What is CTEC Renewal?
If you aren’t aware of what a CTEC bond is, it is a bond specific to the state of California and is a state requirement imposed on professional tax preparers. The acronym itself stands for California Tax Education Council since this is the agency that requires professionals to obtain a $5,000 surety bond for the purpose of conducting business operations related to tax preparation within state borders. The amount of the bond itself is $5,000, but that is not the cost to a business person who must purchase the bond. Current requirements call for the following costs to tax preparation professionals:
How much does a CTEC Bond Cost?
- One year – $25
- Two years – $45
- Three years – $50
- Four years – $64
- Five years – $80
As you can see by the cost schedule above, it is more advantageous for the business person to purchase a business bond that covers a longer period of time. For example, if you were to purchase a one-year CTEC bond every year for five years, it would cost you $125, whereas if you bought a single five-year bond, the cost would be only $80, which represents a savings of $45. Learn more about California tax preparer bonding solutions.
However, there is a second component to the requirement, which is not monetary in nature but requires participation as a student of federal and state tax law. The first time that someone goes through the tax preparation course, it will be comprised of 60 instruction hours, so that any attendee becomes thoroughly versed in U.S. and California tax laws.
Professionals are required to renew CTEC every year, although renewal courses are more in the manner of refresher courses which focus on any changes to tax law which have recently been imposed. Each year, the CTEC renewal deadline is set for January 15th, and all professional tax preparers must complete their renewal prior to doing business for the coming year. We only write bonds with top-rated bonding carriers, such as Merchants Bonding Company, and CNA Surety. If you are ready to get your renew CTEC, or learn more about the ease of CTEC registration, feel free to contact us. We’re happy to help and answer any questions you may have.
Why CTEC is so Important
The reason CTEC registration and renewal are so important is that being registered and certified to conduct business in California as a tax preparer, means that the professional person has been through 60 hours of instruction about California tax preparation laws, and in most cases, one or more refresher courses as well.
Having this kind of knowledge about tax law and about how to prepare tax forms for clients, ensures that a professional person will have a thorough understanding of the law, and about what is required on all tax forms. This protects the taxpayer and reduces or eliminates the possibility of incorrect forms being prepared and submitted to the state. Invalid forms or improperly prepared forms will, at the very least, cause a delay in processing for the submitted tax form, and may even be subject to penalty.
How to Renew CTEC
The process which a tax preparer must go through each year in order to maintain certification with the state of California is fairly simple, and includes the following steps:
- find an approved CTEC instruction provider, and take at least 20 hours of tax law instruction from that provider, prior to the CTEC renewal deadline
- to renew CTEC, the 20-hour total must include at least 15 hours of material geared toward federal regulations, and 5 hours of material specific to the state of CA
- renew the preparer tax identification number with the IRS prior to CTEC registration
- make sure that your $5,000 tax preparer bond is still in effect for the coming calendar year
- renew your preparer registration, and send in a $33 registration fee to CTEC before October 31st, and if you submit your application after this date, the registration fee jumps to $55.
Consequences of not Being Bonded
If you are not bonded as a professional tax preparer (one who prepares tax forms for a fee), in California, you cannot legally conduct business within state borders. Because there would be no guarantee to clients that you have taken the approved CTEC courses of instruction, there would likewise be no guarantee that you are knowledgeable about federal and state tax regulations which must be observed in filling out tax forms.
If you do have your surety bond in a good valid state, but do not register prior to January 15th, you will be considered a NEW tax preparer, instead of having the option to renew CTEC, and that means you would be obliged to go through the full 60 hours.
Exemptions to Bonding and Registration
According to the California Tax Education Council, There are some individuals who are not required to purchase the CTEC tax preparer bond, or to register with CTEC as a professional preparer. These people would include certified public accountants (CPAs), enrolled agents (EA’s), some types of trust or banking officials, and attorneys who hold membership in the state bar of California. These persons are deemed to have the requisite knowledge of tax law and are therefore considered exempt from the requirements imposed on all other would-be professional tax preparers.
Apart from the registration requirements reviewed above, there are specific requirements necessary for the purchase of the CTEC bonds themselves. The bond itself can be applied for either by phone, fax, email, or online in many cases, as soon as you have selected an insurance company that sells CTEC bonds, and is authorized to conduct business in California. A good choice would be NFP Surety, one of the nation’s largest and most respected bonding and insurance companies.
For this type of bond, a credit check is not generally required, so there is no threshold credit score that qualifies or disqualifies your application. You will need to have the name of your surety company and the bond number itself ready to use on your annual CTEC renewal form so that it can be determined that you are legitimately bonded for business.