Delaware Governor John Carney signed a law to protect taxpayers from unscrupulous tax preparers.
The Taxpayer Protection Act, which Carney signed into law on Tuesday, aims to protect Delaware taxpayers and their tax returns by giving the state the resources to identify and stop bad tax preparers. The new law requires tax preparers in Delaware to include their Preparer Tax Identification Number, or PTIN, when filing a state tax return. The Delaware Department of Revenue will be able to use the number to better analyze and track incompetent or fraudulent preparers while giving the tax department the power to enjoin bad tax preparers and shut down their business.
Approximately 60 percent of taxpayers use paid tax professionals to prepare their returns, according to the IRS, but there are relatively few laws in place at the state level to protect taxpayers from tax preparers who are known to be unqualified and repeatedly submit incorrect tax returns.
H&R Block was one of the supporters of the bill. The tax prep chain issued a statement praising Delaware’s governor and the state lawmaker who introduced the legislation. The company also plans to push for follow-up legislation mandating “Taxpayer Service Standards.”
“H&R Block applauds Governor John Carney and Representative Trey Paradee for their leadership on the Taxpayer Protection Act,” said a statement from Block. “For many families in Delaware and across the country, the tax event is the largest and most important financial transaction of the year. This important new law is a good first step that will help protect Delaware taxpayers by giving the state the ability to stop identified bad preparers. We look forward to continuing to work with the governor and legislature to prevent incompetent and/or unscrupulous preparers from entering the market by enacting Taxpayer Service Standards.”
The Taxpayer Protection Act requires paid tax preparers to sign any tax return or refund they file and be subject to a $50 civil penalty for any violation, with a maximum penalty of $25,000 in any calendar year. The law also allows a court to enjoin any paid tax preparer from understating a taxpayer’s liability or taking an unreasonable position. The Act also permits a court to enjoin a paid preparer from failing to furnish a copy of a tax return or claim for refund, failing to sign a return or claim for refund, failing to furnish an identifying number, failing to retain a copy of the return, failing to be diligent or failing to correct information. It also allows for an injunction if the preparer negotiates a check without permission, engages in any criminal conduct, guarantees payment of any specific tax refund amount, or engages in any other fraudulent or deceptive conduct.
“The vast majority of paid tax preparers can take pride in their work to ensure that clients pay no more and no less tax than is due by law,” said Delaware Department of Finance Secretary Rick Geisenberger in a statement. “Unfortunately, some abuse this privilege. This new law increases taxpayer protection by ensuring that paid tax preparers are held to the highest standards of integrity and ethics, and bolstering the tools available to the Division of Revenue to detect and stop patterns of abuse by certain paid tax preparers that understate a taxpayer’s liability by taking unreasonable positions or engaging in reckless conduct.”