SF5261

Purpose

This bill adds stronger rules for tax preparers in Minnesota. It aims to prevent tax preparers from marking a tax return to make a contribution to the state elections campaign account without the taxpayer’s explicit instruction. It also updates standards of conduct for tax preparers to protect clients’ rights and information.

Main Provisions

• Prohibition on Contributions Without Instruction

  • Tax returns cannot be marked to designate a contribution to the state elections campaign account unless the taxpayer directly and explicitly instructs the preparer.

• Expanded Standards of Conduct for Tax Preparers

  • Preparers must:
  • Complete a client’s return promptly and diligently.
  • Obtain the client’s signature on the return or any authorization document that has blanks only after it has been signed.
  • Sign the client’s return when the preparer has been paid for services.
  • Provide the client’s tax identification number on the return when required.
  • Give the client a copy of any document requiring the client’s signature within a reasonable time.
  • Keep copies of the client’s return for at least four years.
  • Maintain a confidential relationship with current and former clients.
  • Use commercially reasonable safeguards to protect a client’s nonpublic personal information.
  • Avoid false, deceptive, or misleading statements about tax preparation services.
  • Not require the client to take out a loan to complete the return.
  • Not claim credits or deductions the client does not qualify for.
  • Not report inaccurate household income on a claim filed under Chapter 290A.
  • Not engage in conduct that could incur penalties under specific state law.
  • Follow Minnesota Rules, including parts that address standards of conduct, and avoid incompetent or disreputable behavior.
  • Not charge or accept a fee based on a percentage of an anticipated refund.
  • Not withhold or fail to return a client’s document used for preparing the return.
  • Not take control of a client’s refund or department payment, including manipulating direct deposits or using the preparer’s own account, unless the client’s name appears on the account.
  • Always act in the client’s best interests and safeguard any money handled for the client.
  • Disclose all material facts the preparer knows that could affect the client’s rights or interests.
  • Comply with related laws, such as section 332.37.
  • Avoid including certain problematic clauses in documents, such as hold harmless clauses, confessions of judgment, powers of attorney to confess judgment, waivers of rights, or other agreements that limit the client’s rights.
  • If offering a refund anticipation loan, provide all required Truth in Lending Act disclosures in a form the client can keep.
  • The bill also reiterates that a tax preparer must not mark a return to designate a political contribution without explicit client instruction (as noted above).

• Prohibited Practices and Disclosures

  • Prohibits certain aggressive or deceptive practices and requires clear disclosures, especially around loans and refunds.
  • Requires certain disclosures when a refund anticipation loan is involved.

Significant Changes to Existing Law

• Replaces or strengthens existing “standards of conduct” for tax preparers by listing explicit duties and prohibitions.
• Adds a clear prohibition on designating political contributions on tax returns without explicit client instruction.
• Tightens rules on handling refunds, direct deposits, and ownership/control of client refunds.
• Expands requirements around record retention (minimum four years), confidentiality, and safeguarding client information.
• Introduces or tightens penalties references under specific sections for violations.

Compliance and Implications

• For tax preparers: Must follow a detailed list of duties and avoid specified prohibited practices; must obtain explicit client instructions for political contributions; must ensure proper handling of client refunds and loans; maintain records and protect client information.
• For clients: Increased protection from unethical practices; clearer rights around signatures, copies of documents, and refunds; more transparency about loans and disclosures.

Practical Implications

• Reduces risk of unauthorized political contributions and improper manipulation of refunds.
• Increases the amount of documentation and safeguards a client can expect from tax preparation services.
• May require training and updates to internal processes for tax preparation firms to ensure compliance.

Relevant Terms

state elections campaign account 10A.31 Truth in Lending Act refund anticipation loan Minnesota Rules part 8052.0300 subparts 4, 5, 6 nonpublic personal information confidential relationship tax identification number (TIN) section 332.37 hold harmless clause confession of judgment power of attorney to confess judgment waiver of jury trial refund/department payment direct deposit loan arrangement percentage-based fee (fee based on a percentage of a refund) penalties (referenced sections: 289A.60 subdivisions 13, 20, 20a, 26, 28)