Can I do others' taxes, for a fee, legally?

I know a lot of people who don’t need to do anything more than a simple 1040 yet they pay H&R block 75 bucks or something like that to do their taxes for them.

Am I legally allowed to offer my own services in this regard, having no certified training in tax law, accounting, or anything in that area?

(BTW I feel like I asked this question once before, but can’t remember what the answer was, and can’t find the thread, so it may not have actually happened.)

Don’t take my advice as determinative by any means, but my wife recently took a course on income tax, and was told that there was a test that the IRS was making available for folks who wanted to do taxes for others for pay, and the IRS was successfully challenged in court by folks who wanted to do others’ taxes without taking the test first.

The IRS site indicates that you must have a Preparer Tax Identification Number (PTIN) to prepare returns for pay.

You can obtain a PTIN by providing some basic information and paying a fee of $64.25.

A PTIN is required, but the Registered Tax Return Preparer progam (and the testing that was proposed) is NOT. The courts have ruled that the IRS can’t enforce it. The current status is that the RTRP designation is optional.

Some states have requirements. I think CA, OR and NY all do.

The only federal requirements are procedural and ethical -sign any return you prepare, keep necessary documentation, comply with Circular 230, etc.

There are some requirements if you want an EFIN, which is necessary to e-file a return. Part of that process is an FBI background check.

This is one reason that the consumer needs to be very, very careful about who they engage to prepare taxes for them. I won’t say that you get what you pay for, but if you don’t see credentials like an EA or CPA, you’re relying entirely on the word of the preparer that they know what they’re doing. Even at a firm like H&R Block, pay attention to the preparer. There are people at HRB with decades of experience who know their stuff… and then there’s the minimum wage newbie with 15 hours of training and the cockiness that comes from not knowing how much you don’t know.

I have a PTIN. I’ve never paid a fee - I don’t know if it was paid for me.

California needs a CTEC certification or higher*. Many states don’t ask for anything similar. I don’t know about those other two except that Multnomah County (Portland) and NYC have their own local taxes which are tricky. With H&R Block et al., you also have recourse if they screw up, as well as add on protection for certain faults on your behalf (nothing illegal). Bob’s Backalley Tax won’t do this, if you can even find him again.

*EA/CPA/or apparently certain attorneys. All these require substantial training or tests.

So the real question is: if the freelance prepared makes a mistake, is s/he prepared to deal with the consequences, legal or civil?

I wouldn’t put much credibility in H&R Block’s guarantee. They’ll fall back on the argument that they were given incorrect or incomplete information and then you have to prove that they had the right info and did something wrong with it. So really it’s just a guarantee against typos, because you’re not going to prove anything else.

The reality is that tax preparers have extremely limited liability. Most of their liability is related to document retention, EITC due diligence and disclosure of uncertain tax positions. As long as they recorded what they were given by the client, it’s pretty much the client’s problem if the return is wrong. Heck, even if the preparer is convicted of outright tax fraud, the taxpayer is still liable for their own tax and interest.

No it doesn’t and isn’t supposed to cover things the client didn’t mention. The base coverage is pretty much the minimum that everyone offers. Then the client should pay their own if they didn’t bother reading it right there, if not soon after they get home. It’s been awhile, but the extra thing H&R sells does cover taxes owed beyond what’s normally covered by any preparer, but of course its usage is so rare that it’s worth it to them to offer it and collect money from those who don’t use it.

In certain branches, EITC is involved in most of the returns and the majority of the goal/work, as in that’s where the great majority of the refund comes from. Back when SSNs were harder to check, there were many fraudulent tax places who would make claims on children that weren’t eligible (I’m not sure if EITC existed or if it was just child tax credit claims). Checking that is much stricter today (“Uniform Definition of a Child”).

Generally this will depend on where you live. Two things to keep in mind:

  1. It is illegal not to pay income tax on your income so you’d need to register to earn income (in Australia you would simply set up a “business” by applying for an Australian Business Number)
  2. It would be ludicrous to do this without having insurance because if you get sued by someone it might cost you a lot of money! (to get insurance you may need qualifications)

Before you do that, you should consider your liability in doing someone else’s taxes without the certification. If you are good at this and serious, then get the certification, because the worst case is that you will learn something and won’t have to answer that embarrassing questions about your lack of credentials. In other words, it doesn’t pay to put a lot of effort into skirting an important issue like this.

Have you renewed your PTIN on-line each year since you got it?

No, I don’t do taxes currently. I just honestly didn’t know there any fee associated, although it’s been long enough that I might’ve forgotten if it was paid on my behalf.