New Iowa law sets state oversight of tax preparers

Michael Bergan

Michael Bergan R-Dorchester

With Gov. Kim Reynolds’ signature Thursday, a new law will require any non-credentialed people paid to prepare more than 10 tax returns each year to include their federal preparer tax identification number on each return, starting in 2020.

Right now there are 754,500 people nationwide with current preparer ID numbers, according to the Internal Revenue Service. Of that total, 459,767, or 61 percent of the tax preparers do not have professional credentials, such as a certified public accountant license or a law degree.

With the IDs on the returns, officials with the Iowa Department of Revenue can seek to stop any identified bad actors from continuing work through court injunctions.

Tax preparers who do not include their preparer ID number on returns will be subject to a $50 civil penalty per violation, up to $25,000 in a calendar year.

An injunction could be triggered by a tax preparer’s “willful or reckless understatement” of how much a taxpayer owes, negotiating on behalf of a taxpayer without that person’s permission or engaging in other “fraudulent or deceptive” conduct, the law reads.

In addition, the new law requires tax prepares to complete at least 15 hours of continuing education annually through an IRS-approved provider, including two hours on professional ethics, beginning in 2020.

Iowa state Rep. Michael Bergan, R-Dorchester, who served as bill manager, said most tax preparers are diligent in providing quality services, but some are “unethical or incompetent.”


“This new law will better protect taxpayers by strengthening the state’s ability to detect and stop abuse while ensuring all preparers are up to date on changes to the tax code,” Bergan said in an email. “By holding tax preparers to higher standards of integrity, ethics and education, this legislation will protect Iowa taxpayers during the tax season and beyond.”

Lawmakers in eight other states — Alabama, Delaware, Illinois, Indiana, Louisiana, Maryland, Minnesota and Virginia — already have enacted similar legislation, and with additional bills under consideration in Michigan and Missouri.

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