What does the Kansas Taxpayer Protection Act require of paid income tax return preparers?

Plain-English summary

Kansas Notice 21-21 explains the Kansas Taxpayer Protection Act, created by 2021 Senate Bill 47 (New Sections 1-6). The Act is effective on and after January 1, 2022.

Who it applies to. The Act applies to "paid tax return preparers." Under New Section 2(a), that means any person who prepares or substantially prepares for compensation -- or who employs one or more people who do -- any Kansas income tax return or refund claim required under K.S.A. 79-3201 et seq. It does not apply to: an individual licensed as a CPA in Kansas (K.S.A. 1-302b or 1-322); a CPA licensed in another jurisdiction practicing in Kansas; or an individual employed by a Kansas-licensed CPA firm (K.S.A. 1-308) who prepares returns under a CPA's supervision.

Signature and PTIN requirement (New Section 3). A paid tax return preparer must sign any income tax return they prepare or substantially prepare and must include the preparer's federal preparer tax identification number (PTIN) on the return. Failure to do so subjects the preparer to a civil penalty of $50 per return, capped at $25,000 per preparer per calendar year. Penalties can be appealed under the Kansas Administrative Procedure Act, and collected penalties go to the State General Fund.

Injunctions (New Section 4). The Secretary of Revenue may seek a temporary or permanent court order enjoining a person from acting as a paid tax preparer if the preparer has, among other things:

• Prepared a return understating liability due to an "unreasonable position" (as defined in the Internal Revenue Code);
• Prepared a return understating liability due to "willful or reckless conduct";
• Failed to furnish a signed copy of the return with the PTIN, retain a copy, or be diligent in determining eligibility for tax benefits;
• Negotiated a Department refund check issued to the taxpayer without the taxpayer's permission;
• Engaged in conduct subject to a criminal penalty under Chapter 79 of the Kansas Statutes;
• Misrepresented the preparer's education, experience, or eligibility;
• Guaranteed payment of a refund or allowance of a credit; or
• Engaged in other fraudulent or deceptive conduct that substantially interferes with tax administration.

The Secretary may seek the Attorney General's assistance and must publish an annual report of such injunctions. New Section 5 provides that any person -- resident or not -- submits to Kansas court jurisdiction for these injunctions by engaging in covered conduct, with actions brought in Shawnee County district court, and allows consent judgments in lieu of injunction actions. New Section 6 authorizes the Secretary to adopt implementing rules and regulations.

What this means for you

Paid income tax return preparers

• Starting January 1, 2022, you must sign every Kansas income tax return you prepare and include your federal PTIN, or face a $50-per-return penalty (up to $25,000 per year).
• Understating a taxpayer's liability through unreasonable positions or willful/reckless conduct, mishandling a refund check, or misrepresenting your credentials can lead to a court injunction barring you from preparing returns.

CPAs and CPA-firm staff

• The Act does not apply to Kansas-licensed CPAs, out-of-state CPAs practicing in Kansas, or staff preparing returns under a licensed CPA firm's supervision.

Taxpayers

• The Act is designed to protect you -- your preparer must identify themselves on your return, and the Secretary can seek to bar preparers who engage in fraud or negotiate your refund check without permission.

Common questions

When does the Act take effect? On and after January 1, 2022.

Who is a "paid tax return preparer"? Anyone who prepares or substantially prepares Kansas income tax returns or refund claims for compensation, or who employs people who do -- excluding licensed CPAs and those working under a CPA firm's supervision.

What must a covered preparer do? Sign each Kansas income tax return they prepare and include their federal PTIN.

What is the penalty for not signing or omitting the PTIN? A civil penalty of $50 per return, up to $25,000 per preparer per calendar year.

Can a preparer be barred from practice? Yes -- the Secretary of Revenue may seek a court injunction for specified misconduct, with actions brought in Shawnee County district court.

Citations and references

• Senate Bill 47 (2021), New Sections 1-6 -- the Kansas Taxpayer Protection Act, effective January 1, 2022.
• New Section 2 -- defines "paid tax return preparer" and excludes licensed CPAs and CPA-firm staff.
• New Section 3 -- signature and federal PTIN requirement; $50-per-return civil penalty, $25,000 annual cap.
• New Sections 4-6 -- injunction authority, jurisdiction and venue, and rulemaking authority.
• K.S.A. 79-3201 et seq. -- Kansas income tax returns to which the preparer duties attach.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 21-21

Original ruling text

Policy and Research
109 SW 9th Street Phone: 785-368-8222
PO Box 3506 Fax: 785-296-1279
Topeka KS 66601-3506 www.ksrevenue.org
Mark A. Burghart, Secretary Laura Kelly, Governor

                                        NOTICE 21-21

                          KANSAS TAXPAYER PROTECTION ACT
                                       (JULY 13, 2021)

   During the 2021 Legislative Session Senate Bill 47 was passed and signed into law. New

Sections 1 through 6 of the Bill are designated the Kansas Taxpayer Protection Act. The Act is
effective on and after January 1, 2022.

  The Act applies to "paid tax preparers". It does not apply to licensed certified public

accountants, or someone employed by a licensed certified public accounting firm. Subsection (a)
of New Section 2 defines the term as follows:

         (a) "Paid tax return preparer" means any person who prepares or substantially
   prepares for compensation, or who employs one or more persons who prepare or
   substantially prepare for compensation, any income tax return or claim for refund,
   required to be filed pursuant to K.S.A. 79-3201 et seq., and amendments thereto. "Paid
   tax return preparer" does not include the following:
         (1) An individual licensed as a certified public accountant in this state under
   K.S.A. 1-302b or 1-322, and amendments thereto;
         (2) an individual licensed as a certified public accountant in another licensing
   jurisdiction and practicing in this state under K.S.A. 1-302b or 1-322, and amendments
   thereto; or
         (3) an individual employed by a firm licensed in this state under K.S.A. 1-308,
   and amendments thereto, and preparing a return under the supervision of an individual
   described in paragraph (1) or (2).

   New Section 3 of the Bill requires paid tax return preparers to sign any income tax return

prepared by, or substantially prepared by, the preparer, and to include the preparer's federal
preparer tax identification number on any such return. Any failure to do so subjects the preparer
to a civil penalty of $50 per return with a maximum of $25,000 in civil penalties per preparer per
calendar year. Any civil penalties assessed can be appealed pursuant to the Kansas Administrative
Procedure Act. Any penalties collected will be deposited in the State General Fund.

   New Section 4 of the Bill authorizes the Secretary of Revenue to enjoin any person from

acting as a paid tax preparer by seeking a temporary or permanent order from a court of competent
jurisdiction enjoining such conduct. Under subsections (b) and (c) of New Section 4 an injunction
could be issued by a court if the preparer has engaged in any of the following conduct:

   ●     Prepared a return that understates the taxpayer's liability due to an "unreasonable
         position," as that term is defined in the Internal Revenue Code;

 ●     Prepared a return that understates the taxpayer's liability due to "willful or
       reckless conduct," as that term is defined in the Internal Revenue Code;

 ●     Failed to, when required, furnish a signed copy of the return including the
       preparer's federal preparer tax identification number, retain a copy of the return,
       or be diligent in determining eligibility for tax benefits;

 ●     Negotiated a check issued to the taxpayer by the Kansas Department of Revenue
       without the permission of the taxpayer;

 ●     Engaged in any conduct subject to any criminal penalty provided for in Chapter
       79 of the Kansas Statutes Annotated or amendments thereto;

 ●     Misrepresented the preparer's education, experience, or eligibility to practice tax
       preparation;

 ●     Guaranteed the payment of any tax refund or the allowance of any tax credit; or

 ●     Engaged in any other fraudulent or deceptive conduct that substantially interferes
       with proper administration of Kansas tax laws.

  Subsection (a) of New Section 4 allows the Secretary to seek the assistance of the Attorney

General or the Attorney General's designee in pursuing an injunction and, in accordance with
subsection (d) of New Section 4, the Secretary is required to publish an annual report concerning
such injunctions on the website of the Kansas Department of Revenue.

  New Section 5 of the Bill provides that any person, whether or not a resident of Kansas,

submits to the jurisdiction of the courts of the State of Kansas for purposes of such injunctions by
engaging in any conduct that could give rise to a cause of action under the Act. It also provides
legal actions brought under the Act must be brought in the district court of Shawnee County. The
Secretary is permitted to enter into consent judgments with respect to violations of the Act in lieu
of actions seeking injunctions.

  New Section 6 authorizes the Secretary to promulgate rules and regulations necessary to

carry out the provisions of the Act.

                               TAXPAYER ASSISTANCE

 Additional copies of this notice, forms or publications are available from our web site,

www.ksrevenue.org. If you have questions about this Notice, please contact:

                            Taxpayer Assistance Center
                           Kansas Department of Revenue
                           Scott Office Building, 1st Floor
                                  120 SE 10th Ave
                                   P. O. Box 3506
                              Topeka, KS 66601-3506
                                Phone: 785-368-8222
                                 Fax: 785-291-3614