IRS warns of ghost tax preparers

Ferrone & Associates CPAsBlog

The Internal Revenue Service issued a warning to taxpayers to beware of unethical “ghost” tax preparers who don’t sign tax returns for clients.

A ghost preparer may prepare and print out the return, but ask the client to sign it and mail it to the IRS. For electronically filed returns, the ghost will prepare but refuse to digitally sign the return as the paid preparer. The service is, however, still allowed to require paid tax preparers to register with a Preparer Tax Identification Number that allows it to trace illegal activity or incompetent practices. But ghost tax preparers avoid affixing the PTIN to their returns to evade detection and instead have the taxpayer write “Self-Prepared.”

Some unscrupulous preparers set up shop only during tax season, prepare a number of fraudulent tax returns, and then disappear without a trace right after the tax deadline passes. Other typical scams of ghost preparers include sticking a business label on the tax return instead of signing it. Some ghost preparers will claim they simply “forgot” to sign the return and promise to sign it “later” after they have been paid.

The IRS warned that ghost preparers may also require payment in cash only and not provide a receipt. They may also invent income to qualify their clients for tax credits and claim fake deductions to increase the size of the tax refund. They may even direct refunds into their own bank account instead of the taxpayer’s account.

The IRS recommends that taxpayers visit the IRS’s Choosing a Tax Professional page on IRS.gov, which includes information about tax preparer credentials and qualifications. The IRS also offers an online directory of federal tax return preparers who have credentials and qualifications like CPAs, Enrolled Agents and preparers who have completed the IRS’s voluntary Annual Filing Season Program.

The IRS cautioned taxpayers to verify their routing and bank account number on the completed tax return for any direct deposit refund and beware of ghost preparers putting their own bank account information on the returns instead of the taxpayer’s account.

Taxpayers can report misconduct to the IRS by filing a complaint on Form 14157. If a taxpayer suspects a tax preparer filed or changed their tax return without their permission, they can file an affidavit on Form 14157-A

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