the IRS each year
- Maintain a $5,000 tax preparer bond
- Renew your registration and pay the $33 annual registration before October 31 of each year
- November 1 - January 15 a late fee of $55 will be assessed.
If you fail to renew by January 15, your CTEC registration will be considered expired and you will be subject to the new preparer registration requirements and enforcement penalties for not being in compliance.
| If you: | And you: | Does the state of California require CTEC registration? |
|---|---|---|
| Are an inactive CPA or are a non-California CPA | Prepare income tax returns for a fee in California | Yes, or you must resume/become an active California CPA |
| Work for an exempt tax preparer | Sign the income tax return | Yes |
| Do not sign the income tax return (exempt tax preparer is the responsible party) | No | |
| Work for a CTEC registered tax preparer | Take income tax data from a client and enter it into a computer (whether in person or other contact) | Yes |
| Have no contact with clients and perform the clerical function of inputting tax information into the computer for your employer | No | |
| Are a nonexempt tax preparer | Take income tax data from a client and enter it into a computer and/or prepare the income tax return | Yes |
| Are a nonexempt tax preparer who prepares income tax returns that are bundled or included with other services | Receive a fee for the bundle of services which include the preparation of the income tax return | Yes |
| Are an employee of a business unrelated to income tax return preparation | Prepare (or assist with preparation of) the company’s business income tax return | No |
| Compile the company’s business income tax information for submission to a paid tax preparer who will prepare the income tax return | No |
Unregistered tax preparer penalty
FTB has the authority to penalize tax preparers not registered with CTEC per R&TC § 19167(d).
Penalties are as follows:
- $2,500 for the first failure to register
- $5,000 for each subsequent failure to register
You have 90 days to comply after receiving notification of the $2,500 penality issued for your first failure to register with CTEC or not having a valid credential. The penalty will be waived if you provide proof of compliance within 90 days.
Report fraudulent tax preparers to the appropriate agency.
The penalty for any subsequent failure is waived only if the CTEC Enforcement team determines the failure is due to reasonable cause.
