A bill is currently in the California legislature that would significantly increase obligations if you’re a CTEC Registered Tax Preparer (CRTP). This bill, AB1140 (authored by Assembly Member Mark Stone), would apply to CRTPs only. It would not apply to a much larger portion of the tax preparation community that includes: Certified Public Accounts (CPAs); Enrolled Agents (EAs); and
attorneys. This bill, if passed in its current form, would require CRTPs to provide clients and potential clients with two disclosures, one before preparing the tax return and one after preparing the tax return.

Notice Before: A written notice would be required before preparing a potential client’s return that includes all of the following information:

• A standardized disclosure statement informing a potential client with income below sixty-six thousand dollars ($66,000) that they may be eligible for free online tax preparation services, and that an individual with income below fifty-six thousand dollars ($56,000) may be eligible for free in-person tax preparation services through the IRS’s Volunteer Income Tax Assistance (VITA) program. The statement shall also identify the IRS’s internet websites where an individual may find additional information on each program and the Franchise Tax Board’s CalFile internet website.
• A list of costs and fees charged by the CRTP for usual and customary tax preparation services, including, but not limited to, California Form 3514 and federal Schedule EIC (Form 1040).
• The CRTP’s federal PTIN number.

Notice After: After completing a tax return, a CRTP would be required to provide a written disclosure signed and dated by the CRTP including:

• The total cost charged by the tax preparer
• The CRTP’s contact information and federal preparer number (PTIN)
• Whether others were involved in preparing the return, their names, contact information and PTINs

Both statements must be signed and dated by the client and retained by the CRTP for a minimum period of three years.

A CRTP who violates these provisions more than once will be subject to a $750 penalty issued by the California Franchise Tax Board.

The full text of the bill can be found here: AB-1140 Tax Preparers - Disclosures

If you have concerns about this legislation, please contact your local representative and let your voice be heard. You can find your representative, or contact Assembly Member Mark Stone’s Office, as Mr. Stone is the legislator carrying this bill.

His office can be reached here:

Your popular 2019 tax return questions answered!

Preparing your clients’ tax returns is like completing a puzzle. There are a bunch of different pieces that fit together to make a complete picture, but it’s up to you to figure out how. Each puzzle has a varying degree of complication, just like your clients’ returns. Your time is money, so relying on our tax research experts to help you with your complicated puzzles is a smart financial decision.

Our team is working longer hours to help you get through tax season.

February
Monday - Wednesday, 8:00 a.m. to 6:00 p.m. CST
Thursday - Friday, 8:00 a.m. to 5:00 p.m. CST

March 2 - March 28
Monday - Wednesday, 8:00 a.m. to 6:00 p.m. CST
Thursday - Friday, 8:00 a.m. to 5:00 p.m. CST
Saturday, 9:00 a.m. to 1:00 p.m. CST

March 30 - April 15
Monday - Friday, 8:00 a.m. to 6:00 p.m. CST
Saturday, 9:00 a.m. to 1:00 p.m. CST

---

Here are some examples of the questions and answers our team worked on so far this tax season:

Question: My client has a child who is 22 and at least a half-time student, according to the 1098-T. The child made $20,000 last year. Can the child claim the education credit?
Answer: Yes, the child can claim education credit if the parents don’t claim the child as a dependent. However, the child is not entitled to the refundable American opportunity tax credit if the child meets certain conditions:

1. The child was under age 18 at the end of 2019; age 18 at the end of 2019 and their earned income; was less than one-half of their support; or over age 18 and under age 24 at the end of 2019, a full-time student and their earned income was less than one-half of their support.
2. At least one of the child’s parents was alive at the end of 2019.
3. The child is not filing a joint return for 2019.

Question: My client put a new roof on their commercial building. Is this eligible for §179 deduction or bonus depreciation?
Answer: The Tax Cuts and Jobs Act expanded the definition of qualifying real property for §179 to include the cost of a roof on non-residential real property. The expense is not eligible for bonus however because the class life of the roof (39 years) is not 20 years or less.

Question: A person, age 19, is sentenced to prison for a couple years. Their income consisted of wages of a few hundred dollars. Can that person’s parents claim their child as their dependent for 2019 and during their child’s term in prison? Is prison a temporary absent? Is the child considered being supported by the government?
Answer: This is assuming the child was not a full-time student for five months in 2019, therefore we look to the rules of qualifying relative (rather than qualifying child). The regulations allow for a temporary absence in cases such as this, but a qualifying relative does not need to meet the test of living with the taxpayer for over half the year. The issue lies in the support test for a qualifying relative; parents would need to provide over 50% of his support (versus a qualifying child cannot provide over 50% of their support). Regulations explain “except as provided in paragraph (a)(3)(iii) of this section, governmental payments and subsidies for an item of support are support provided by a third party, the government” [Prop. Reg. 1.152-4(a)(3)(i)(A)]. This particular government expenditure is not listed as an exception so it would be provided by the government. Therefore, he is considered being supported by the government.

Please be advised, these answers are not to be applied to other individual tax situations. NATP’s researchers explain answers for specific tax situations that vary for each question. For accurate help with your clients’ unique returns, contact the NATP research team at 800-558-3402, ext. 2, or submit your question online.

---

Professional level membership includes one free question and Premium level membership includes five for free. Basic members receive a discount on the nonmember question rate.

With so many resources to help you find answers to the complex questions you face when preparing your clients’ returns, now is a great time to be a tax professional. Long gone are the days of waiting for an answer from the IRS. In fact, one of the tools our members love most allows them to do their own research and get answers to tricky tax questions in seconds.

TheTaxBook WebLibrary Plus online research tool is available to Professional level NATP members for only $65 and it is included with Premium level membership. This tool saves tax preparers on average 10 to 15 minutes per question versus researching on their own.

Don’t just take our word for it though, hear what Jacob from TheTaxBook has to say about the best features of this industry-favorite tool.