Nevada tax preparers have been required to comply with a number of new requirements as of July of last year. These requirements include the necessity to pay application and renewal fees to become registered as a document preparation service, as well as to obtain and maintain a surety bond.
Requirements of Assembly Bill No. 324
AB 324 introduced a series of new registration requirements for document preparation services in the state of Nevada. To begin with, the bill expanded the definition of such service to also include:
Along with the expanded definition, the Bill also amends the requirements for being allowed to practice as document preparation service in the state. Previously, licensees were not required to pay application or renewal fees which has now changed.
Beginning July 2017, applicants for a document preparation service registration are required to pay a $50 nonrefundable application fee and a $25 renewal fee. Registrations expire on a yearly basis, and must be renewed prior to running out.
Bond Requirement for Tax Preparers
Since AB 324 includes tax preparers in the definition of document preparation service, they are required to post and maintain a $50,000 surety bond with the Secretary of State as part of their registration. This makes Nevada the fifth state to have introduced regulations and a bond requirement for tax preparers.
The Nevada Revised Statutes (NRS) Chapter 240A specifies the conditions of the bond and its purpose. The bond is required in order to provide compensation to any person who suffers a loss or damage due to a tax preparer’s actions, as they are specified in the Chapter. Such actions include fraud, dishonesty, and negligence. But they also include any acts or omissions that violate any other provision of the chapter, but also federal and state law.
In any of the above instances, if a complaint is brought against a tax preparer by a customer to request indemnification, a claim can be filed against the bond. When a claim is filed against a surety bond, the surety usually extends compensation to claimants which can be as high as the full amount of the bond. In return, the bonded tax preparer must then reimburse the surety for any such compensation in full.
An important point here is that the cost of the bond is not the same as the bond amount!
Cost of Your Bond
First-time applicants for a bond often wonder if they need to pay the full bond amount to get bonded. Bond amount and bond cost are different! The amount of your bond, also known as the penal sum, is the full amount of compensation that can be made available by the surety in case of one or several claims.
The cost of your bond, or the premium, is the sum you need to pay to obtain the bond from the surety company. This cost is typically a small fraction of the full bond amount. It is determined by the surety when you apply. In determining the cost of your bond, the surety will review your personal credit score and possibly a number of other items, such as your financial statements, your assets, and even your industry experience.
Applicants with high credit scores are typically offered low rates on their bond, which can be as low as 1% of the whole bond amount or lower. The exact rate is determined once you apply for your bond.