ARIZONA STATE SENATE
Phoenix, Arizona
REVISED
tax forms; electronic filing
Purpose
Establishes provisions
pertaining to the Department of Revenue’s (DOR) electronic tax return filing
program. Provides administrative provisions regarding electronic preparation
and filing, alternative signatures, as well as the penalties for violations of
DOR’s electronic filing program.
Background
In 1997, DOR began its
electronic filing program for individual income tax. This program is done in
partnership with the Internal Revenue Service (IRS).
Under current law, the
Director of DOR is authorized to prescribe, by administrative rule, methods for
the use of alternative signatures for subscribing and verifying returns,
statements and other documents filed with DOR. Over time, the IRS has modified
its electronic filing program for individual income taxes so that the program
would be more accessible to the public, which has enabled more citizens to file
their individual income tax returns with DOR. Many of the rules contained in
the Internal Revenue Code (IRC) governing return preparers do not exist in the
current law. This bill is modeled after many of the IRC’s provisions governing
return preparers and enables the Director, while promulgating rules for
alternative signatures, to prescribe the use of such signatures by tax ruling.
Provisions
1. Authorizes the Director of DOR to apply to the tax court to enjoin any return preparer from engaging in business if any of the following apply:
·
The
preparer has been subject to a civil or criminal penalty under Article 3 of the
statutes pertaining to DOR.
·
The
preparer has misrepresented the preparer’s experience or education.
·
The
preparer guaranteed the payment of any tax refund or the allowance of any tax
credit.
·
The
preparer was engaged in any other fraudulent or deceptive conduct that
interferes with the proper administration of Arizona’s taxation statutes.
2. Authorizes the court, with an application from the Director of DOR and after a hearing, to enjoin the preparer from engaging in business as a return preparer.
3. Provides definitions related to return preparers and returns.
4. Authorizes DOR to impose a civil penalty of $250 against a return preparer who knew or should have known that an understatement of tax liability was present on a return claim for refund.
5. Authorizes DOR to impose a civil penalty of $1000 against a return preparer who purposefully understates the tax liability on a return claim for refund.
6. Allows the return preparer to pay 85 percent of the penalty if the payment is made within 30 days from the date of the penalty’s imposition.
7. Restricts the return preparer from appealing the penalty if the preparer fails to file the appeal within 30 days from the date the penalty was imposed.
8. Stipulates that if a final decision is made stating the preparer did not make an understatement of tax liability in a return or claim for refund, DOR must refund any penalty amount paid and interest to the preparer.
9. Provides definitions of “return preparer” and “understatement of liability” under a section of statute concerning the understatement of liability by a return preparer.
10. Authorizes DOR to suspend an electronic return preparer from participating in the electronic filing program if the preparer fails to comply with the requirements of the program.
11. Allows the electronic return preparer, within 180 days of the mailing notice of suspension, to petition DOR for a review of the action taken and to report its decision within 15 days.
12. Allows the electronic preparer to bring a civil action against DOR in tax court within 30 days after the Department notifies the electronic preparer of the suspension.
13. Requires the tax court to make a final determination within 20 days after the service of process is made on DOR whether the suspension should be lifted.
14. Allows an electronic return preparer to seek up to a 40-day extension of the 20-day deadline if a reasonable explanation can be established regarding why an extension should be granted.
15. Defines “electronic return preparer” and “return, statement or other document” for the purposes of the electronic filing program statute.
16. Specifies that the taxpayer’s identification number must be listed if someone files the return, electronically or otherwise, on behalf of a taxpayer.
17. Authorizes DOR to administrate alternative methods for signing, subscribing or verifying a return, statement or other document required or authorized to be filed with DOR that has the same validity as the signature of a taxpayer or another person authorized to sign, subscribe or verify the return of another.
18. Allows the Director of DOR, pending the development of rules regarding the acceptance of electronic signatures, to waive the requirement of a signature for a particular class or return, declaration, statement or other document.
19. Provides a definition of “tax ruling” for the purposes of the statute regarding taxpayer identification.
20. Permits DOR to authorize electronic return preparers participating in the electronic filing program to retain documents signed by the taxpayer in which the taxpayer is signing or verifying the return, statement or other document that is being electronically filed, as well as any attachments to the documents.
21. Requires a return preparer or electronic return preparer to provide a completed copy of the return, statement or other document to the taxpayer no later than the time the document is presented to the taxpayer for the taxpayers signature.
22. Requires a return preparer to keep copies of the return, statement or other documents for four years following the date on which the return, statement or document was filed or due to be filed with DOR.
23. Requires the electronic return preparer to act as a custodian for the following documents prepared for DOR for four years following the later of either the date on which the return was filed or due to be filed:
·
The
signature document or a tax return form bearing the taxpayer’s original
signature prescribed by DOR's administrative or tax ruling.
·
Any
attachments to the return, statement or other document not electronically
transmitted.
24. Requires return preparers and electronic return preparers to sign the prepared return, statement or other document according to DOR's administrative or tax rules.
25. Provides definitions for the statute regarding signatures and return preparers.
26. Specifies that the term electronic return preparer does not apply to a person who, for compensation, solely provides computational and informational software used to prepare and file taxes.
27. Specifies that a return, statement or other document filed electronically under the electronic filing program is considered filed and received by DOR on the date of the electronic postmark.
28. Specifies that if the taxpayer and the electronic return preparer or the electronic return transmitter are in different time zones, the timeliness of the document depends on the taxpayer’s time zone.
29. Specifies that if a return, statement or other document has been electronically received on a host system of more than one electronic return preparer or transmitter, the document is considered filed and received on the date of the earliest electronic postmark.
30. Specifies that a return, statement or other document is considered filed and received on the date of the electronic filing if the sender either establishes the date of the electronic filing or files a duplicate form within ten days of a notice of nonreceipt.
31. Specifies that if the due date of any return statement or other document falls on a weekend or legal holiday, the filing is considered timely if it is filed on the next business day.
32. Provides definitions regarding the date of filing by electronic means statute.
33. Subjects return preparers, electronic return preparers or electronic return transmitters to a class 3 misdemeanor if the preparer or transmitter knowingly or recklessly discloses information related to a return, statement or other document to anyone not authorized to receive that information.
34. Subjects a return preparer to a $50 fine, not to exceed $25,000 in one calendar year, if the preparer fails to provide a taxpayer with a complete copy of any return, statement or other document when it is presented for the taxpayer’s signature, unless the preparer can show with reasonable cause why the document was not furnished.
35. Subjects a return preparer or an electronic return preparer to a $50 fine, not to exceed $25,000 in one calendar year, if the preparer fails to sign the return, statement or any other document or can demonstrate not signing was not due to wilful neglect.
36. Subjects a return preparer to a $50 fine, not to exceed $25,000 in one year, if the preparer fails to provide the preparer's identifying number on a return, statement or any other document, unless the preparer can demonstrate the omission was not due to wilful neglect.
37. Subjects a return preparer to a $50 fine, not to exceed $25,000 in one year, if the preparer fails to retain a copy of a return, statement or other document for four years.
38. Subjects a return preparer to a $500 fine if the preparer fraudulently endorses or negotiates a check issued to a taxpayer.
39. Subjects a return preparer, an electronic return preparer or an electronic return transmitter to a $50 fine, not to exceed $25,000 in one year, for each failure to comply with any electronic filing program requirement.
40. Subjects anyone who is not an electronic return preparer and who prepares a return for electronic filing to a $50 fine, not to exceed $25,000 in one year.
41. Specifies that the penalties assessed under the statute regarding civil penalties assessed for electronic preparers are in addition to other penalties provided by law.
42. Specifies that all penalties are payable on notice and demand of DOR.
43. Specifies the section regarding civil penalties assessed for electronic return preparers applies to all taxes administered by DOR.
44. Provides definitions for the statute regarding civil penalties for return preparers.
45. Makes technical and clarifying changes.
46. Updates the definition of tax return form to include the option of electronic or paper instructions.
47. Provides for a general effective date.
Amendments Adopted by Committee
1.
Specifies
that the term electronic return preparer does not apply to a person who, for
compensation, solely provides computational and informational software used to
prepare and file taxes.
2. Makes technical and clarifying changes.
House Action Senate
Action
EUT 1/24/01
DPA 10-0-0-0 FIN 4/2/01 DPA 7-0-1-0
3rd Read 2/12/01
55-0-5-0
Prepared by Senate Staff
April 4, 2001