The Internal Revenue Service is cautioning taxpayers to avoid the dangers of “ghost” tax return preparers.
According to the IRS, a ghost preparer is paid to prepare a tax return, but does not sign it, either electronically or on paper, as the paid preparer. These phantom preparers who won’t put their name on the tax return are a warning sign for taxpayers of a potential scam.
Here’s how it works. The ghost preparer can print the paper return for their client and tells them to sign and mail it to the IRS. Or, for electronically-filed returns, they will prepare it but won’t digitally sign it as the paid preparer. By doing so, the tax return appears to be self-prepared, with no indication that a paid tax preparer was used in completing the tax return — helping keep the return preparer under the radar.
By law, anyone who prepares or assists in preparing federal tax returns for compensation must have a valid 2018 Preparer Tax Identification Number, or PTIN, before preparing any tax return. Tax preparers should sign the tax returns they prepare on paper and include their PTIN on the tax return, which provides the IRS with their identifying information. A paid tax preparer who prepares more than 10 tax returns is also generally required to e-file those returns. In this case, the preparer would digitally sign the tax return.
For 2018, the IRS has issued more than 737,000 PTINs to tax preparers.
Dishonest and unscrupulous tax preparers, including some who are “ghost” tax preparers, perpetuate refund fraud and scams that hurt honest taxpayers who are simply trying to do the right thing and file a legitimate tax return. Dishonest preparers look to make a fast buck by promising a big refund, sometimes charging fees based on a percentage of the refund. These shady preparers may also:
- Require payment in cash only and not provide a receipt.
- Invent income to erroneously qualify their clients for tax credits or claim fake deductions to enable the taxpayer to get a larger refund.
- Direct refunds into their own financial account rather than the taxpayer’s account.
The IRS urges taxpayers to review their tax return carefully and ask questions if something is not clear before they sign and file it with the IRS. They should ensure they are comfortable with the accuracy of their tax return. And for any direct deposit refund, taxpayers should make sure both the routing and bank account number on the completed tax return are correct.
Taxpayers can report abusive tax preparers to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a tax preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.