As of October 1, 2024, HB 452 introduces changes aimed at enhancing ethics, enforcement, and penalties in the individual tax preparation industry. Approved by the Governor of Maryland on May 16, 2024, this bill affects tax preparers, accounting professionals, and taxpayers alike. Below, we break down the key aspects of the bill and what they mean for you.

1. Strengthened Communication Between the Board and the Comptroller

HB 452 enhances coordination between the State Board of Individual Tax Preparers (“Board”) and the Maryland Comptroller’s Office (“Comptroller”) when it comes to disciplinary actions. Specifically:

• The Board must notify the Comptroller within five business days if they seek an injunction or if disciplinary action is taken against an individual under the Individual Tax Preparers title of the Business Occupations and Professions section of the Maryland Code.
• The Board must notify the Field Enforcement Bureau of the Comptroller’s Office if an individual provides, attempts to provide, offers to provide, or employs someone to provide, attempt to provide, or offer to provide tax preparation services when not registered to do so by the Board.
• The Comptroller is required to inform the Board within 5 business days whenever they prohibit a tax preparer from submitting returns electronically.

These measures aim to ensure that these regulatory bodies are communicating, in turn enabling better enforcement and oversight, and providing heightened protection to taxpayers.

2. Licensing and Registration Requirements with Heavier Penalties

HB 452 prohibits anyone from preparing income tax returns or claims for refunds without being properly licensed or registered to provide these services in the state and imposes harsher penalties for violation. Violators of this provision could face a misdemeanor charge and a fine of up to $5,000 per return or claim for refund prepared without the requisite licensing or registration. This change underscores the importance of maintaining proper licensure and highlights the risks of non-compliance.

3. Code of Ethics and Rules of Professional Conduct to Be Published

One of the most notable additions under HB 452 is the requirement for the Maryland Board of Individual Tax Preparers (the “Board”) to publish a comprehensive code of ethics and rules of professional conduct. The deadline for the Board to make this information publicly available is January 1, 2026. For tax preparers, this publication will provide clear standards and guidelines for ethical conduct, helping to foster greater accountability within the profession.

The Board will publish the code of ethics after allowing for public input by the tax preparer community. This gives preparers an opportunity to provide input on the standards that will direct how they engage in the practice of individual tax preparation.

Why This Matters to Maryland Tax Preparers? 

For Maryland-based CPAs and tax preparers, these new regulations are more than just legal formalities—they represent a heightened focus on ethics, compliance, and professionalism within the industry. Firms will need to ensure that their staff are fully aware of these changes and that all preparers under their umbrella are correctly licensed and adhere to both existing and upcoming ethical standards.

Additionally, the increased communication between the Board and the Comptroller serves as a more robust enforcement effort, making it more critical than ever to avoid any compliance missteps. Firms should also be prepared to review the upcoming code of ethics once published and adjust their internal practices accordingly.

Next Steps: Preparing for Compliance

To stay ahead of these changes, tax preparers and firms should consider:

• Monitoring Updates from the Board: Stay informed and involved with the discussion about the publication of the new code of ethics and rules of professional conduct.
• Conducting Internal Compliance Audits: Regularly review your firm’s licensing, registration, and ethical practices to ensure all team members are in full compliance with state regulations.
• Education: Providing updated information to your preparers on the new requirements and penalties can help mitigate risks.

Authored By Cedar L. Bauer, Esq. – Tax Research Associate at RS&F