March 3, 2014
Albany, NY

Governor Cuomo Announces New Regulations to Protect Consumers Who Hire Tax Preparers

Governor Cuomo Announces New Regulations to Protect Consumers Who Hire Tax Preparers

Governor Andrew M. Cuomo today announced historic new regulations that will better protect New York consumers who hire a tax preparer. The regulations make New York one of only four states that regulate the tax preparer industry.

The comprehensive rules - covering 40,000 paid tax preparers throughout the state - will reduce errors and omissions on tax returns, reduce fraud and increase the level of competence and ethics among preparers.

"With 70% of New York taxpayers depending on a tax preparer to file their taxes, we need to ensure clear standards exist to prevent fraud and protect consumers, Governor Cuomo said. These new regulations will better protect New Yorkers who use tax preparers by requiring minimum qualifications and professional practices within the industry. In addition to these changes, I urge those putting their trust in a preparer to also do their homework: check the internet, get a referral, and make sure the person you hire is legally registered with the State Tax Department.

Preparer scams to avoid

Governor Cuomo warned New Yorkers to be on guard for unethical actions by tax preparers, such as:

  • Advertising or promising in-person to do an income tax return for a low price, but then billing the client for a much higher fee, arguing the return was more complicated than originally anticipated.
  • Convincing a client to have their refund deposited into the preparers account instead of the clients, and then the preparer covertly steals a portion of the refund.
  • High-interest loans often with unclear terms - offered by preparers prior to refunds being received.

Taxpayers should also avoid hiring tax preparers who offer to use illegal means to increase the amount of a refund.

What unsuspecting taxpayers dont realize when they agree to file false information on a return, is that they, in the end, will end up paying perhaps steeply - for these fraudulent filings, warned Commissioner of Taxation and Finance Thomas H. Mattox. They are paying hard-earned money for advice that jeopardizes their future financial stability.

Identifying and stopping fraud

The Tax Department continually investigates and arrests preparers for criminal activity. In addition, a new Fraud Analysis and Selection Team (FAST) detects large-scale tax preparer schemes. In just the past year alone, FAST has identified and stopped more than $26 million in improper refund payments.

Recent examples of tax preparer arrests include:

New York's first tax preparer regulations

Since 2011, the majority of tax preparers have been required to register annually with the Tax Department. Building on the registration, for the first time in New York State, most individuals who are paid to prepare at least ten New York State tax returns in a year will be required to:

  • Pass a State competency examination
  • Be at least 18 years of age and be a high school graduate, or possess the equivalent of a high school degree
  • Meet applicable IRS requirements
  • Take four hours of annual continuing education
  • Beginning tax return preparers (with less than three years of experience preparing New York State tax returns) must take a 16-hour basic tax course

Violation of the new standards could result in a range of disciplinary actions, from remedial education to suspension or cancellation of a preparers registration.

Attorneys, certified public accountants, public accountants and enrolled agents are exempt from the regulations, but are required to meet specific professional standards set forth by their licensing agencies - and may be subject to formal sanctioning if they fail to meet those standards - as part of their professional certification.

For more informationFact Sheet: New Yorks First Tax Preparer RegulationsAware of illegal or improper conduct by a tax preparer?

Call 518-530-HELP, or File a complaint online

Considering hiring a tax preparer?Confirm that he or she is registered

Consider free tax preparation optionsFind an IRS-certified volunteer site (income max = $52,000)Visit an AARP Tax-Aide site (no income limit)

Read the Consumer Bill of Rights